@noise 6 October 2020

The OG Bitcoin business model works fine

I took a break from the insanity that is US politics and their sociopath president and relaxed by reading Tobias Ruck’s article on how Bitcon’s original business model is broken. In a nutshell he argues that: https://read.cash/@TobiasRuck/the-og-bitcoin-business-model-is-broken-979a132e The OG Bitcoin business model is “Buy Bitcoin, Adopt Bitcoin, Profit”. After 11 years we still haven’t a viable replacement for USD, and that is proof that the model is broken. That the existence of other projects with supposedly sound business models is more proof that Bitcoin’s model is broken. I think the article is well written, but let me try to explain why I think he’s completely wrong. False claims of USD superiority Tobias writes that USD is faster, cheaper and more reliable and therefore Bitcoin and it’s forks aren’t a viable replacement for USD. I do agree that cryptocurrencies cannot replace USD easily, but I do not agree that USD is superior in the ways Tobias claims. 0-conf are just as **fast** as credit cards, PayPal and others. You see, when a payment arrives after a credit card payment you don’t actually receive the money until later. What you get is a *payment notification*, which is exactly the same as a 0-conf payment. (And of course a credit card payment only becomes irreversible after weeks or months.) When he writes that credit cards and PayPal are free, he means that it’s *only free for customers*. What he fails to mention (maybe because it doesn’t support the point he’s trying to make or something?) is that businesses are charged 3 or 4% for every transaction, on top of other minor charges. That’s **4% cheaper** to accept Bitcoin or it’s forks. This alone invalidates his central thesis that “there simply is no money to be made directly from replacing the USD with Bitcoin”, but that would make for a pretty short article and there are some other points I’d like to make. He claims that USD is more **reliable** because it’s backed by the government… A few paragraphs after posting a graph of the insane USD inflation. I don’t think that’s what reliable means. He also writes “that there’s always someone you can call to get your transaction handled”. Except that one of the big points of Bitcoin is that not everyone has access to credit cards. 11 years is not a long time Of course not everything he writes is wrong. In particular I think he hits the nail on the head with this comment about USD: it’s basically accepted everywhere Which is the answer why USD is better for payments and it dwarfs any other reason. (Including price stability as if everything was priced in BCH then it wouldn’t matter if it would fluctuate against something else.) Now where we differ is that he thinks Bitcoin no replacing USD in 11 years is a sign of failure, but I think it’s amazing how far we’ve come in *only 11 years*. Bitcoin went from $0 to +$10,000 and is accepted in tens of thousands of shops around the world in only a decade. That’s a world changing event that could be attributed to the OG Bitcoin business model. Maybe it’s the modern generation that has an attention span of a goldfish and needs constant stimulus to not lose focus, but 11 years is a really short time to disrupt something as huge as the USD. Just look at how many decades it took for the car to become mainstream. Or the computer, electricity, the internet or the light bulb. And presenting an alternative to the USD, today’s “world currency”, would be something as big as any of these inventions. It doesn’t matter if Bitcoin was 10x better than USD in all technical aspects, it would still take a long time to convince people to switch. Adoption has been set back by attacks And Bitcoin didn’t even have a normal adoption curve as it has been severely set back by large and disruptive events. (Call them attacks if you like.) The absolutely largest is of course when small blockers successfully changed Bitcoin from a “peer-to-peer digital cash” to a “store of value” coin, causing Steam, Stripe and others to drop Bitcoin as a payment method. Bitcoin Cash has taken up then mantle but the network effect is very difficult and time-consuming to rebuild. I’m convinced the small blockers set back cryptocurrency adoption many, many years. Bad examples of sound business models As proof of Bitcoin’s broken business model he lists some examples: He uses Liquid as an example, but it wasn’t created until after the small blocker takeover. And besides, it’s a centralized shitcoin so who cares? The treasury of Dash is referred to as a viable business model, but Dash is itself a failed project in large part of it’s poor governance structure that’s made to enrich the ones in control. (Sort of like ABC’s IFP.) Ethereum is another project that supposedly has a viable business model, yet Ethereum is very far from the peer-to-peer electronic cash ideal because the benevolent dictator can, and has, censored transactions on the protocol. (Lookup the DAO controversy.) BSV supposedly took good part of the “data-on-chain” people, yet their chain is completely full of nonsense transactions that only exist to create an illusion of activity. AVAX has a coin distribution that’s extremely lopsided, putting many shitcoins to shame. This is incredibly serious in a proof-of-stake coin, which throws away any semblance of decentralization. ABC is brought up as an example, but the fork hasn’t even happened yet and so far it seems only a very small minority will follow it (including Tobias). I don’t know about you, but if these are supposed to prove how successful cryptocurrencies with a “sound business model” are, then consider me underwhelmed. Instead let me give a counterexample of a successful project that uses the “OG Bitcoin business model” (other than Bitcoin Cash): Monero follows the vision of peer-to-peer electronic cash faithfully. Monero has developed best-in-class privacy, outclassing the privacy delivered by ZCash (where 20% of the miner reward instead goes to founders, early investors and certain developers). It’s propelled forward by enthusiasts and the community funds projects via the Community Crowdfunding System, and the supposedly inevitable burnout is nowhere to be seen, as Monero is stronger than ever. https://ccs.getmonero.org/ Who cares about decentralization? Tobias references Elinor Ostrom and her tips on how to “govern the commons” and how to manage a public good. (I’m not convinced that Bitcoin is a public good either, but let’s play along shall we?) The only problem with her 8 principles is, as Tobias notes, that they don’t fit Bitcoin because there’s **no central party in control**. This is a core assumption of Ostrom’s work, making it not applicable to us. Tobias concludes that to fix this we must introduce a central party. A worthy goal some might say, and a trade-off that many projects in the cryptocurrency space has made. But. **In the process we invalidate the whole idea of Bitcoin.** Maybe that’s why a lot of people in the Bitcoin Cash community, including some of it’s most prominent members, oppose the Global Network Council and the IFP so hard? Because decentralization is so important and so central to the goal of peer-to-peer electronic cash, that we absolutely cannot compromise it. It’s truly unfortunate that some in the community forget this fact as soon as there’s a possibility to get some of those juicy IFP coins.