It’s encountered all over the crypto space these days — the idea that the only correct way to “Bitcoin” is to hold and not spend, and to desperately lash out on crypto Twitter at anyone who thinks differently. But what ever happened to Satoshi’s original call for an “electronic payment system based on cryptographic proof instead of trust”? To see what all this division really comes down to, a more in-depth examination of Bitcoin’s trajectory from inception to current status is in order.
Calls for an Electronic HODL System
watch Justin Bons, Founder & CIO of Cyber Capital, recently weighed in on the BTC store of value debate on Twitter, writing: “BTC now needs to compete as a Store of Value only … A purely speculative asset is not a good SOV at all.”
#BTC now needs to compete as a Store of Value only, a purely speculative asset
— Justin Bons (@Justin_Bons) September 29, 2019
Bons, who has announced he will soon be releasing his paper “Theory on Bitcoin governance: the three stage model,” speaks from a significant perspective and degree of experience. Cyber Capital has been in the crypto investment arena since 2016, and as Bons has previously detailed, noticeably does not invest in Bitcoin Core due to issues with its lack of utility and high fees.
This is really where the fork in the road, and not just the Bitcoin blockchain, begins. One camp seems to believe that Satoshi’s original whitepaper prescription, “What is needed is an electronic payment system based on cryptographic proof instead of trust,” was just idle talk, where the other takes the idea of a permissionless payment system very literally. This is ultimately the reason Bitcoin Cash split from Core on August 1, 2017 — because payments on the BTC network were becoming increasingly expensive and difficult.
Store of Value and Utility Are Synergistic
Although many in the maximalist camp make comparisons between gold and BTC where store of value properties are concerned, the two aren’t very analogous. Gold has a long history of being used and spent as money, and even prior to that, for other applications in jewelry and architecture. This long history of use is one of the main factors driving gold’s evolution into a dependable and solid SoV asset. Everyone was using it. The whole world values it. It makes sense that it came to be a great store of value given its other favorable qualities such as limited supply.
Bitcoin has no such lengthy track record, and no such market ubiquity. Without active and well-adopted use cases as cash on the market, it becomes little more than a speculative asset competing against others which have both SoV potential and active utility. Of course, SoV itself can be said to be a kind of utility, but (where money is concerned) it’s one that has always depended economically on an asset’s active and widespread use in the market.
It wasn’t so long ago that Bitcoin Core was widely being promoted as “money without borders.” This is also well in line with Satoshi Nakamoto’s positions as delineated in the Bitcoin whitepaper itself, which expounds on the virtues of “A purely peer-to-peer version of electronic cash” that “would allow online payments to be sent directly from one party to another without going through a financial institution.” Payments and use as cash have been absolutely central to Bitcoin’s value proposition since day one.
To the maximalist who might argue that market salience is possible without use as cash (Van Gogh’s paintings are an excellent store of value, after all, and are not used as money) there’s a big oversight being made. A painting by Vincent Van Gogh is one of a kind. Irreplaceable. The open source code that is Bitcoin is not. It can be easily replicated. And — though a significantly taller order — so can the network, should the existing one fail. To imagine that crypto economies do not evolve according to the same market realities governing other assets seems to be a staple of the new maximalist fanaticism.
The Most Saleable Good Will Win
Carl Menger, founder of the Austrian School of economics, described money as the most saleable good in an economy. That is to say, the good which is most able to be traded and exchanged for other goods, assets, or currencies. Gold has historically been the winner, given that virtually no matter where one goes, it is accepted as payment. Times are changing though, and crypto has great capabilities that gold does not. For example, it can be sent anywhere in the world, instantly, for almost zero fees.
It stands to reason that the new top money will not be a mere “hodl and wait” store of value, then, but one that is actively used, accepted, held and traded by the market. After all, what value is there to be seen in a monetary-use code and network that cannot readily and easily facilitate the flow of value itself? It’s not a masterwork of art. The value proposition of Bitcoin depends on use as money.
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