Some Call Bitcoin ‘Boring’ – Here’s What They Forget
Just like with shoe and car brands, people become tribal to their investments as they integrate them into their identity. The same is happening with popular cryptocurrencies, such as Bitcoin. In many instances however, the original vision – and simplicity – of Bitcoin, is largely overlooked.
Not a Boring Day with Crypto Wars
After a decade of spearheading and setting up the crypto market, Bitcoin’s perception is shifting. This is a result of both familiarity and the formation of exciting new sub-markets in less than two years: NFTs, DeFi tokens and GameFi tokens. Moreover, generalist blockchains that rely on smart contract flexibility tend to create an impression that Bitcoin is becoming obsolete.
This argument partly follows on the back of the long-standing Proof-of-Work vs. Proof-of-Stake dichotomy. It suggests that Ethereum, along with other smart contract PoS blockchains, are more advanced due to less energy used in securing the network.
More importantly, smart contract platforms like Ethereum, Solana or Avalanche are Turing-complete. Meaning, they use a programming language that has a universal application range, making it easy to create smart contracts. To illustrate, a $5 calculator is limited compared to an advanced scientific calculator with programmable functions.
However, it is not exactly the case that Bitcoin’s blockchain is not Turing-complete. Rather, it removes flexibility where it is not needed to not introduce vulnerabilities. Otherwise, Bitcoin is Turing-complete. This was done with purpose in mind, to reduce complexity and potential code exploits. In other words, Bitcoin was made to persist throughout time, withstanding tampering because its foundation Proof-of-Work is based on a physical stake.
Donald McIntyre, the founder of Etherplan and blockchain researcher, emphasized that this was Bitcoin’s intention all along.
“The brilliant invention by Satoshi Nakamoto was to anchor these subjective, thus insecure systems, to an objective physical base. Without that anchor, proof of stake distributed ledgers basically become traditional subjectively managed systems again.”
Due to wider applicability, PoS blockchains have a long history of smart contract breaches and exploits. The most recent of which happened when the Polygon (MATIC) network had to commit an emergency hard fork to seal off a smart contract bug.
Now, imagine if that were to happen to Bitcoin. What would happen to its reputation and long-term prospect? That is to say, assets that are created for the long-haul must by necessity be less exciting, or in other words, boring. If not, one would soon wish they were boring.
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What about Bitcoin’s Deflationary Nature?
As reported in August, after Ethereum implemented its EIP-1559 coin-burning mechanic, Ethereum laid a course from inflationary to deflationary future. ETH price corresponded with a 45% price surge within a single month. This burn-rate – removal of coins from circulation – continued to the point of reaching the $5 billion milestone.
However, this doesn’t mean that Ethereum has suddenly leveled up with Bitcoin’s deflationary nature. Rather, ETH inflation decreases depending on the network’s traffic.
By the same token, Bitcoin’s supply has increased by 1.78% YTD, with only 10% of its supply left for mining and without having to keep installing new upgrades to mitigate enormous ETH gas fees.
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What about Bitcoin’s Lack of Flexibility?
Although Ethereum boasts greater usability thanks to its smart contracts, it has also become unaffordable for the common user. As a result, a number of Layer 2 solutions have emerged, in the form of Loopring or Arbitrum.
Again, by the same token, Bitcoin too can employ Layer 2 solutions to address both its fees and smart contract functionality. Lightning Network has drastically lowered transaction fees and increased speed, heading to the level of service one would expect from Visa. At the same time, following the Taproot upgrade, Bitcoin’s usability will increase while still retaining time-tested PoW security.
When we take all of these pros and cons into account, and consider why a system holds certain features, we see that sometimes, perceived weaknesses become strengths. More importantly, we see that weaknesses of one blockchain can be mitigated by another, and vice-versa.
While metaverse coins, NFTs and DeFi yields seem more exciting compared to Bitcoin, the latter is poised to become more mature and less volatile. For many, that is a preferable status. Not exactly as gold, but gaining the status of an ‘asset’ nonetheless.
Recall the words of Satoshi Nakamoto, in “Bitcoin: A Peer-to-Peer Electronic Cash System” – long before NFTs or smart contract platforms were conceived:
The network is robust in its unstructured simplicity.
Do you think crypto maximalism is inherently toxic and too lacking in critical nuance? Let us know in the comments below.