What is Bitcoin Maximalism?
Understand the idea behind Bitcoin Maximalism, and what Bitcoin Maximalists believe about the current state of Bitcoin, crypto, and Web3.
Bitcoin maximalism is a view held by people who refer to themselves as Bitcoin maximalists — commonly known as “maxies” on social media. The view holds that Bitcoin, the world’s first and oldest cryptocurrency, is the only digital currency that the world will ever need.
Although not all, a majority of Bitcoin maximalists think that other cryptocurrencies that are not Bitcoin, including the second-biggest crypto Ethereum, are inferior. Some of them have even closed their minds about any sort of technological innovations in crypto. They insisted that Bitcoin is still superior in its current state.
What does Bitcoin Maximalism mean?
Bitcoin maximalism can be boiled down to three principles, according to Pete Rizzo, a contributor for the Bitcoin Magazine:
- Bitcoin is the world’s first working non-state monetary system. All other crypto assets compete with Bitcoin by virtue of their existence, and none offer long-term advantages without trade-offs.
- Investing in other cryptocurrencies should be discouraged and ignored socially for the benefit of others as a form of consumer protection.
- Bitcoin is only limited by human ingenuity. Anything that other cryptocurrencies can do can otherwise be achieved by either Bitcoin or a centralised financial alternative.
The third point is interesting as it implies that other cryptocurrencies do not necessarily add value to what Bitcoin or centralised financial institutions have offered. At first glance, you may scoff at the idea, because clearly, at the current state, Bitcoin isn’t even programmable with smart contracts.
However, on a basic level, many Bitcoin maxies are concerned about a great majority of coins, if not all coins, that introduce new technologies on top of a different, modified blockchain. You’ll learn what that means in the next few sections.
Is Satoshi Nakamoto a Bitcoin Maximalist?
Satoshi Nakamoto is a pseudonymous individual or team of developers who invented Bitcoin. They were active in the first year following Bitcoin’s launch, and are the owner of approximately 1.1 million Bitcoins. This is the result of becoming one of the first who mined Bitcoin.
However, the world no longer heard of Nakamoto some time after December 2010, and their Bitcoin has never moved since. While it would make an interesting narrative if Nakamoto is a Bitcoin Maximalist, there is no evidence pointing to that fact.
In fact, the term Bitcoin Maximalism was coined by Ethereum’s founder Vitalik Buterin in 2014, who was also a contributor of the Bitcoin Magazine. Despite his initial view of Bitcoin Maximalism, he recently wrote a piece to praise it.
Rather, Bitcoin Maximalism believes that other cryptocurrencies are not aligned with Nakamoto’s idealism for a money system that is independent of any central control. But there is no evidence to suggest that Nakamoto is against applying his invention in a different case.
Why do Bitcoin Maximalists believe only in Bitcoin?
Bitcoin’s code is open-source, meaning anyone can copy the code and create a modified version of Bitcoin. While many Bitcoin copy-cats turned out to be fraudulent, there were a few exceptions, such as Litecoin and Dogecoin.
Vitalik Buterin used Bitcoin’s verification mechanism, and added programmability into Ethereum. As a result, developers can now create their own crypto tokens that live on the Ethereum blockchain (distinct from the native ETH coin). With this, anyone can apply blockchain to a variety of use cases.
The year 2015 and 2017 was a great time for crypto innovation. During this time, it would seem as if Bitcoin Maximalism was a dying philosophy. However, most crypto tokens made in this period are the result of a typical centralised business model:
From business concept to ICO tokens:
- Create a successful decentralised application.
- Launch a utility token that allows users to use the app.
- Sell the tokens to the public at an initial coin offering (ICO)
- Get the investment capital from ICO tokens and continue to grow.
- Make a profit, and hopefully more people will buy the tokens as app usage grows.
- Optionally, the company can “burn” the tokens to make them increasingly rare and therefore more expensive.
This model goes against the pure decentralisation ethos set forth by Nakamoto’s Bitcoin. Firstly, a large portion of the tokens would’ve been owned by the early stakeholders of the business before it was sold to the public. In contrast, Bitcoin was readily mined by anyone when it was first launched in 2009.
Most of the tokens themselves don’t generate dividend yields, but are tied to the performance of the business. This is why US Securities and Exchange Commission Chairman Gary Gensler repeatedly claims that most if not all crypto can be classified as securities, except for Bitcoin. In 2020, the SEC filed a lawsuit against Ripple Labs for not registering their XRP token as a security.
Secondly, when it comes to continuously improving the crypto network, many networks use their native token in a classic stakeholder voting system. Simply, the more crypto you own, the stronger your vote would be. The first to implement this is Tezos, in a system called decentralised governance.
Bitcoin doesn’t use this system. Instead, a forum of developers make arguments to “fork” or transition to a slightly different version of Bitcoin.
Bitcoin maximalists have argued that investing in digital assets other than Bitcoin would be unwise. Bitcoin is a decentralised money system that is free of centralised control, while evidence points to the fact that many tokens (particularly “2017 ICO tokens“) are highly likely to be influenced by centralised control.
What about the limitations of Bitcoin?
Bitcoin maximalists are aware of the limitations of Bitcoin, such as the intensive energy use of the Proof of Work verification system, lack of programmability, and the slow transaction speed.
For the latter, developers have created the Lightning Network, which is a software that works directly with Bitcoin. It is not a separate blockchain. Lightning Network confirms Bitcoin transactions and bundles them up before they are sent back to the Bitcoin network.
While smart contracts aren’t originally built into Bitcoin, it is technically not impossible for the Bitcoin community to develop such capability. There are live examples of blockchains that use Bitcoin’s data structure (UTXO model) that is also compatible with smart contracts. An example is the Cardano blockchain.
A smart contract blockchain called Stacks claims to be secured by Bitcoin on a data level. But on a protocol level, it is still a separate blockchain from Bitcoin, and relies heavily on honest Stacks miners that follow the Proof of Transfer protocol.
As for the environmental concerns of Bitcoin mining, which is often cited by Bitcoin critics, the answer is still unclear. While there are truthful claims that 50% of Bitcoin’s energy consumption comes from renewables, the fact still remains that Bitcoin could be made more efficient somehow.
Most modern blockchains use the Proof of Stake mechanism, which is 99% more energy-efficient. However, as we’ve learned in the previous section, the drawback is that the network becomes less decentralised as the network relies on a group of rich stakeholders.
Proof of Work, in contrast, creates a challenging environment where deep pocketed investors won’t necessarily be the ones influencing the network the most.
The proof is that there are Bitcoin mining companies who went bankrupt due to business-related factors. These companies, despite being well-funded initially, found themselves in financial problems such as debt, increasing energy prices, and fluctuating Bitcoin prices.
The key takeaways
Bitcoin’s security and decentralisation remain unchallenged. Its mechanism is as simple as it could be, and as a long-term decentralised store of value, Bitcoin has been reliable so far since 2009.
The purely decentralised nature of Bitcoin is attractive to Bitcoin maximalists. In contrast, the Bitcoin maxies reject the adoption of the crypto tokens that were born from the all-too-familiar centralised business models.
So far, in 2022, Bitcoin has been resilient in the face of some of the crypto token’s implosion — from Terra’s LUNA coin to FTX’s FTT token. These crises have uncovered some of the flaws of “decentralised” tokens that Bitcoin maxies have been afraid of for so long.
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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated January 13, 2023