Every four years or so, the seemingly cyclical nature of Bitcoin rises and another bull market begins to rise. There are headlines in the mainstream media boasting massive price movements and droves of people come out of the woodworks to claim they have been using Bitcoin for years! However, there is another, more nefarious cyclical event that inevitably also occurs. The seemingly irresistible pull of alternative cryptocurrencies tugging at the minds and purses of people trying to regain what Bitcoin has achieved.
Those who think they have missed Bitcoin are trying to compensate by finding the next big thing because they are plagued by the mindset that they somehow “missed” Bitcoin. There is no shortage of these dubious crypto assets that claim to be able to remove Bitcoin. You may agree to faster transactions, cheaper fees, or more complex applications. There are literally thousands of these coins and all of them failed to dethrone the king in 12 years.
The truth is, none of them are even close. If you look deeper than the surface, they are actually illiquid, insecure, centralized copycats, perpetuated by bloated marketing budgets, looking for dummies with deep pockets. They track the wrong metrics and are built with faulty incentive structures. Don’t fall for the siren’s song. In reality, there is only one investment grade digital asset – Bitcoin.
“100 out of 100 of the most recent conversations I’ve had with investors who are seriously looking for an allocation, let’s say over $ 50 million. 100% of those talks were about Bitcoin and 0% of them were about other crypto assets.”
Robert Gutmann, CEO of NYDIG
Crypto Copy Cats will continue to fall short
Silicon Valley startups fall asleep at night dreaming of building something that will capture the massive returns from Bitcoin. Bitcoin went from an idea for a whitepaper valued at $ 0 to a market cap of $ 700 billion in just 12 years. Everything without funding. No CEO. No marketing team. Just the right economic incentives contained in a robust protocol that continues to grow and adapt against all odds. What the tech crowd in Silicon Valley doesn’t realize is that this isn’t just a competition for the best technology or marketing strategies. Bitcoin is truly the first creation of digital scarcity and was built in such a way that it would never change once its first version was released.
“When technicians see Bitcoin, they want to play around with different parameters: block size, monetary policy, core competency / utility, etc. This is exactly the right mindset when building applications, but the wrong mindset when building the base layer of the financial system. “
Dan Held, “Why Silicon Valley Doesn’t Get Bitcoin”
The technology contingent in Silicon Valley can still launch thousands of VC-funded cryptocurrency projects. When they get their hands on these cryptocurrency projects, their first instinct is to tinker. You want to optimize and initiate existing structures and rules, or as the common nickname Mark Zuckerberg says: “Move quickly and break things.”
This is exactly the opposite of what you’d want to do with the software that powers a $ 700 billion financial network. Their efforts fail to realize that it is precisely these boring, slow, and immutable properties of Bitcoin that make it so great. In essence, a base layer protocol on which an entire financial system should be built should be just that. Rigid, slow, precise and immutable.
Blockchain buzzwords and decentralization theater
Everywhere, crypto projects try to attract investors with marketing efforts, business partnerships and buzz words like “blockchain technology”. Their marketing budgets may be big, but their words are hollow.
Many crypto projects love to put the term “decentralized” on their websites and marketing collateral, as if it gives their coin an air of legitimacy. Here’s the bad news: if your cryptocurrency has a website, pitch deck, marketing budget, HR, and CEO that can ultimately be called before Congress … then it’s not all decentralized, is it?
Bitcoin’s code base is maintained by a widespread group of developers around the world, and the network is made up of tens of thousands of people who freely choose to run their open source software. There is no marketing budget with Bitcoin. In fact, there is no marketing department at all. There is no head, no CEO and no human resources department. Bitcoin has no employees on a payroll. Rather, Bitcoin works to align human activity through a series of elegantly balanced economic incentives.
It’s decentralized. No company controls it. No government regulates it. It runs on thousands and thousands of decentralized nodes and the obvious thing is that it is an investment grade safe haven treasury reserve asset.
Michael Saylor, Founder and CEO of MicroStrategy
Buyers are encouraged to hold, miners are encouraged to be honest actors, developers are encouraged to commit code, and network participants are encouraged to enforce the network’s rules of consensus.
Bitcoin even took care of its brand marketing. There are thousands of evangelists, writers, podcasters, and educational content creators, all of whom feel compelled to take on the role that is most appropriate for them. Of their own free will, they are working to drive the network forward and drive general adoption of this emerging digital asset because they believe in the protocol rules and monetary policy that allow non-sovereign healthy money to emerge in the free market. This is what real decentralization looks like.
More than just technology
Yes, at its core, Bitcoin is just code. It is a software program that is widely used and that runs on individuals’ computers. But don’t let the fact that this is all about technology confuse you. Bitcoin’s success is also based on the monetary and social revolution. It’s the opposite of the debt-based monetary system we have today. Its network effects have put it out of the reach of competitors for a variety of reasons. Above all, this includes the ability to motivate people to implement the protocol rules in social consensus.
“The social class and its rules are at the heart of Bitcoin. But the protocol layer makes it enforceable for the first time, while also making the social contract more credible to outsiders. “
Hasu, “Unpacking the Bitcoin Social Contract”
The entrenchment grows
Regulatory anchoring: The anchoring of investors and supervisory authorities has gained considerable momentum in recent years. In terms of regulation, we’ve seen the following people stand out in the new administration:
- Gary Gensler, Head of the US Securities and Exchange Commission: Classes in cryptocurrency at the Massachusetts Institute of Technology
- Chris Brummer, Chairman of the Commodity Futures Trading Commission (pending confirmation): Authored a book entitled “Cryptoassets: Legal, Regulatory and Monetary Perspectives”
- Brian Brooks, Acting Currency Auditor: Former Chief Legal Officer at Coinbase, the leading cryptocurrency exchange in the US.
Institutional anchoring: Successful investors like Paul Tudor Jones, Stanley Druckermiller, and the like have eliminated career risk for interested money managers. We have also seen an increase in adoption by hedge funds, financial institutions, and publicly traded companies such as MicroStrategy and Square that have chosen to allocate treasury reserves in Bitcoin.
None of these major players listed above are here to pump altcoins or dubious VC-backed cryptocurrency projects. They’re all here only for bitcoin and bitcoin. The main reasons for this are clear and obvious. Bitcoin is king when it comes to three fundamental principles of an investable asset – liquidity, security, and the credibility of its monetary policy.
Bitcoin has grown and prospered and counted for 12 years. It withstood network attacks, prevailed and its heart kept beating, bringing out a new block of transactions every 10 minutes.
Most importantly, however, among all the features that make Bitcoin the only investment-grade digital asset is the credibility of its hard cap offering, which has been ingrained in its protocol rules since its inception. It is the cornerstone of what makes Bitcoin the most significant compound of computer science, business, and game theory ever discovered. There will only ever be 21 million Bitcoin.
This is a guest post by Nick Ward. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.