Matthew P. Schmidt

My Blog

Yesterday, I sold my remaining supply of, and ended my involvement with, that infamous cryptocurrency called Bitcoin.

This is less a ragequit than a sadquit. I do not have a philosophical objection to Bitcoin itself, aside from concern over the twin moral issues of the misnamed system of Proof of Work and the ever-growing but never-shrinkable blockchain. Rather, my bit-exodus results from the Bitcoin community’s inability to not be overly obsessed with Bitcoin.

The drama du time period is the blocksize debate, a technical issue that would take far more than this blog post to describe yet is vital to the very future of Bitcoin. There are too many on both sides to honestly generalize why they hold to their specific positions, but they march under the banners of “Bitcoin must change to grow or it will fail.” and “No change, Bitcoin must find alternate ways of growth lest it fail.” Both have their arguments. As Bitcoin is designed to be difficult (or, perhaps, impossible) to change, the only method of change is messy and essentially leads to two kinds of bitcoins coexisting for a time.

Bitcoin Maximalism forbids this.

Bitcoin the payment system is fine. Even intellectually knowing it was possible, I was amazed how easy it was to spend my minute hoard of bitcoins—sending money is as easy as scanning an image. Bitcoin the store of value is iffy, being alternately valued at one cent, one dollar, ten dollars, a hundred dollars, a thousand dollars, and down and up and down throughout its tempestuous life. Bitcoin the idol, an idol that promises future wealth for a small price now, is a false god.

The Bitcoin community is drenched with a kind of paranoid optimism. As it is said—and the math indeed shows—if the bitcoin replaces the dollar as the backbone of the world economy, a single bitcoin would be worth the equivalent of a hundred thousand or even a million dollars. Thus Bitcoin, if it does so, will make its users fabulously wealth—and thus the optimism that this will be the case. On the other hand, if it fails, it will be worthless numbers on a uselessly large ledger—thus, the paranoia. This is a community that can believe Bitcoin will even replace governments with a cryptoanarchic paradise while simultaneously contriving conspiracy theories that an US Marshal auction of seized bitcoins was staged in order for the government to hold on to them. The most extreme form is Bitcoin Maximalism, that Bitcoin must triumph, will triumph, and is destined to be all in all.

Perhaps it is unfair for me to ascribe positions of a few to the whole community, but the zeitgeist of the community does not suppress such absurdities. The vocal few are not shouted down by the reasonable many, which leads me to doubt the existence of a reasonable many.

But why is Bitcoin Maximalism so dangerous? Like all false gods, it not only destroys its own worshipers but itself. The math that would make a single bitcoin worth a million relies on there only being twenty-one million bitcoins. If the blockchain forks into two because of the current anarchic inability to agree, there will be forty-two million bitcoins and each worth five hundred thousand. If this same fork causes Bitcoin itself to fail, against the messianic hopes of Bitcoin Maximalism, then each bitcoin will be worth pennies, and the dollar will continue in its fiat existence. Thus, there must not be a fork, or the new bitcoin must destroy the old bitcoin, or all is lost. But which side is right? Sabers are rattled, war drums are beat, propaganda floods the community. Yet there is no greater chance of bitcoin failing than a suicide caused by a contentious fork. The very methods that would “save” Bitcoin, hacks, DDoSes, 51% attacks, dumps, double-spends; are the same that would destroy it.

But what if the two sides could agree to disagree and continue coexisting?

If Bitcoin is only a tool for sending money, it is no issue if there is suddenly twice as much of the tool. If Bitcoin is a store of value, it still does not matter, because everyone will have twice as much bitcoin that are worth half as much, and life goes on. But if Bitcoin is the only god that exists, and only one Bitcoin must exist, and Bitcoin must exist or all is lost, all is already lost. There can be no other hope to save the only hope, if that only hope might be lost.

At the moment the train wreck is slow enough in motion to hop off before the train is crushed into metaphorical scrap metal. I have bought Ether, the cryptofuel of Ethereum, with my aforementioned minute hoard of bitcoins. I was already involved in the Ethereum, being that the Ethereumers are sane, the developers agree on future directions, the founder is known, and that Ethereum itself is a framework for making things, not for attempting to nest atop mounds of virtual money like a wannabe cyber-dragon. Ethereum is, in my humble and obviously right opinion, technically superior to Bitcoin, and could even recreate every salient aspect of Bitcoin so easily it is one of the first tutorials. Ether is inflationary as opposed to Bitcoin’s deflation, true, but it is explicitly a tool, not a security, and hopefully, not a god.

I feel some sadness leaving Bitcoin, but I had already left it in spirit months ago. I still follow the drama of the blocksize debate/argument/screaming fit out of remote interest, not for any interest in the financial sense. I do not set myself on a permanent opposition to Bitcoin—if it gets better, or by some absurd twist of fate actually does replace the dollar, I will not necessarily refuse to use it again. I did love Bitcoin once, and still in some light sense care, but I distance myself. If Bitcoin fails forever, I need not morn. Idols are no God, for when we destroy them, they do not come back.