Even before Michael Saylor abandonment The phrase now immortalized by memes “there is no second best,” bitcoin maximalism has been a staple of the crypto space. So much so that “crypto” became an unworthy nickname to describe the weight and importance of bitcoin.
For bitcoin maximalists, bitcoin is bitcoin and cryptocurrencies are altcoins, if not shits. With bitcoin heading into a bull run, fueled by the buzz from the 4th halving and bitcoin ETF approvals, Saylor's MicroStrategy is already over. 1.2 billion dollars in unrealized gains territory.
The bitcoin meme creator himself wasted no time in visualizing the payoff of his bitcoin maximalism strategy.
With such results on the table, it is time to take a closer look at bitcoin maximalism. Is simply holding btc tokens more sophisticated than all the altcoin derivatives trading in the world?
The Core Beliefs of bitcoin Maximalism
In essence, bitcoin maximalism is an extension of the first-mover advantage. After launching the bitcoin mainnet in January 2009, pseudonymous Satoshi Nakamoto launched a revolutionary proof of concept. Is it possible to establish peer-to-peer money safely?
Can a blockchain-based wealth transfer and storage resist network manipulation? Satoshi achieved this by cleverly combining cryptography with economic incentives. At the base of it is the bitcoin proof-of-work algorithm. It causes network participants (miners) to exert computational resources by adding new blocks of transaction data.
In exchange, miners are rewarded with btc tokens, capped at 21 million. And because all miners must agree on the state of the ledger, there is no single point of failure to exploit. It took until February 2017 for this innovative concept to start shaking up altcoins, eroding bitcoin's market cap dominance.
With eight years under its belt for people to become more comfortable with the novel concept, the rise of initial coin offerings (ICOs) diversified the crypto landscape. As one of the beneficiaries of this wave, Vitalik Buterin, co-founder of ethereum, ethereum.org/2014/11/20/bitcoin-maximalism-currency-platform-network-effects”>equated bitcoin Maximalism with bitcoin Dominance Maximalism.
“It's a stance that building something on top of bitcoin is the only right way to do things, and that doing anything else is unethical.”
From this point of view, the evolution and consolidation of bitcoin maximalism is predictable:
- The first-mover advantage leads to the legitimization of blockchain-enabled wealth.
- From this process comes the dominance of bitcoin's market capitalization.
- bitcoin's market cap dominance leads to a more secure network.
- A more secure P2P money network generates greater public trust.
- Greater public trust leads to greater mass adoption.
- Greater mass adoption leads to a higher btc price, strengthening all the previous steps.
So it's easy to see how an avalanche of altcoins would have the potential to disrupt any of those stepping stones. In fact, the ICO craze in 2017 affirmed the idea that bitcoin maximalism is fair.
Specifically, Grupo Satis carried out a study which found that 78% of ICO projects were fraudulent. They were nothing more than exit liquidity scams with the project objectives serving as bait. This adds up to 4% failed ICOs and 3% dead ICOs.
However, that finding was mild compared to the catastrophic culmination of cryptocurrency failures in 2022. From Terra (LUNA), Celsius and Three Arrows Capital (3AC) to FTX, BlockFi and others, cryptocurrency enthusiasts suffered a hit of at least 60 billion dollars.
Not only did altcoins become suspect, but so did the entire corporate edifice connected to blockchain networks. In turn, these shocks fed into each other, sending the price of bitcoin down to $16.5k, a price last seen in November 2020.
With public trust in “cryptocurrencies” shaken and an entire cycle effectively nullified, bitcoin maximalists became even more eager to point out bitcoin’s founding virtues: decentralization and self-custody.
However, even with these lessons behind us, does it make sense to prioritize bitcoin over altcoins?
Economic rationale behind bitcoin preference
bitcoin maximalists face a difficult dilemma. There is a limited amount of money that can be invested in an asset, including bitcoin. This is the liquidity of the market. Taking advantage of first-mover advantage, bitcoin has been the target of that flow for at least a decade before this wave of thousands of altcoins was born.
