The Big Divide in the Cryptocurrency Industry

In early April, “Bitcoin 2022” was held in Miami, the annual conference dedicated to the world’s most popular cryptocurrency, which took place after a year of strong growth in activities related to blockchain, the technology on which cryptocurrencies depend. As journalist Ryan Broderick notes, “It wasn’t Bitcoin, but Ethereum that was to blame for the boom in the crypto sector in 2021.”

Ethereum is the name of the new generation of the blockchain in relation to Bitcoin, which also serves as a platform for the creation and publication of so-called “smart contracts,” agreements in which compliance with terms and conditions is controlled by software that eliminates the need for a middleman. Ethereum also owns a native cryptocurrency, Ether, but it has been known for some of its applications which in recent months have attracted a lot of media attention, as well as massive investments. Among them are NFTs (non-fungible tokens), digital certificates that certify ownership and authenticity of a product on the blockchain, DAOs (Decentralized Autonomous Organizations), organizations and groups that are managed through the blockchain.

Above all, NFTs have attracted attention and sparked media and economic interests, and last year, too, thanks to celebrities, singers and actors who announced their involvement in this sector on social networks. The success of these products widened the gap between investors who remained loyal to Bitcoin and newcomers.

This split was described in 2014 by programmer Vitalik Buterin, founder of Ethereum. Already at that time, some of the most enthusiastic Bitcoin enthusiasts took a bad look at the competition, criticizing the existence of alternative blockchains: in terminology, this type of investor is called “Bitcoin Maximalist” (or “Maxi”). According to Buterin, behind the extremism was “the idea that an environment made up of several competing cryptocurrencies is undesirable, that it is wrong to launch ‘another currency’ and that it is right and inevitable that Bitcoin will reach a monopoly position on the digital currency scene.”

Today, Bitcoin is still the most widely used and the currency with the largest market capitalization ($800 billion versus Ethereum’s 379 billion), but it is undeniable that the market has changed dramatically, opening up hundreds of different offerings. Not only that, for millions of people, “crypto” refers to more and more products that have little to do with Bitcoin, such as Bored Ape Yacht Club or CryptoPunks, the two most popular NFT chains.

One of the most famous “maxi” in the sector is Jack Dorsey, co-founder of Twitter, a social network that he was CEO of until last November, when he decided to deal full time with the Square payments system immediately renamed Block (in honor of blockchain). As a radical, Dorsey invests only in Bitcoin, publicly rejecting the possibility of opening up to Ethereum. For extremists like him, all cryptocurrencies that don’t belong to Bitcoin (called “shitcoin”, by shitdamn it) just isn’t worth it: “I don’t consider it,” he said last year, calling bitcoin the “original currency of the internet.”

Among the reasons why extremists aspire to Bitcoin dominance, there is also its origin, which is considered to be more “pure” and transparent than the original competition. The currency, in fact, does not have central banks and has not received initial investments capable of undermining its independence, which is what many other cryptocurrencies have done. Ether, for example, funded itself in 2014 by a fundraising method known as an ICO (Initial coin offer, or initial coin offering), whereby investors buy an initial amount of cryptocurrency in the hope that over time it will gain more value, and be able to access the services offered by the startup in question. It is an increasingly pervasive mechanism, yet extremists judge it poorly in contrast to the traditional way of startups that lure users and later investors with their own product. “Bitcoin, on the other hand, is a neutral launch,” he explained. Motherboard Jimmy Song, one of the most active extremists in the industry.

Among the accusations made by bitcoin extremists against the crypto world, he has essentially abandoned the focus on decentralization and – above all – independence from any form of central authority. Today’s industry will be more interested in chasing the current currency or NFT than building a new financial and economic model.

Pushing extremists to deny any possible development in this sector is also the hope of a future phenomenon they call excessive currency. The term was coined in 2014 by Daniel Krause, a researcher at the Satoshi Nakamoto Institute, who used it to refer to a “voluntary transition from a lower currency to a higher currency,” the adoption of which would result from “a series of individual business choices rather than by a single monopolist playing system.”

Bitcoin and crypto culture have often been defined by many analysts and investors as a sect, i.e. a closed environment, governed by powerful charismatic leaders, from which it can be difficult to break out. If Bitcoin is a cult, then the use of hyperbitcoin is a great promise, the dream of a better future and the scenario that members must strive for. As such, it is unknown when this will happen, but the most persuasive extremists believe that it will be the moment when the world will completely abandon fiat currency (such as the euro or the dollar) through the global adoption of cryptocurrency. just one.

As mentioned on the website of Phemex, a cryptocurrency exchange service, for hyperbitcoinization We mean the moment when the world will abandon the old idea of ​​money (a process called demonization) to collectively and uniquely adopt Bitcoin, which will serve as a “safe haven, medium of exchange, and unit of account.”

It’s an unlikely scenario today, given the growing influence of Ethereum in this sector, also because it’s hard to imagine a moment when cryptocurrencies are actually being used as currencies, in the truest sense of the word. In fact, their direction is too volatile and unpredictable to use to pay for everyday goods: the risk is to pay a certain amount of Bitcoin today and regret it in the future, when the value of the currency changes dramatically.

To give an idea of ​​this phenomenon, only last March Bitcoin reached a value of about 42 thousand euros; Today it is about 36 thousand. This unpredictability makes using bitcoin as a trading currency extremely risky, making it a speculative financial asset (“crypto assets” defined by the European Central Bank). It is not surprising that excessive currency He charts a future where this problem will be resolved and Bitcoin will be the only currency in use around the world.

Besides the peculiar Christian undertones of this discourse, the extremist margin, albeit a minority one, illustrates the persistence of cultural divisions within the crypto world. Like he wrote Broderick, “Ethereum advocates want to re-create the internet,” while Bitcoin proponents “want to break up the whole world.” Given that the cryptocurrency sector seems increasingly oriented towards a wide variety of currencies and products, the extreme situation can harm the spread of bitcoin, precisely in favor of competition. Especially Ethereum.

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