The intention of this post is to share very simply why Bitcoin works so well and why it will be the only cryptocurrency left standing by next year.
To start, here’s a screenshot from the first page of the Bitcoin Whitepaper.
Note I have highlighted the word System. This word is often overlooked when talking about Bitcoin. Drilling down on the word System:
Bitcoin is a SYSTEM. It’s critical to understand this to get the whole picture. Bitcoin is “a set of connected things or parts forming a complex whole“. If any part of Bitcoin is removed or altered it is no longer “whole”.
Bitcoin was designed to work as a system. Economics, game theory, fault tolerance, incentives, proof of work. All of it designed to work in sublime harmony. If any piece of the system is missing the system doesn’t work (all other coins). If all parts of the system are present then Bitcoin is the honey badger of currencies, it doesn’t give a F**k. The SYSTEM is resilient and powerful.
Put even more simply, Bitcoin is a three legged stool. If you remove any leg the system doesn’t work.
So why is Bitcoin crashing?
The simple answer: market participants capitalized on opportunities to enrich themselves.
Like any new market/technology Bitcoin was imitated, replicated and then rebranded in all manner of names and sold to a public hyped up on a “new paradigm”. This is normal in human psychology and markets. We are now dealing with the consequences of this misallocation of resources and, although hard to believe now, we will soon see a resurgence in the strength of Bitcoin.
The hype cycle and crash is normal. Painful, but normal. We are resetting the market.
In Henry Hazlitt’s Economics in One Lesson the impact of tariffs and subsidies are discussed in how they favor certain parties near term, the seen effects, while having negative effects elsewhere, the unseen effects. A tariff may favor a seller of beef but there is a hidden impact on chicken farmers. Economics studies these impacts, seen and unseen.The negative effects are often not seen until much later. Economics is a system. Bitcoin is a system.
Bitcoin’s brilliant design shows that Bitcoin was designed to operate as a system with economic integrity. If a principle in Bitcoin is violated the long term consequences, the unseen effects, will impact the rule breaker. The incentives and economics of Bitcoin as a system are sound. Bitcoin was designed to balance on the head of a pin and it does it exceptionally well.
All of the countless projects and development invested to make a better Bitcoin, billions in capital, have only proved Bitcoin to be the exception to the rule.
This is why Bitcoin BTC and Bitcoin ABC are failing. They have altered the system believing that the code they implement today can operate independent of the entire system. The developers are working on changing the system making the critical error of ignoring the unseen effects of tomorrow. There is no free lunch in a finely tuned system. Every action has a reaction when things are in balance.
The BTC and ABC development teams have implemented protocol level changes that altered the economics of their coins. They believe they have answers to Bitcoin’s (imaginary) problems. In reality, this is happening:
Despite the detours Bitcoin has encountered the genius design of Bitcoin continues on.
Bitcoin is designed so that competition makes the system stronger. As companies compete according to the rules of Bitcoin the SYSTEM gets stronger. When any party strays from Bitcoin’s design Bitcoin’s mechanisms punish the rule breaker.
BITCOIN IS A SYSTEM. World class developer? Who cares. Ignore the system at your own risk.
And here is where we separate Bitcoin from everything else.
Unless otherwise noted when I say Bitcoin I am always referring to Bitcoin SV (Satoshi’s Vision). BSV is the only version of Bitcoin that has stayed true to the original whitepaper. The SYSTEM that is Bitcoin is in BSV. The system matters. Original economics, incentives, game theory and strengths are intact and the roadmap is to exploit the natural mechanics of Bitcoin. This is what I (and many others) signed up for.
Bitcoin SV is on a mission to scale. Build it and they will come. Also see, Valuing Systems, the margin of substitute goods. Scale, on chain, at Visa levels in less than 4 years. Goodbye Reddit and Social Media warriors. Bitcoin is going professional. Imagining Bitcoin going forward full steam without distractions. Well….
There is branding damage to the Bitcoin name. In time, this will be repaired and Bitcoin will be a household name.
Bitcoin is a system. If any rules of the system are violated the rule breakers are punished. This concludes today’s lesson.
Full disclosure: I have sold all of my Bitcoin ABC from the November 15 hardfork and fully invested those funds in Bitcoin SV.