Am I a Bitcoin Maximalist?

Talking with Jeff Tucker, he wondered how I ever got sucked into the Bitcoin Maximalism cult. He obviously sides with people like Aaron Day, Roger Ver, Steve Patterson, the ones who bemoan the “hijacking” of Bitcoin. See Steve Patterson, Hijacking Bitcoin: The Hidden History of BTC. Am I a maxi? Let’s think about it.

I did speak at the conference Jeff arranged in 2013: “The History, Meaning, and Future of Legal Tender,” Crypto-Currency Conference: Bitcoin and the Future of Money (Atlanta, Oct. 5, 2013) (KOL085 podcast). I had recently lost a bet about bitcoin with Vijay Boyapati, as I recount in Comments on Block and Barnett on the Optimum Quantity of Money (see also Bitcoin Confiscation vs. Gold Confiscation).

As I wrote there:

In this email, back in 2011, at the dawn of bitcoin, I said bitcoin seems almost like an “ideal money”. Too bad I didn’t act on it… :

(IN the bitcoin thing with digital currency, you can arbitrarily increase the granularity by adding more digits; in such a digital numeraire (which I confess I sort of think is the ideal money, in some sense, though not in a practical sense given some political and other problems), you never need to increase the supply at all (once it reaches its asymptotic maximum), because any supply truly is enough: you never face the granularity problem you guys allude to.

The “political problems” I referred to was my belief that if Bitcoin were to gain steam and look like it might succeed, the state would sense this threat and stamp it out, much like FDR outlawed gold in the 1930s. This is why, on Aug. 15, 2012, I made a $100 bet with Vijay Boyapati that by the end of 2012 the price would be much lower than it was then. It was about $13.50 at the time. I said it would be less than $0.65 by Aug. 15, 2013, or one-twentieth its current price. By Feb. 2013 the price had almost tripled to $30 so it was clear I would lose the bet, so to cut my losses I paid Vijay $90 in 3 bitcoins purchased from Coinbase. And so it started.

And as I wrote on a recent tweet,

Well my problem with it is this. Bitcoin may be in the process of monetization. We have never seen anything like this in real time, especially not a non-physical commodity, so nobody really knows what is going to happen–nobody on either side. If it monetizing its value will go up a lot before it plateaus, and that means it is better to spend fiat and to HODL for now. Once it is closer to plateauing and monetization then it makes more sense to use it, plus the tax situation may be clearer by then.

But the real problem with these promoter types is they seem to believe bitcoin needs rah rah promoters to make it, and that you can push it along by exhorting people to “use” it. It’s like liberty: either it works of its own logic or it won’t work. If BTC really works it won’t be because of promoters pushing it, it will be because it solves a real problem (which I think it does – see https://stephankinsella.com/as_paf_podcast/kol337-wasabikas-15-you-dont-own-bitcoin/ and https://stephankinsella.com/2022/10/austrian-economics-discord-conference-jan-2023/

Anyway, so am I a maximalist? I’m not sure. Depends on how it’s defined. Here is my view.

1. A cryptocurrency can be a money. Main thing blocking it is taxes and the inertia of old money and legal tender law. Austrians who think they have a regression theory proof against this are wrong.
2. When and how one will or can emerge nobody knows, and if it happens we will see it happen in real time. Store of value, usage, and so on. Anyone who pretends they know how this will proceed is guessing.
3. It seems to me you need one that is permissionless and censor proof and peer to peer and that cannot be inflated. This rules out lots of possible cryptocurrencies.
4. It seems to me you need only one, not multiple currencies, and that if one ever becomes money it will be the only one, and all the others will fade into hobbies or irrelevancies. That is one place I disagree with the Haykeian take. Yes they can compete but only until one wins. There is a natural tendency towards one, worldwide. As Hoppe writes, “the competition between monies qua media of exchange inevitably leads to a tendency of converging toward a single money—as the most easily resold and readily accepted commodity.” ¹
5. I am persuaded as of now that you need proof of work not proof of stake. That rules out many. But I could be wrong.
6. It seems to me that of the thousands of cryptocurrencies extant now, one of them is likely the one to be the best candidate for a future money.
7. Given bitcoin’s predominance I think it’s the best one to bet on. It’s as good as any other and better than others in many respects given its origin and name and network effects.
8. I do not think its small block size is a problem at all since the cost of increasing it is too high and you can work around this with second layer solutions.
9. At the present then I invest in bitcoin only as a speculation. I think it’s unlikely it will ever work in my lifetime, it’s a gamble, but it’s not too much of a longshot. Say, 20% chance of success. But what do I know. It’s still an asymmetric bet worth taking.
10. The way the big blockers whine about the hjacking is stupid. It’s like you guys think we had one small random moment of time, say from 2012 to 2017, before PayPal and Venmo and Zelle made the “you can pay easily” aspect of BTC irrelevant. The Big Blockers, even around the time of your Atlanta 2013 conference, were focused on how neat the technology was, but it really wasn’t solving a problem just yet. Dollars work fine for everyday transactions and we already had Visa and Mastercard, and then PayPal and the rest emerged. I was there at Atlanta too ² and I also was not imagining that if BTC ever did become a global money then its value would have gone from, what, $100, to maybe $10M. If I had realized that then, I would have realized that it’s irrational to spend it during the adoption phase, and not even necessary because during this phase Dollars are still legal tender and work fine for transactions, not to mention that there are tax complication costs to spending bitcoin. If I had realized that it’s irrational to spend or “use” bitcoin during the adoption phase I would have concluded sooner that the big blockers’ worries make no sense, since you can never make the block size big enough to avoid second layer solutions without unacceptable costs in centralization etc.
11. Does this make me a small blocker or a maxi? I don’t know. I am not confident BTC or any other crypto will ever work; I hope one will and I think there is a reasonable chance. I think the only purpose of blockchain is as a backbone for a cryptocurrency; people who say that bitcoin/crypto sucks but the blockchain has potential for recordkeeping etc., have it backwards. Smart contracts make no sense, keeping records in a blockchain is stupid, using bitcoin for a $3 cup of coffee is not an issue. (See LIBERTARIAN ANSWER MAN: Smart Contracts; others here.)
12. So for now I’m observing, waiting, HODLing, and speculating.
13. One more thing: I do not trust a single person who claims to know what’s going to happen with BTC–not the maxis and HODLers and promoters and activists, and certainly not the whining big blockers and smart contract and “blockchain is amaze” types. In my view, nobody knows.

1. Hoppe, “How is Fiat Money Possible?—or, The Devolution of Money and Credit,” The Economics and Ethics of Private Property. [↩]
2. KOL085 | The History, Meaning, and Future of Legal Tender (Crypto-Currency Conference, Atlanta, 2013). [↩]