Giacomo’s thunder storm

In the Bitcoin vs Bcash debate today I saw this thread go down. It will go down as a legendary tweet storm so take a minute to click through and read Giacomo’s fantastic analysis.

Some of my key learnings and takeaways from Giacomo’s legendary tweet storm:

  • This is our one shot to make global sound money, let’s not blow it. No other cryptocurrency will have the same kind of ‘immaculate conception’ that bitcoin had. All cryptocurrencies that came after were basically some combo of enriching the founder, having bad security flaws, or they are just too centralised (and thus not censorship-resistant). If a neutral sound money of is what we wanted, Satoshi anonymously creating bitcoin, and then leaving is the best we could ask for.
  • While Bcash arguments were made along the lines (paraphrasing): “Oh we better hurry and increase the block size now or some altcoin will take over!” – this is wrong, because of the reason above i.e. all altcoins are shitcoins. Bitcoin has time to scale.
  • Giacomo really nails it with pointing out the trade-off here: ease of validation (Bitcoin specifically trying to keep running a full node accessible) vs ease of transaction (BCash with lower fees etc).
  • The trade-offs above, in the extreme failure case, are not equal – even if transaction fees on Bitcoin were to rise very very high, there would still be use cases for Bitcoin as the digital high powered money. But on the other hand, with BCash, if nodes and mining are not decentralised enough, there’s no going back! Transactions could be censored by the government and there’d be nothing left to salvage from this wreckage.

So with the above in mind, see Chris Pacia’s response post. At a high level, the key criticism I would make: There’s not much content addressing the key points of Giacomo’s thread i.e. the fact that the trade-off is not an equal one. Reading Chris’s post as charitably as I can, he seems to think it will all just degenerate back into the same way gold was co-opted and therefore there’s no point having “layer 2”.

Now to some specifics and other arguments:

“Small blockers are not real libertarians”

Most of the people on the small block side don’t strike me as libertarians. Most are people who just got attracted to the large gains and bought into the promise that if they support the Core devs the gains will continue. These people come from many different political ideologies, but I see a good deal of left wing ideology in some of them.

Here I think Chris is basically cherrypicking a few people associated with Core to make it look like Bcash is the free market libertarian side and non-Bcash people are sell outs etc – when really this is not the case. If anything, most of the people who are really into Bitcoin are principled libertarians. They may not talk as much about being libertarians, but that doesn’t mean they aren’t.

“The world doesn’t need another sound base money”

My view is the world was not in need of another sound base money when Bitcoin came along. Nor is that the main innovation Bitcoin brings to the table. The world has had sound base money for thousands of years… gold coins, silver bars, etc.

No, the world really does need sound money. The problem is that gold was too easy to co-opt. Bitcoin is different, and much harder to co-opt. It is much easier to ‘take physical delivery’ of Bitcoin than it is to take physical delivery of gold. Moving gold can take years (here’s an example).

So the layer 2 system ended up being too easy to control and manipulate and became the cause of the downfall of gold standard. What libertarian Bitcoiners who hold the views above are fundamentally advocating is to build the exact same type of gold-standard-like two layer system that failed so hard in the 19th and 20th centuries. Only this time with a digital asset instead of a physical asset as the base money.

So for us, the very fact that it is digital changes the game. It means:

  1. We can build technological solutions on top of it, and some of these solutions can be full reserve e.g. Lightning Network. Full reserve here meaning that the bitcoin user doesn’t actually lose control over the bitcoin, again reducing the likelihood of government co-opting it like gold got co-opted.
  2. Even failing Lightning Network, it’s easier to take ‘physical delivery’ with bitcoin than gold.

 

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