Every month it seems there is a new hot project that is promising to be faster, to be more stable, to operate better as money. There is no shortage of promises from developers or venture capitalists who want to attempt at displacing Bitcoin as the greatest form of money on earth. I want to tell you why this is literally impossible.
What matters are 4 things:
– decentralization
– limited and predictable supply
– censorship resistance
– network effects & adoption
Let’s break these down.
Decentralization
The only reason Bitcoin is valuable as money is because it is 100% decentralized and censorship-resistant. We are seeing right now, the mass exodus of miners leaving China, and moving their mining businesses across the globe, taking the decentralization further. More important though, Bitcoin started with no pre-mine, and is truly decentralized due to the nature of the mining, nodes, and global adoption of rational economic actors. Miners validate history, and get paid for security in a trustless way. Bitcoin has a fixed supply and is protected by its security model, and because nodes validate the work, the consensus is achieved through this decentralization.
Limited and Predictable Supply
Bitcoin has a fixed supply of 21 million, miners are incentivized to enforce the supply, this is how they are paid. Personal nodes, which anyone can run at home validate the transactions before adding them to the blockchain. This monetary policy and fixed supply is what makes Bitcoin unique, irreplaceable, and increases demand. The fixed supply is enforced by the network participants. Zero trust is required and each individual economic actor enforces these rules on their own, thanks to no central authority. Before, I wrote about the hard cap, (read here), and how people have tried to change the supply of Bitcoin, and failed.
Censorship Resistance
The more decentralized Bitcoin becomes, the harder it becomes to change the rules of the network or to change/reverse transactions. As more people use the network, each user represents a smaller % of the network. This immutability of the Bitcoin blockchain further pushes its decentralization, adoption, and desirability to use the network. (WHY THIS MATTERS: literally this last week a shitcoin fork of Bitcoin was double spend attacked due to lacking security and network effects, read here)
Network Effects and Adoption
I want to share an incredible write-up that NYDIG has created breaking down the Network Effects of Bitcoin, you can read it here. They go into incredible detail, I think you will be encouraged and surprised upon reading the breakdown!
No other project, token, coin, can replicate what Bitcoin has done. It is impossible. What I am seeing happen on Ethereum with proof of stake just further pushes a centralized and banking agenda. Big money can just buy hundreds of millions or billions of dollars worth, then stake, then earn the tokens back. This centralizes and pushes more supply into the hands of few.
We have only one shot at decentralized money that serves everyone on earth, and that is Bitcoin. Limited, censorship-resistant, and fully decentralized. Everything else is just a quirky marketing scheme someone is using to get rich by scamming you, or to take your Bitcoin. You have been warned.