Every four years, bitcoin’s seemingly cyclical nature emerges and the emergence of a new bull market begins. There are headlines about mainstream media outlets boasting massive price action, and throngs of people are starting to come out of the woodwork to claim they’ve been on bitcoin for years! However, there is also another more nefarious cyclical event that will inevitably surface as well. The seemingly irresistible appeal of alternative cryptocurrencies, drawing the minds and purses of individuals looking to reclaim what bitcoin has achieved.
Those who think they’ve missed bitcoin start looking for compensation by finding the next big thing, as they are plagued by the mindset that they somehow “missed” bitcoin. There is no shortage of these dubious crypto assets claiming to be able to fire bitcoin. They may declare that they have faster transactions, cheaper fees or that they are capable of more complex applications. There are literally thousands of these coins, and they have not overthrown the king for 12 years in a row.
The truth is, none of them are even close. In reality, if you look deeper than the surface, they are illiquid, insecure, centralized copycats perpetuated by inflated marketing budgets looking for dummies with deep pockets. They’re chasing the wrong statistics and built with flawed incentive structures. Don’t fall for the siren’s song. The reality is that there is only one investment-grade digital asset: Bitcoin.
“100 out of 100 of the last conversations I’ve had with investors serious about allocating, say over $ 50 million, 100% of those talks were on Bitcoin and 0% of them were on other cryptocurrencies.”
Crypto Copy Cats will continue to fall short
Silicon Valley startups go to sleep at night dreaming of building something that captures bitcoin’s massive returns. Bitcoin has grown from a white paper idea worth $ 0 to a market cap of $ 700 billion in just 12 years. All without financing. Not a CEO. No marketing team. Just the right set of economic incentives embodied in a robust protocol that continues to grow and adapt against all odds. What the Silicon Valley tech crowd doesn’t realize is that this isn’t just a competition for who has the best technology or marketing strategy. Bitcoin is truly the first creation of digital scarcity, and was built so that once the first version was released, it would never change.
“When tech workers see Bitcoin, they want to play with different parameters: block size, monetary policy, its core capabilities / utility, etc. This is exactly the right mindset when it comes to building applications, but the wrong mindset when it comes to building the foundation layer of the financial system. “
The tech contingent in Silicon Valley can continue to launch thousands of VC-funded cryptocurrency projects. When they get their hands on these cryptocurrency projects, their first instinct is to tinker. They want to tweak and poke at existing structures and rules, or as the more commonly used Mark Zuckerberg nickname says, “go fast and break things.”
This is the exact opposite of what you would want to do with the software supporting a $ 700 billion financial network. Their efforts fail to realize that it is these very boring, slow, and unchanging characteristics of Bitcoin that make it so great. At its core, a base layer protocol that wants to be the foundation on which an entire financial system is built should be just that. Stiff, slow moving, precise and unchanging.
Blockchain buzzwords and decentralization theater
Crypto projects everywhere are trying to convince investors with marketing efforts, business partnerships and buzzwords like ‘blockchain technology’. Their marketing budgets may be big, but their words are hollow.
Many crypto projects love to paste the term ‘decentralized’ all over their websites and marketing materials, as if it gives their currency legitimacy. Here’s the bad news: If your cryptocurrency has a website, a pitch deck, a marketing budget, an HR department, and a CEO that could eventually be sued before Congress … well, it’s not completely decentralized, right?
Bitcoin’s code base is maintained by a widespread array of developers around the world, and its network is made up of tens of thousands of individuals who freely choose to use its open-source software. With Bitcoin, there is no marketing budget. In fact, there is no marketing department at all. There is no leader, no CEO and no HR department. Bitcoin has no employees on the payroll. Rather, Bitcoin works by coordinating human actions through a series of elegantly balanced economic incentives.
It’s decentralized. No company controls it. No government regulates it. It runs on thousands upon thousands of decentralized nodes, and it stands to reason that it is a secure investment-grade treasury reserve.
Buyers are incentivized to hold, miners are incentivized to be honest actors, developers are incentivized to commit code, and network participants are incentivized to enforce the network’s consensus rules.
Bitcoin has even taken care of its brand marketing. There are thousands of evangelists, writers, podcasters, and educational content creators who all feel compelled to take on the task that best suits them. Of their own free will they work to advance the network and push for the widespread adoption of this burgeoning digital asset as they believe in the protocol rules and monetary policy that can create a non-sovereign sound money in the free market . This is what true decentralization looks like.
More than just technology
Yes, at its core, Bitcoin is just code. It is a software program that is widespread and runs on individuals’ computers. But don’t let this confuse you into thinking that this is all about technology. Bitcoin’s success is also rooted in the monetary and social revolution. It is the antithesis of the debt-based monetary system we have today. Its network effects have pushed it out of the reach of competitors for numerous reasons. Chief among these is the ability to incentivize people to implement the protocol rules through social consensus.
“The social layer and its rules are at the heart of bitcoin. But the protocol layer makes them enforceable for the first time, and at the same time makes the social contract more credible to outsiders. “
Regulatory bulwark: Anchoring by both investors and regulators has gained significant momentum in recent years. In terms of regulation, we have seen the following individuals in prominent positions within the new government:
- Gary Gensler, Chief of the US Securities and Exchange Commission: Cryptocurrency course taught at Massachusetts Institute of Technology
- Chris Brummer, Commodity Futures Trading Commission Chairman (confirmation pending): Author of a book entitled “Cryptoassets: Legal, Regulatory, and Monetary Perspectives”
- Brian Brooks, Acting Currency Controller: Former chief legal officer at Coinbase, the leading US cryptocurrency exchange.
Institutional entrenchment: Productive investors such as Paul Tudor Jones, Stanley Druckenmiller and the like have removed career risk for interested money managers. We have also seen an increase in adoption from hedge funds, financial institutions and publicly traded companies such as MicroStrategy and Square, who chose to allocate bitcoin treasury reserves.
None of these major players mentioned above are here to pump altcoins or questionable cryptocurrency projects with VC support. They are all here just for Bitcoin and Bitcoin. The main reasons for this are clear and obvious. Bitcoin is king when it comes to three basic principles of an investable asset: liquidity, security and the credibility of its monetary policy.
Bitcoin has been growing and thriving and counting for 12 years. It has withstood network attacks, has been accepted and the heart kept beating, starting a new block of transactions every 10 minutes.
Chief among all the features that make bitcoin the only investment-grade digital asset, however, is the credibility of its hard-capped offering, rooted in protocol rules since its inception. It is the cornerstone of what makes Bitcoin the most important alignment of computer science, economics and game theory ever. There will only be 21 million bitcoin.
This is a guest post from Nick Ward. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.