Now that it has a market capitalization of $735 billion, it is much more difficult to gain more weight, that is, a higher price. When the price of btc exceeded $50,000, bitcoin-s-price-by-1″>Bank of America It calculated that net inflows of $93 million would be needed to move its price by 1%.
This translates into very small percentage gains for new investors, even if they fully understand bitcoin's status as a hedge against monetary debasement. Case in point:
- If one had purchased 100 SOL in July 2021, one would have paid ~$2500.
- In November 2021, its value increased to ~$25,000.
- These 9x gains were only possible in the early days of bitcoin, when its market cap was low.
Even in the last bull run, without the Fed money supply element, Solana investors could have received three times the profits from October to November. The same dynamic is at play for a host of other altcoins and even memecoins.
With this in mind, bitcoin maximalists take a distinctive approach, viewing bitcoin as a key player in monetary evolution rather than a mere asset for short-term gains. An integral part of this approach is to align technical pattern analysis with long-term strategies to navigate the dynamics of the bitcoin market.
Philosophical foundations of maximalism
Even for people who have not purchased a single cryptocurrency token of any kind, the rapidly evolving blockchain space brought valuable lessons to the public.
Concepts that were previously reserved to the margins of economic theory suddenly came to life on blockchain: money supply, inflation rate, tokenomics, token allocation, vesting, burning, utility, governance.
It was then easy to extrapolate these mental models to the dollar itself. Applying tokenomics to USD, some bitcoin enthusiasts He even called the dollar “the ultimate shit currency.”
- 1 node
- 2.3 trillion dollars On circulation
- 33.75 billion dollars total offer (as owed to creditors)
- 1% of holders own 53% of the capital (worth $19.16 trillion).
- Lost 94% of value in the last 100 years.
- Arbitrary supply adjustments, which trigger inflations and recessions in a roller coaster manner.
This is the new mental model that enabled bitcoin, which was previously unavailable to the masses. For bitcoin maximalists, the pioneering cryptocurrency represents the first viable alternative to a one-node (central banking) system. After all, Satoshi Nakamoto launched bitcoin in reaction to central banks bailing out commercial banks with taxpayer money.
To store or transfer wealth, people no longer have to ask anyone for permission. More importantly, there is no central entity that can exert influence over the bitcoin network and modify its money supply. In turn, money can finally be truly private and serve as a savings vehicle.
In the long term, bitcoin maximalism is about not needing fiat on- and off-ramps for bitcoin. Rather, the bitcoin standard would form a new decentralized monetary system. Auditable, transparent and limited, they imagine a system that will root out the government's tendency towards corruption and wars.
Meanwhile, as they currently stand in the debt-based monetary model, all fiat currencies incentivize risky investments to beat inflation rates. While the Federal Reserve's coveted inflation rate is 2%, bitcoin is heading towards bitcoin-inflation/”>inflation rate less than 1% after the fourth halving in April 2024.
At this point, altcoin advocates may say, “but hundreds of altcoins have negligible inflation rates and a limited coin supply.” bitcoin maximalists have a simple answer. bitcoin, which is based on a proof-of-work algorithm, is based on physicality or, as Michael Saylor said, “digital energy.”
In practice, anyone can clone altcoins, which are then subject to crypto.html#coins”>influence of capital network (share)
Conclusion
bitcoin is unique in its lack of attachment to any organization or personality. The same cannot be said for its opposing army of altcoins, starting with ethereum. The cost of this decentralized resilience is paid with energy and not with capital participation. This has been the contentious source of countless articles and comments from politicians attacking bitcoin's energy use.
However, even these ecological pressures appear to have lost strength. Can anyone really say what the fair price for financial sovereignty is? Looking at that horizon, bitcoin maximalists are more focused on escaping the central banking system than on short-term gains from altcoins.
Although some maximalists see all altcoins as a useless distraction on that path, it is certain that bitcoin will integrate into the altcoin ecosystem. At the end of the line, incentives create a blockchain landscape on their own, regardless of opinions.
This is a guest post by Shane Neagle. The opinions expressed are entirely their own and do not necessarily reflect those of btc Inc or bitcoin Magazine.
