Bitcoin's Role in the Era of Emerging Cryptocurrencies

An underrated part of the orange pill experience is diving into the value proposition of other crypto tokens to then start questioning Bitcoin’s future. Listening to some quirky computer programmer on YouTube explaining that ‘since Bitcoin is slow and expensive, it can never have worldwide adoption, but MonkeyCoin420 can process transactions faster than Mastercard, so this is now the future of money,’ we start questioning whether we’re hodling the right coins or whether our thoughts on Bitcoin are antiquated. This thinking builds on our innate understanding that since technology is ever expanding and moves in one direction, any newer technology is superior to previous iterations otherwise it wouldn’t exist.

But this surface level assessment of technology often overlooks what we’ve lost to obtain this.

Allow me to explain.

My favourite bitcoin slogan “there are no solutions, only trade-offs” is perfectly conveyed in the bitcoin trilemma below .

Bitcoin Trilemma

The idea overall idea is the following,

1. You can only achieve two out of the three components
2. Any improvement one section will result in a regression in another

Take Solona for example. Assuming their claim that their transaction speed on the base chain can service all the world’s digital transactions, the response is not to suddenly sell all your bitcoin to buy theirs, but rather question what they gave up achieving this.

As for most cryptocurrencies, the answer is decentralisation.

Bitcoin’s hard fork; Bitcoin Cash

The blocksize war from 2015-2017 was boiled down to this very trade-off between speed and decentralisation.

In short – the argument for ‘big blockers’ and ‘small blockers’ is summarised as

Smaller block size= easier to store transactions = more nodes = increased decentralisation.

Larger block size = more transaction in each block = faster base chain layer.

Both can be true at the same time and the results of this experiment can be observed in a simple price chart below:

Bitcoin Cash priced in bitcoin since inception: source

The lesson from this is that speed isn’t everything and as [Austrian] economics teaches us there is no magic formula which quantifies this trade-off, we only have the collective subjective views of willing market participants (the price).

Ultimately, the small blockers won out and running a full bitcoin node today uses around 650 gigabytes (which is low in today’s computing standards) and helps create a low barrier entry to uphold bitcoin’s decentralisation.

This will always be a prominent component of freedom money.

There are no easy solutions a fancy line of code can address that doesn’t bring negative consequences. To think of bitcoin in such a way is to imply that you can upgrade the laws of thermodynamics itself, you can’t have it all.