The financial market is a dynamic environment that goes through ups and downs in cycles. The…
Bitcoin maximalist. Do you believe that Bitcoin is the superior cryptocurrency? Also, do you think that Bitcoin is the exclusive crypto coin that will ensure the success of cryptocurrency in the future?
If you are thinking along these lines or these thoughts have crossed your mind, then this blog post is for you.
Today’s discussion will center on bitcoin maximalism – its definition, origins and implications.
Bitcoin Maximalist Definition
A bitcoin maximalist is a person who strongly believes that single true cryptocurrency is Bitcoin. Altcoins are inferior and will not rise to the same status as the btc.
Furthermore, they believe that it should maintain its status as a digital asset. It should not grow into a wide network that caters to decentralized finance (DeFi) and non-fungible tokens (NFTs) similar to Solana or Ethereum.
Podcasts and crypto sites on Twitter have widely used this term recently. Some crypto experts sharply criticize this philosophy because it slowly evolved into a toxic movement.
Vitalik Buterin’s Opinion
Ethereum co-founder, Vitalik Buterin described bitcoin maximalism as “Bitcoin dominance maximalism.” In his words, he explains it as:
The idea that an environment of multiple competing cryptocurrencies is undesirable, that it is wrong to launch ‘yet another coin,’ and that it is both righteous and inevitable that the Bitcoin currency comes to take a monopoly position in the cryptocurrency scene.
He further argues by saying that:
A simple desire to support Bitcoin and make it better; such motivations are unquestionably beneficial…rather it is a stance that building something on bitcoin is the only correct way to do things and that doing anything else is unethical. Bitcoin maximalists often use “network effects” as an argument, and claim that it is futile to fight against them.
Why do Bitcoin Maximalists Exist?
These are the following reasons why there are people who become bitcoin maximalists.
The Robust Network of Bitcoin
Several maximalists believe that a crypto asset’s success largely depends on its blockchain network. To illustrate, they emphasize Bitcoin Cash and Bitcoin’s dominance through their market capitalizations.
Even though Bitcoin gold and Bitcoin cash are altcoins, have less features than the newer altcoins, they achieve a higher price because of their connection to Bitcoin. Bitcoin is a class of its own because of its usage history, size of its customer base, and wealth.
Cryptocurrency is still met with skepticism and resistance. Centralized financial institutions still regard digital currencies as unreliable because of its unpredictability in performance, price, and potential.
Bitcoin maximalists opine that the integration of digital currencies will take a long time to fully happen. As a result, people will tend to trust crypto assets that have been around for the longest time. Obviously, it is no other than Bitcoin.
It is difficult to argue against Bitcoin’s history in performance and transactions. In addition, the hacks that other cryptocurrencies go through serve as added evidence to support the claims of maximalists.
It Influences Trading of Altcoins
Investors are often advised to diversify their portfolio. They are encouraged to put money into other kinds of digital assets. But, the argument of Bitcoin maximalists is that there is no need to risk investment on altcoins because Bitcoin exists.
Bitcoin can be considered a more stable crypto asset compared to newer altcoins. Furthermore, Bitcoin is considered as the gold standard of cryptocurrencies. It has the largest market cap and is often on top of many rankings. It has somehow proven its long-term usefulness.
Drawbacks of Being a Bitcoin Maximalist
The strong conviction of Bitcoin maximalists isn’t without problems. Developers created the recent form of crypto coins because the Bitcoin blockchain and its proof of work mechanism did not suit everyone. Here are other additional issues with bitcoin maximalism.
Bitcoin’s scalability is probably one of its most prominent issues. Primarily, its consensus mechanism poses an environmental threat that hinders its expansion. Mining is the main method of creating new blocks and validating transactions in the Bitcoin network. However, it is energy-intensive and time-consuming. As a result, there is latency in the Bitcoin blockchain.
Volatility in Trading
The fluctuations in Bitcoin’s price is known as volatility. Even though some people see Bitcoin as the gold standard in cryptocurrency, it still experiences volatility. This is one of the major reasons why banks and businesses are hesitant to fully embrace cryptocurrencies as a payment method.
Unlike Ethereum, Cardano and Solana that strive to make their blockchains progressive, Bitcoin does not support smart contracts and decentralized applications. Many crypto enthusiasts now favor the use of smart contracts because it allows deals to occur between two participants directly. The terms of agreement exist in the computer code and executes it independently.
As of now, there is still no development to alter its blockchain so that it can accommodate dApps and smart contracts.
Blockchains Continuously Evolve
Blockchains today no longer confine themselves to the cryptocurrency space. Various private businesses formulate their own blockchains. For instance, Union Bank of Switzerland (UBS) explores how blockchain can be helpful in their business through their very own sandbox.
Consequently, this experimentation helped them create their own cryptocurrency, Utility Settlement Coin (USC). Switzerland’s Utility Settlement Coin (USC) operates the same way that a fiat currency does because of its link to the central bank.
Final Word on Bitcoin Maximalists
In conclusion, there is no denying that Bitcoin established itself as an excellent choice for cryptocurrency investment. However, we are all familiar with the idea that it is difficult to please people all the time. This also applies to Bitcoin.
Investors and traders have their own preferences in the functionalities of cryptocurrencies that they want to buy. Hence, it is not possible for Bitcoin to be the sole crypto asset as it would be unfair to the people.
Also, Satoshi Nakamoto’s vision was to bring people together using a peer to peer digital currency. It is acceptable to advocate for Bitcoin. Nevertheless, adhering to a staunch philosophy such as bitcoin maximalism somehow contradicts Nakamoto’s goal.