On Maxi-ism, Community, and Bitcoin

The train ride up the Hudson, sweet vaporwave aesthetic.

I have a confession to make, I’m a Bitcoin maxi. Well, sort of. I add that qualifier because I’m not a maxi maxi who believes Bitcoin is the Sauron-esque one crypto to rule them all. But I do believe that Bitcoin to $1 million is an inevitability in the next two decades and the Bitcoin Whitepaper was part of the troika of writings that crypto-pilled me¹. So while I may not be a capital ‘M’ Maxi, I am further to the right on the distribution curve of Bitcoin maxi-ism than your average resident of the Cosmopolitan Metaverse.

I’ve been thinking about Bitcoin and maxi-ism because I’ve spent the last three days in a house in the western Massachusetts woods with a capital ‘M’ Bitcoin Maxi. Capital ‘M’ Maxi as in moved a vast majority of their networth into Bitcoin several years ago Maxi and, in standard Bitcoin Maxi behavior, cared more about privacy than collaborating in the great online game when I mentioned I was writing this piece. We’ll call this individual BM.

In all relationships the honeymoon phase eventually ends. As I got deeper into the world of crypto/web3, my crush on Bitcoin waned. The promise of crypto and defi is to include the entire world in the global financial system, and I wasn’t convinced Bitcoin could scale to meet the needs of the world². Before boarding the Ethan Allen express up the Hudson, I told BM I wanted to understand how Bitcoin scales for billions of users.

On a hike we talked through a few solutions, of which I found the Lightning Network most compelling. The Lightning Network probably gives Bitcoin the same chance at reaching the requisite scale that your favorite L2 provides your L1 of choice (e.g. Polygon on Ethereum). After our hike, I had less uncertainty about Bitcoin’s scalability, but realized Bitcoin’s next obstacle required more than the clever technological innovation. That’s because Bitcoin’s greatest remaining challenge is community.

Beyond technical challenges, successfully scaling a crypto protocol to billions of users requires three characteristics of its community:

  1. Willingness to transact and spend
  2. Ability to build the ecosystem
  3. People welcoming and growing the community

Let’s consider why each of these groups poses a challenge for Bitcoin.

Willingness to Transact and Spend

It’s not entirely surprising that people who created the concept of HODLing don’t really want to spend their Bitcoin. To cherry-pick data that backs up this claim, consider these daily volume charts of transactions on Bitcoin and Ethereum.

2021 Average Daily Bitcoin Transactions = ~300,000/day

I have no rights to this image, it’s from https://ycharts.com/indicators/bitcoin_transactions_per_day

2021 Average Daily Ethereum Transactions = ~1,250,000/day

I have no rights to this image, it’s from https://ycharts.com/indicators/ethereum_transactions_per_day

For most of 2021, Ethereum has averaged about 4x the daily number of transactions of Bitcoin³. What’s most damning about this trend is that Ethereum transactions regularly cost 40–75x more (on the low end!) than Bitcoin transactions. Though it’s a bit of a broad brush to paint with, Galen Moore of CoinDesk neatly sums up this idea by explaining that people buy Bitcoin “not because they expect to be able to go to the store and spend it, but because they expect it to hold its value.”

BM argues that macro trends may shift and cause Bitcoin HODLers to become Bitcoin transactors. After all, it grows increasingly difficult not to spend Bitcoin if merchants around the world demand Bitcoin as settlement for invoices. The point is salient, but BM and I are a decade or three apart about when we think such global shifts might occur.

Ability to Build the Ecosystem

In addition to a willingness to transact and spend, a cryptocurrency with aspirations of global scale also needs the ability to actually build the ecosystem. To do so, a community needs a supply of developers and the ability to create complicated smart contracts. These aspects are important in globally scaling a crypto because a populated ecosystem is a prerequisite for adoption⁴.

I am not a dev but I am not convinced Bitcoin has the community of devs or the programmability to build the necessary ecosystem to support global scale. I am also not the only one who feels this way as seen in a very recent tweet by Ryan Selkis, founder/CEO of Messari, a leading crypto analytics and market intelligence firm.

https://twitter.com/twobitidiot/status/1473992921653420036

People Welcoming and Growing the Community

Assuming early believers become willing to transact and devs build a vibrant ecosystem in which the world can participate, Bitcoin still needs to onboard the rest of the world as users. A steep hill to climb considering that the ethos of the Bitcoin community favors privacy and individualism over openness and community.

That’s a stark contrast to the broader crypto/web3 environment where community members, both doxxed and anon, are focused on inclusivity and trying to get folks involved. For at least the next decade, acts of welcoming and holding-your-hand-out to onboard and continually assist your fellow community member are vital to scaling your crypto of choice globally.

First, barring few exceptions, the UI/UX across the crypto-universe is terrible. Sometimes you literally need to tell someone which buttons to push. Beyond that, there is undeniable risk. Why? Because to onboard the world people will need to put real money at risk. To become the solution for billions, hundreds of millions of people will have to feel comfortable putting savings and retirement accounts they may have worked for years to accrue into Bitcoin, not just techbros yolo’ing for lols and gains.

Perhaps the most important reason the crypto community needs to be welcoming to achieve global scale is because we are welcoming people to the revolution. Crypto and defi represent an opportunity to empower billions and fundamentally change the global financial system. On the journey from speculative investor to crypto-revolutionary, few people crypto-pill themselves. Almost everyone in the crypto community has a story of the friend, acquaintance, or anon who started their journey down the rabbit hole.

This third challenge is both the most abstract and likely the most difficult to resolve. While macro trends can force HODLers to become spenders and brilliant devs can find ways to improve the ecosystem, transforming the community will require a level of buy-in that seems at odds with the individualist nature of bitcoin’s earliest adopters.

Do I think all roads lead to bitcoin and that defi’s inevitable rise over the next 15–25 years may merely serve as a trojan horse? I think there’s a real chance. But until Bitcoin fixes its community problems it will be difficult to reach global adoption and I will remain a lowercase ‘M’ Bitcoin maxi.

As always, nothing above can be considered financial advice, it is purely informational. Many thanks to my friend Bitcoin Maxi for the hospitality, education, and conversation this week and to Simon Kamerow for his edit.

¹ For those curious, the other two writings were A Changing World Order, because it shifted how I thought about macro trends of empires and reserve currencies, and The Deficit Myth, which — perhaps counterintuitively to the author’s intent — convinced me deficits are a huge problem because there is no solution for inflation.

² Neither can Ethereum. Ethereum is not inclusive but that is a topic for another essay.

³ These charts were pulled from ycharts.com and are not perfect. For example, it is unclear if the numbers include transactions on the Lightning Network on Bitcoin or similar L2 solutions on Ethereum.

⁴ Matthew Hine, CPO of Radix DLT has a great breakdown of this concept in the first half of this video.

the best API is assuming positive intent