In this issue:
Giving up on Bitcoin maximalism
Hit the road, Jack
Uber does not need a blockchain
Giving up Bitcoin maximalism
Bitcoin maximalism is a term invented by Vitalik Buterin in 2014 in an essay titled, "On Bitcoin Maximalism, and Currency and Platform Network Effects." In his words Bitcoin maximalism is:
"The idea that an environment of multiple competing cryptocurrencies is undesirable, that it is wrong to launch “yet another coin”, and that it is both righteous and inevitable that the Bitcoin currency comes to take a monopoly position in the cryptocurrency scene."
Calling someone a maximalist was intended to be pejorative, implying a lack of curiosity or an ideological blind spot. To Vitalik a Bitcoin maximalist was someone who had let tribal identity with Bitcoin overrun their sense of logic. Vitalik was especially concerned about maximalists who criticized Ethereum, of which there were a lot because Ethereum is a bad idea.
2014 was a simpler time. There were only a few dozen projects of any significance and they were basically all (Ethereum included) trying to become money. Most projects (Ethereum not included) simply cloned Bitcoin and adjusted parameters to appeal to unsophisticated investors — such as how Litecoin marketed itself as "silver to Bitcoin’s gold" with "4x faster blocktimes." These superficial advantages weren’t valuable but they sounded valuable to people who didn’t understand the nuances of blockchains yet. They were scams.
So there were people who worked tirelessly to sell bad tokens to newcomers and people who worked tirelessly to educate newcomers about why they shouldn’t buy. The latter often called themselves Bitcoin maximalists, reclaiming the term from Vitalik as a point of pride. I considered myself a Bitcoin maximalist — I originally wrote the essay "Why I am still a Bitcoin maximalist" in 2017 years before I started this newsletter. I still consider Bitcoin the best money ever invented and the only investment that I ever recommend.
But in 2014 there was no significant difference between the beliefs "Bitcoin is the best (and only) money" and "Bitcoin is the best (and only) token." In 2021 there is an incredible diversity of cryptocurrency projects that represent social clubs or decision engines or market makers or video games or art projects. I still believe that money is a ruthlessly zero-sum winner-take-all competition that Bitcoin will win, but cryptocurrency is very obviously being used for things other than money.1
In 2014 people who thought Dentacoin was a scam but that 401ks were fine could co-exist with people who wanted you to sell your chairs for bitcoin because sitting makes you complacent. In 2021 …
Ross Ulbricht is most famous as the Dread Pirate Roberts the founder of the darkweb exchange Silk Road. He is currently serving two consecutive life sentences without parole for crimes related to the Silk Road. The NFT he is selling will raise funds for a charity to help prisoners and their family — most notably helping children afford travel expenses to visit incarcerated parents.
I have made no secret about the fact that I like NFTs but even if you think they are a ridiculous fad that doesn’t make them a scam. I’ve had smaller, but similar scuffles with maximalists on Twitter who feel a need to do righteous battle with anyone who has chosen the wrong tech stack. Increasingly the group who most proudly claims and most clearly defines the term maximalist are precisely the people Vitalik had in mind when he originally invented the slur.
I still think you should buy Bitcoin and I still don’t think you should buy Ethereum. But the term Bitcoin maximalist has drifted and expanded from where it was when I adopted it. It no longer feels like it applies to me.
Hit the road, Jack
On Monday morning Jack Dorsey announced his resignation as CEO of Twitter, simultaneously emailing the company and tweeting his statement to the public. Jack didn’t include much explanation in the announcement, saying merely:
"I want you all to know this was my decision and I own it. It was a tough one for me, of course. I love this service and this company … and all of you so much. I’m really sad ... yet really happy. There aren’t many companies that get to this level. And there aren’t many founders that choose their company over their own ego. I know we’ll prove this was the right move." — Jack Dorsey
Anytime someone says "I want you all to know this was my decision" one thing you can be reasonably sure of is that it was not their decision.
Dorsey’s position as the head of Twitter was a controversial one. For one thing it made a lot of investors unhappy that he split his time as CEO of both Twitter and Square. Activist investors Elliot Management actually bought a stake in Twitter in 2020 to demand that Dorsey step down from either Twitter or Square. Twitter was able to mollify them by offering a pair of seats on the board of directors, but since then Twitter’s business has continued to struggle.
Frustratingly for its owners and executives, Twitter is a business whose cultural importance wildly outpaces its actual economic value. Twitter has much lower lifetime user value than its peers and monthly active users have stagnated for years. Last quarter Twitter reported ~$1.3B in revenue compared to Facebook’s ~$29B. Given that none of the problems that originally motivated Elliot to lobby for Dorsey to leave have improved, it seems likely the market still had concerns.
Dorsey has not shared anything yet about what he is planning to do next. He is famously a Bitcoin enthusiast so many are hoping he will turn his attention to the space full time (he remains CEO of Square, which has a number of Bitcoin focused product initiatives). Dorsey was the most pro-crypto of the major tech executives, so his departure seems like a loss for mainstream adoption. On the other hand he has only ever been interested in Bitcoin (in simpler times he would have been called a maximalist) so it might also signal increased willingness by Twitter to integrate with other cryptocurrencies. In fact, the day after the announcement Twitter began testing a new Ethereum tipping feature.
I don’t know enough about the inner workings of Twitter to know what this change will mean for crypto, but I will say I am happy for Dorsey himself. CEO of Twitter seems like a shit job. I hope he gets more joy from whatever he takes on next.
Other things happening right now:
I’ve actually used decentralized Uber as my go-to example for why some applications make no sense to decentralize. The last time I used it I was accused of cherry-picking a bad example to strengthen my argument. But look! This is the bad idea that never dies. I will probably spend the rest of my life continuously re-explaining why Uber does not need a blockchain.
Federal Reserve Chair Jerome Powell spoke to Congress on Tuesday morning and declared that it was time to retire the word "transitory" when describing inflation. No doubt Powell is a subscriber to the newsletter and felt emboldened after our last post observing that conventional wisdom no longer considers inflation transitory.
Bloomberg @businessNEW: Powell says it's time to retire the word "transitory" regarding inflation https://t.co/X4KdvBTmrZ https://t.co/DcmgrcImio
Enterprise software company (and backdoor leveraged Bitcoin margin trade) MicroStrategy has apparently purchased ~28% of all new Bitcoin mined since it began adding bitcoin to its balance sheet late last year. I saw lots of positive reactions to that stat but honestly it seems alarming to me. Obviously no wave of institutions followed MicroStrategy’s example and we’ve talked before about the risks implicit in their trade. It isn’t an existential threat to Bitcoin but it is a good reason to be less confident in the price growth this year.
Presented without comment:
Side note: you can read more about the early days of ICOs in my two part history of how the pyramid scheme keeps reinventing itself over and over in crypto. It traces the arc of fundraising in cryptocurrency from the inception of Bitcoin through the emergence of DeFi and puts those developments in historical context.