This podcast was hosted by Laura Shin who is a journalist and host of the Unchained podcast. She was joined by Justin Bons, the founder & CIO of Cyber Capital, and Eric Wall, a crypto blogger & investor.
In this episode, they touched on the cons and pros of BTC and other cryptocurrencies and got into a heated discussion on the flaws of BTC.
Read our notes below to learn more.
Different Views on BTC
Justin
● By 2014 he was working full-time in crypto.
● He doesn’t believe that BTC is competitive in the market as a store of value or as a form of money.
● Cyber Capital hasn’t held BTC since 2017.
● The values that attract him to cryptocurrencies are decentralization, censorship resistance, utility, greater distribution of power, separation of the monetary power from the state, etc.
● These values are the same for many believers in BTC as well.
● There are different means to achieve these values.
Eric
● Cryptocurrencies are not enemies to each other; the greater enemy is the government’s monopoly on money creation.
● He tries to focus on the positives of BTC and ETH.
BTC’s Security Model
Justin
● BTC’s long-term security model is likely going to fail within the next 10 to 15 years.
● BTC is envisioned as being a p2p electronic cash, its inflation reduces every 4 years, and fees have to replace the security of the network over time.
● Block sizes are restricted and it has to receive individual transaction fees.
● Justin doesn’t believe that it’s going to happen, therefore, BTC’s security model is going to fail.
● Supporting a fundamentally flawed network does more harm than good to the crypto space.
● He doesn’t believe that BTC won’t exist anymore but it will lose its dominance.
● If BTC increases inflation, then the store of value model is broken.
● ETH’s design is more competitive and BTC must compete with other cryptocurrencies for attention, investment, energy, etc.
● Supporting BCH in the past allowed Justin to be consistent with the initial principles of BTC, he stopped supporting BCH once the project couldn’t deliver on its promise.
Eric
● Eric agrees that the largest problem BTC will face is to secure the network purely with transaction fees.
● Transaction fees are one of the most volatile mechanisms for securing a blockchain, therefore, it’s a risk for consistent security.
● A protocol’s ability to face these challenges depends on the thought leaders in the community and their ideas.
Blocksize War and BTC Maximalism
Eric
● Eric was more compelled by the small block size arguments.
● Preserving the decentralization of the nodes and the ability to verify the blockchain was important.
Justin
● Segwit wasn’t a compromise, but Segwit2x was.
● The fact that segwit2x didn’t happen is a failure of BTC governance.
● Small block-size supporters won because they were better connected and had the ability to play dirty.
● Major communication channels were all censored (Reddit) and it played a large part.
BTC Governance Theory
Justin
● He developed a three-stage theory of governance.
● A blockchain goes through multiple stages of decision-making by different groups, creating checks and balances of power.
● The first stage is the development team and client implementation because someone needs to write the code.
● In BTC’s case, it was less of a debate about block size and more about governance.
● The second stage is the validators, and miners because they have skin in the game.
● The third stage is the market which is the ultimate arbiter.
BTC Culture
Eric
● Winners of the blocksize war got overconfident.
● The headline speaker at conferences in 2017 was Andreas Antonopoulos.
● The headline speaker today is Michael Saylor.
● While Andreas Antonopoulos could speak intelligently about BTC, Michael Saylor lacks comprehension.
● The intellectual climate has died and critical thinkers have been pushed out of the discussion and the stock-to-flow model is a demonstration of that.
● The stock-to-flow model is absurd because it implies that the price of BTC is a programmatic quality of the inflation schedule rather than a function of supply and demand.
● He doesn’t think he can change the culture in BTC, the only thing he can do is to show other people that there is a way to be a Bitcoiner without being a maximalist.
Monetary Aspects of BTC
Justin
● In his view BTC and ETH should be attempting to achieve the same goals, both are base layer blockchains, both aim to be money and money should be a good store of value.
● Money should be fungible which is heavily degraded in BTC, it doesn’t have a lot of privacy technologies.
● Money should be portable, however, BTC is not very portable because it can end up very expensive if a lot of people use it.
● BTC is not very divisible.
● It’s not a good medium of exchange and a store of value, especially if BTC will have to increase inflation in the future.
● Only if you look at BTC in isolation, does it look great.
Eric
● If the arguments given by Justin are true, what are the alternatives - becoming an ETH maximalist?
● It becomes very difficult to fork ETH if you have stakeholders which control assets in DeFi and all these DeFi protocols are interlinked and collateralized by each other - it’s a systemic issue for ETH.
● If ETH has tons of external dependencies, there should be one cryptocurrency that is dependency free.
● PoS is very interesting, however, PoW has very powerful attributes.
Justin
● Justin doesn’t advocate for being a maxi of anything, he is a cryptocurrency pluralist since 2013.
● He views DeFi as a utility rather than a dependency.
● Good decentralized money requires DeFi to support it.
● The fact that ETH is harder to change makes it more resilient and secure.
● The ultimate form of decentralization would be all of the major geopolitical powers in the world competing with each other on the same neutral platform.
PoS vs PoW
Justin
● ETH currently is vulnerable to regulations due to scale, not fundamental vulnerability.
● PoW is far more vulnerable to censorship because miners require a lot of space and electricity.
● There are already several OFAC-compliant mining pools.
● People have to decide which option is better because they have to allocate capital.
● The cost to attack PoS is a lot higher than for PoW.
Eric
● The debate about PoS vs PoW is very nuanced.
● They behave differently in different environments.
● Eric would argue that he would bet on both.
● PoS is not fundamentally more secure, it’s different because it has different advantages and disadvantages and it depends on the attacker.
Final Remarks
Justin
● BTC gives crypto space a bad name because it’s purely speculative.
● He prefers an asset that is useful and the underlying utility gives it value and security.
● What BTC has become today doesn’t represent the original vision that he first signed up for.
Eric
● BTC and ETH are two cryptocurrencies that we can bet on.
● They are so fundamentally different that they are going to be better than the other in different situations.
● Eric suggests being humble and not ruling out the possibility that we might need both.
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