The great division in the cryptocurrency industry

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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. Such as he noted the journalist Ryan Broderick, 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 certify 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 and in the last year, also thanks to celebrities, singers and actors who 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 took a bad eye on the competition, 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 hiding “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 in the trading scene. cryptocurrencies “.

Today the Bitcoin currency is still the most used and the one with the market capitalization greater (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 only invests in Bitcoin, refusing publicly the possibility of opening up to Ethereum. For maximalists like him, all cryptocurrencies that are not Bitcoin (kindly called “shitcoin”, by shitshit) just don’t count: “I don’t even take them into consideration”, he said last year, calling Bitcoin “the native currency of the 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, has no central banks nor has it received initial investments capable of undermining its autonomy, which instead many other cryptocurrencies have done. Ether, for example, self-funded itself in 2014 with a fundraising method known as an ICO (initial coin offering, or initial coin offering), in which investors buy an initial sum of cryptocurrencies hoping that over time it will acquire greater value, and to be able 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 that attract users and investors at a later time with their own product. “Bitcoin, on the other hand, had an impartial launch”, explained to Motherboard Jimmy Song, one of the most active maximalists in the industry.

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 industry 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 they have often defined Bitcoin and the culture linked to crypto as a sect, or a closed environment, governed by strong charismatic leaders, from which it can be difficult to get out. If Bitcoin is a cult, 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 dolar or the dollar) by universally adopting the cryptocurrency. Only one.

Such as it is read on the Phemex site, a service for the exchange of cryptocurrencies, for hyperbitcoinization we mean the moment when the world will abandon the old idea of ​​money (a process called demonetization) to adopt Bitcoin en masse and uniquely, which will act as a “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 dolars; today it is around 36 thousand. This unpredictability makes the use of Bitcoin as a trading currency too risky, effectively making it a speculative financial asset (“crypto-asset” defines it the European Central Bank). Not surprisingly the hyperbitcoinization paints a future where even this problem will 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. Such as he wrote Broderick, «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 harm the spread of Bitcoin, precisely to the advantage of the competition. Especially Ethereum.

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