The great division in the cryptocurrency industry
Loading player In early April, “Bitcoin 2022” was held in Miami, the annual conference dedicated to the world's most widespread cryptocurrency, held after a year of strong growth for activities related to blockchain, the technology on which cryptocurrencies are based. As the journalist Ryan Broderick noted, however, “it was not Bitcoin, but Ethereum that was responsible for the boom in the crypto sector in 2021”.
Ethereum is the name of a new generation blockchain with respect to Bitcoin, which also functions as a platform for the creation and publication of so-called “smart contracts”, agreements in which compliance with terms and clauses is controlled by a software eliminating the need for an intermediary. Ethereum also has a native cryptocurrency, Ether, but it is best known for some of its applications which in recent months have attracted a lot of media attention, as well as massive investments. Among these are NFTs (Non-Fungible Tokens), digital certificates that attest to the ownership and authenticity of a product on the blockchain, and DAOs (Decentralized Autonomous Organizations), organizations and collectives that are managed through the blockchain.
It is above all the NFTs that have attracted attention and have stirred media and economic interests in the last year, also thanks to celebrities, singers and actors who have advertised their involvement in this sector on social networks. The success of these products has only widened the gap between investors who have remained loyal to Bitcoin and newcomers.
This division was described in 2014 by programmer Vitalik Buterin, the founder of Ethereum. Already at the time, some of the most avid Bitcoin enthusiasts viewed the competition with a bad eye, criticizing the very existence of alternative blockchains: in jargon, this type of investors are called “Bitcoin Maximalist” (or “Maxi”). According to Buterin, behind maximalism was “the idea that an environment composed of several competing cryptocurrencies is undesirable, that it is wrong to launch” yet another currency “and that it is right and inevitable that Bitcoin reaches a monopoly position on the scene. of cryptocurrencies “.
Today the Bitcoin currency is still the most used and the one with the largest market capitalization (800 billion dollars against 379 billion of Ethereum), but it is undeniable that the market has changed drastically, opening up to hundreds of different proposals. Not only that, for millions of people the word “crypto” refers to more and more products that do not have much to do with Bitcoin, such as the Bored Ape Yacht Club or the CryptoPunks, the two best known NFT series.
One of the most well-known “maxi” in the sector is Jack Dorsey, co-founder of Twitter, a social network of which he was CEO until last November, when he decided to deal full-time with the Square payments system, immediately renamed Block ( in honor of the blockchain). As a maximalist, Dorsey invests only in Bitcoin, publicly rejecting the possibility of opening up to Ethereum. For maximalists like him, all cryptocurrencies that aren't Bitcoin (kindly called “shitcoin”, from shit, shit) just aren't worth it: “I don't even take them into consideration,” he said last year, calling Bitcoin “the native currency of Internet”.
Among the reasons why the maximalists aspire to the dominance of Bitcoin there is also its origin, considered more “pure” and transparent than that of the competition. The currency, in fact, does not have central banks nor has it received initial investments capable of undermining its autonomy, which instead many other cryptocurrencies have done. Ether, for example, financed itself in 2014 with a fundraising method known as an initial coin offering (ICO), in which investors buy an initial sum of cryptocurrencies hoping that over time it will gain more value, and in order to access the services offered by the startup in question. It is an increasingly widespread mechanism, which however the maximalists judge badly as opposed to the traditional one adopted by startups, which attract users and investors at a later time with their product. “Bitcoin, on the other hand, had an impartial launch,” Jimmy Song, one of the most active maximalists in the sector, explained to Motherboard.
Among the accusations leveled by the Bitcoin maximalists against the crypto world is essentially having abandoned the focus on decentralization and – above all – independence from any form of central power. The sector today would be more interested in chasing the current currency or NFT than building a new financial and economic model.
To push the maximalists to deny any potential evolution of the sector is also the hope in a future phenomenon that they call hyperbitcoinization. The term was coined in 2014 by Daniel Krawisz, a researcher at the Satoshi Nakamoto Institute, who used it to indicate “a voluntary transition from a lower to a higher currency”, the adoption of which would be caused by “a series of individual entrepreneurial choices rather than by a single monopolist playing with the system “.
Many analysts and investors have often defined Bitcoin and the crypto culture as a sect, that is, a closed environment, governed by strong charismatic leaders, from which it can be difficult to get out. If Bitcoin is a sect, then hyperbitcoinization is its great promise, the dream of a better future and the scenario for which members must strive. As such, it is not known when it will happen, but the most convinced maximalists think it will be the moment when the world will completely abandon the fiat currency (such as the euro or the dollar) by universally adopting the cryptocurrency. Only one.
As we read on the website of Phemex, a service for the exchange of cryptocurrencies, by hyperbitcoinization we mean the moment in which the world will abandon the old idea of money (a process called demonetization) to adopt in mass and univocally Bitcoin, which will act as ” safe haven, medium of exchange and unit of account “.
It is an unlikely scenario today, given the growing influence of Ethereum in the sector, also because it is difficult to imagine a moment in which cryptocurrencies will actually be used as currencies, in the true sense of the word. In fact, their trend is too fluctuating and unpredictable to be used in the payment of daily goods: the risk is to pay out a certain amount of Bitcoin today and regret it in the future, when the value of the currency will have changed drastically.
To give an idea of the phenomenon, only last March a Bitcoin had reached a value of about 42 thousand euros; today it is around 36 thousand. This unpredictability makes the use of Bitcoin as a trading currency too risky, making it in fact a speculative financial asset (“crypto-asset” defines it by the European Central Bank). It is no coincidence that hyperbitcoinization paints a future in which this problem will also be solved and Bitcoin will be the only currency in use around the world.
Beyond the bizarre messianic tones of this rhetoric, the maximalist fringe, albeit a minority one, demonstrates the persistence of cultural divisions within the crypto world. As Broderick wrote, “the Ethereum evangelists want to remake the internet”, while those of Bitcoin “want to deconstruct the whole world”. Given that the crypto sector seems increasingly directed towards a wide range of currencies and products, the maximalist position could damage the spread of Bitcoin, precisely to the advantage of the competition. Especially Ethereum.