Bitcoin is not crypto

In a world where digital assets are increasingly prevalent, it is necessary to make a distinction between Bitcoin and what is often referred to as “crypto.” Although there are thousands of cryptocurrencies and blockchain initiatives, only Bitcoin truly matters. The rest (NFTs, Web3, DeFi, etc.), collectively referred to as crypto, faces significant challenges. These challenges stem from their unclear structure and incentives, which raises concerns about trust and their value, often associated with promises they do not keep.

These technologies and projects do not solve genuine problems. Instead, they create artificial problems to justify their existence. In fact, many individuals and companies involved in these projects and who promote them often have access to pre-mined tokens in advance, which gives them a strong incentive to recruit new buyers, regardless of the utility or value of those tokens.

Furthermore, these projects are far from being decentralized as they claim to be. In the vast majority of cases, the creators of these cryptocurrencies or protocols have the ability to change the rules whenever they want, unilaterally and for any reason, which undermines any pretense of true decentralization, credibility, and immutability.

On the other hand, these projects can be and are easily copied, since the source code is open-source. New tokens are often technically indistinguishable from the originals, which logically allows one to conclude that the disparity in market price comes from manipulation, marketing campaigns, and sentiment, and not from the value or utility of the tokens.

The huge volatility and the rapid sporadic returns are the only reason why people show interest in these small-scale projects, given that the technological component, innovation, and liquidity are not present. These promises are driven by a lot of marketing, and the gains and losses are multiplied by an enormous amount of irresponsible leverage, which often leads those tokens to lose their market value entirely.

In the “crypto” world the leaders of these projects make promises they cannot keep and take advantage of the greed and naivety of smaller investors to generate their profits. By contrast, those who take the time to study and understand how and why Bitcoin truly works can easily grasp the massive flaws inherent to the great majority of blockchain projects.

By contrast, Bitcoin stands out because there is no central authority. Bitcoin does not have nor need a foundation to coordinate its maintenance or development. The people involved (developers, miners, and users) have no special privileges, and there is no marketing team. The Bitcoin Core project is a meritocracy. Those interested in contributing start from zero and earn reputation according to the quality of their contributions.

In fact, over time Bitcoin has done exactly what it promises: to be scarce, uncensorable, and unconfiscatable money. That is precisely why Bitcoin has credibility and the other “crypto” projects do not.

Bitcoin’s main property is its decentralization. There is no single point of failure, and the network is controlled by the consensus of a community of users who are willing to run a node. Over time we have seen people try to copy the code to launch their own projects, but they are not able to copy decentralization. Decentralization is a property of the network, not of the code.

On the other hand, Bitcoin is a new form of money that does not try to rebuild the Web, the financial world, or art. From the start, Bitcoin has been better money because it is digital, decentralized, and absolutely scarce. In fact, the only network that requires trust in no one is Bitcoin.

Bitcoin is not a get-rich-quick scheme. It is a disruptive technology that makes it possible to preserve value that has already been created. Bitcoin was created specifically to solve a problem with fiat money: to create a digital money system where it is not necessary to trust a third party or a central authority.

Thus, Bitcoin (token/currency) and its blockchain are interdependent. One cannot exist without the other. Bitcoin needs the blockchain to function, and there would be no functional blockchain without a native currency to incentivize the proper allocation of resources that adequately protects the blockchain. Therefore, the native currency of the blockchain must itself be a viable form of money, because it is what pays for security. For that reason, for the currency to be viable it must have credible monetary properties.

Without money there is no security, and without security the value of the currency and the integrity of the data stored on the blockchain disappear. The blockchain has only one utility: to remove the need to trust third parties. Whoever does not have this problem to solve does not need a blockchain. Thus, the blockchain is only useful when applied to money.

Although it may seem possible for the blockchain to be able to record the ownership of other assets off the network, in reality it is only possible to enforce ownership of the currency that is native to the network. Thus, immutability is not an inherent characteristic of the blockchain, but rather an emergent property. And if the blockchain is not immutable, the native currency will never be a viable form of money because final transfer and settlement cannot be trusted.

Over time, the market and liquidity consolidate around the form of money that offers more security and proves to be a store of value over time. It would be irrational to store wealth in money that is less liquid and secure when a better alternative exists and is accessible. Therefore, value continues to consolidate around Bitcoin because it is the most secure blockchain by several orders of magnitude. Ultimately, only one blockchain will be viable and necessary.

Understanding these concepts is fundamental and makes it possible to consider and evaluate Bitcoin beyond the noise of the “crypto” world. In this way, Bitcoin remains the only innovation when it comes to digital money, without falling into the pitfalls that plague the broader “crypto” ecosystem.