WILL 2023 VINDICATE THE BITCOIN MAXIMALISTS?

As someone who first discovered bitcoin way back in 2012, when I was still on the right side of thirty, I’m aware I’ve got a particular fondness for the original cryptocurrency - something that may well make me more than a little biased. Still, the tumultuous happenings of 2022 have gone a long way to reaffirming the wisdom of Satoshi Nakamoto’s monumental project. For, despite there now being thousands of altcoins, many now argue that bitcoin is still in a class of its own. Indeed, some say that recent events serve to prove that bitcoin is the only crypto with a solid future. And, they could be right.

Bitcoin is still on top

Of course, as anyone familiar with blockchain and crypto knows, in many ways, it's not really fair to compare bitcoin to other cryptocurrencies and protocols. After all, the Ethereum network enabled the decentralised finance (Defi) and NFTs revolutions, while stablecoins like tether have transformed international payments. Meanwhile, the Bitcoin network has remained relatively limited in terms of use cases, and undeniably slow. But, the inescapable fact is that, as a digital asset, bitcoin itself is still way out in front, and is increasingly appreciated as uniquely robust.

While the Terra Luna crisis of May 2022 shook the entire crypto sphere and the spectacular collapse of FTX made for dramatic headlines, bitcoin actually weathered the storm better than many expected. And, while the Ethereum crowd scored brownie points with Greta and co for their move to a more energy-efficient proof-of-stake mechanism, potentially catastrophic regulatory issues are still looming. Meanwhile, both the public and institutions are warier than ever of crypto projects, and asking questions that stakeholders don’t seem able (or willing?) to answer - yes, I’m looking at you Binance and Tether.

At this point, I must stress, that I’m not trying to kick any cryptos in the teeth here. I’m merely pointing out that, as we go into 2023, it's looking increasingly likely that the outspoken crypto maximalists like Michael Saylor and Max Kaiser may actually be right. Yes, I said Max Kaiser may be right - despite his somewhat, erm, ‘abrasive’ manner. But, before you judge me, let me explain. I’m not saying that the likes of Saylor and Kaiser are financial geniuses, but rather that the industry as a whole may have lost sight of the big picture.

Is the crypto space blinded by potential?

You see, the crypto and blockchain space is exciting! The potential of the technology is limitless, and every day there’s some new development that gets techies all hot under the collar. Add to this a large dash of VC money and an enthusiastic social community, and you’ve got an environment that breeds optimism and dreams.

But, the understandable tendency to focus on potential positives has led many to turn a blind eye to two unpalatable, but very real truths. Firstly, that bad actors will always try to harness new technology (and naivety of new technology) for their own nefarious purposes, and secondly, those currently benefiting from being in power will fight tooth and nail to protect the status quo - even if they pretend to be doing otherwise.

And, these two points are exactly why I believe 2022 will be seen as a turning point for the crypto space. The Terra Luna crisis that took down platforms like Celsius and Voyager, and the FTX collapse that is still in the process of claiming victims, demonstrate clearly what happens when bad actors are tolerated. While the regulations currently being formulated in the United States, Europe, and elsewhere will, I suspect, be attempts to stifle freedoms and innovation, albeit thinly veiled as consumer protection measures.

Of course, this represents something of a ‘Catch 22’. For, without regulation, how is the crypto industry supposed to prevent bad actors from taking advantage? But, with regulation, how is the industry supposed to harness the true potential of decentralisation? In reality, although crypto exists in a digital, borderless space, in the purest sense, as long as it interacts with humans, it will be subject to our foibles and follies. This includes both the exploitative tendencies of our minds and the self-preserving machinery of state governance we’ve constructed over centuries.

Keep it simple, stupid!

This is why I think Saylor and Kaiser might be vindicated over the coming years. Not because there aren’t hundreds of exciting crypto projects in among the ocean of sh!tcoins, but rather because, to channel the X-Files, just because you want to believe in something, doesn’t make it real. Indeed, while the wider blockchain and crypto industry has been busying itself with chasing potential - including plenty of pipe dreams - while often ignoring or wishing away unwelcome realities, bitcoin has just been doing its thing.

And, that thing is very simple; storing wealth. Yes, it has weathered price volatility and yes, it did upset the applecart to an extent. But, by and large, the very fact that it only does one thing is precisely what makes it so strong. While regulators, politicians, institutions, and the public, might not understand the technical details of hash rates and distributed ledgers, they can easily understand what bitcoin does.

Yes, it's a tired analogy, but bitcoin really is digital gold. In fact, it's better than gold, because it's got a hard limited supply, can be stored and sent anywhere much more easily, and is a lot harder to confiscate. Now, many argue it isn’t like gold based on price behavior, but that’s not the key thing to focus on. The key thing is the utility. Both gold and bitcoin share one simple use case - to store wealth. Yes, technically, you can use them both for payments too, but the fundamentals of them both are super simple and easy to understand.

So, although many in the crypto space itself criticise Bitcoin for not having the utility and use cases of other projects, it is this very thing that has enabled it to dovetail into our world. By that, I mean the real world. Not the world we dream of or see as potentially viable - but the one we have now. Conversely, because many other crypto projects have so many use cases, and are so full of potential (aka complicated) they will inevitably smash themselves against the rocks of the real world.

Maybe, there will be some survivors - some altcoins and tokens that find niche-dependent survivability, but no amount of potential or optimism will move the rocks. But, then again, I could be wrong. Perhaps I’m just in a cynical mood after losing money on Dejitaru Tsuka and maybe Saylor and Kaiser are mad? Maybe the powers that be (the same ones that recently put us all under house arrest, banned us from hugging, and destroyed the global economy) will focus on crafting legislation that deftly combines consumer protection and oversight with freedom?

Really, I want to believe - but if I can’t, there’s always bitcoin.