Bitcoin maximalism vs. altcoin idealism

Jessica Mitchell Dezember 26, 2020 0 Comments

A comparison

There is no shortage of diversity in the crypto market: with around 6,000 cryptocurrencies listed, the crypto ecosystem is exceedingly diverse. But not all investors are convinced of the potential of altcoins. For maximalists, only Bitcoin counts. Is this position justified or naïve?

For maximalists, the crypto market is divided into Bitcoin on the one hand and all the rest – nearly 6,000 cryptocurrencies after all – on the other. For Bitcoin maximalists, the case is clear: only Bitcoin delivers on its value proposition; altcoins are doomed to fail sooner or later. On the other hand, altcoin traders argue with more lucrative returns and real use cases of some ambitious Atcoin projects. To make both positions heard, we contrast the views and let you decide who has the better arguments.

Pro Bitcoin maximalism

Besides Bitcoin, there are no cryptocurrencies with staying power. It is not for nothing that this totalitarian stance is called Bitcoin maximalism. For maximalists, affectionately called maxis, there is just only Bitcoin that delivers on its value proposition. Why? Because Bitcoin is the best of all monetary systems, according to the Maxis. To make this line of thought plausible, a look at the genesis of BTC helps.

Bitcoin emerged as a reaction to inflationary and centrally controlled monetary systems. The deflationary programmed BTC circulation is fixed via blockchain. Moreover, this infrastructure protects against manipulation and intervention – there is no single point of failure in the BTC network. Unlike many altcoin projects such as Ethereum, the Bitcoin blockchain also hardly swallows any computing capacity. With a Full Node, everyone can contribute to the network; over 10,000 Full Nodes are currently active. In terms of decentralization, BTC therefore fulfills all requirements perfectly.

But the decisive criterion for Maxis is the scarcity of the asset. After all, BTC is the „most finite“ of all commodities and, with a total supply of 21 million coins, rarer than gold, the most coveted of all precious metals. The interplay with factors such as divisibility and the inherent value storage function therefore allows only one conclusion: Bitcoin will survive, while all altcoins will bite the dust sooner or later. Due to the network effects, no other cryptocurrency is able to reconcile the separation of money and institution with increasing acceptance as a means of payment and function as a store of value in the same way as Bitcoin.

Contra Maximalism

Bitcoin was the first mover – but that was it. Its quality as a secure store of value is primarily based on the fact that the Bitcoin Blockchain has had the most time to grow. The same applies to the awareness of the Bitcoin „brand“, which is the only cryptocurrency that regularly makes its way into the mainstream media – even if this is usually only about the latest price escapades of BTC, which has long since degenerated into a purely speculative asset and has moved far away from Nakamoto’s original idea of an „electronic peer-to-peer payment system“.

The fact that in eleven years the not exactly small community of BTC developers has not yet succeeded in turning BTC from a digital asset into a currency suitable for everyday use should be a warning signal for those who think that BTC can replace fiat money in the future. Bitcoin is neither anonymous nor scalable. Attempts to make BTC usable for payments have ended in forks (BCH, BSV) or gotten bogged down in the development of the Lightning Network, which remains stagnant.

In the long run, this also puts the saw to the narrative of Bitcoin as a store of value, as its artificial scarcity alone will not be enough to live up to its reputation as „digital gold“ in the long run. Dogmatic Bitcoin maximalism, which generously turns a blind eye to developments in the crypto sector, is characterized more by ideology and wishful thinking than by rationality. The supposed „safe haven“ Bitcoin could turn out to be a mirage at the latest when the last block is „mined“ and the miners have to live exclusively off the network fees.