In past Iu2019ve been very dismissive of Alt

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In the past Iu2019ve been very dismissive of Altcoins and endorsed the philosophy of u201cBitcoin Maximalismu201d (that Bitcoin is all you need). Here were three of my biggest reasons: Network Effects u00a0u2013 In the past, Bitcoin had 90+ percent of the crypto market, and the remaining 10 percent was distributed among many terrible projects. Thus,…

In the past Iu2019ve been very dismissive of Altcoins and endorsed the philosophy of u201cBitcoin Maximalismu201d (that Bitcoin is all you need).
Here were three of my biggest reasons: Network Effects u00a0u2013 In the past, Bitcoin had 90+ percent of the crypto market, and the remaining 10 percent was distributed among many terrible projects. Thus, Bitcoinu2019s network effect effectively shielded it from competition. n Utility u00a0u2013 With a few important exceptions, no Altcoin offered anything new to the user. Instead, the alternative explanation (that the Altcoin-creators were justu00a0 taking peopleu2019s money ) was overwhelmingly accurate.

n Sidechains u00a0u2013 I assumed sidechains would be eventually invented. At which point, theyu2019d absorb features of rival blockchains.

n
The first reason, in particular, has not held up well over time.

1. Network effect collapse
Theu00a0 market share (among investors) u00a0of u201cBitcoin Coreu201d (the healthiest candidate) has fallen to 45 percent or so.
Many people, myself included, believe that this downturn is only temporary. But as new data rolls in, it is time to take seriously the alternative theory: that the u201cnetwork effect shieldu201d has departed u2013 or at least significantly weakened.

These data are: that it has now been over two years since Bitcoin was last above 90 percent; it has been 12 months since it was above 80 percent; it has been under 50 percent for 7 of the last 12 months, including the most recent three months, during which it reached its all-time low (of 32 percent under a third).
Most perplexing is the relentless, stable, multi-year progress of the u201cOthersu201d category. This is a direct challenge to the logic of network effects.

Furthermore, many of Bitcoin’s strongest defenders have jumped ship and a few of these are even socially secure enough to admit so openly. Roger Ver, indefatigable promoter and angel investor, owner of theu00a0 Bitcoin . com u00a0domain, now favors Bitcoin Cash.

Brian Armstrong, CEO of the $1 billion unicorn company Coinbase, now favors Ethereum.
Reasons 2 and 3 have not done as well as Iu2019ve hoped, either.

2. Rising Altcoin utility
The Altcoins of todayu00a0 do u00a0offer their users a real value proposition u2013 two in fact. Value 1: Cheap Blockspace
At minimum, Altcoins offer users u201ccheap blockspaceu201d.
Some users rely on u201cround tripu201d transactions. I define these as situations where: User wants to buy something, for (say) $20.

n User then spends $20 on u201ccryptou201d, and immediately spends that crypto on their desired end-product. n The merchant receives the crypto and immediately sells it for $20. n
For such transactions, cheap blockspace is ideal.

Value 2: New Ideas
Todayu2019s Altcoins do more than just offer cheap payments.u00a0They also offeru00a0permissionless innovation. Certain ideas, such as Monero, Siacoin, Namecoin, and Zcash, cannot efficiently be tested in any other way. Many ideas that I originally felt were laughable, such as Dashu2019s u201cmarketing budgetu201d, have nonetheless proven to be effective .

Of course, these experimentsu00a0shouldu00a0have been done on sidechains (which we will turn to in a moment). In Comparison to Bitcoin
As to the first value proposition (cheap payments), much has already been said. I have writtenu00a0 an article with my views on the subject .
More important is to discuss the second value proposition.

For, while the Altcoins try 1001 new ideas a day, (most bad, but occasionally one or two good), Bitcoin instead has retreated into an overcautious and highly-pretentious paternalism. I can count on three hands, the number of times I have been personally given the u201cwe need to make sure the airplane doesnu2019t crashu201d metaphor, by extremely-senior members of our industry. Somehow, these people are oblivious to the fact that 1. they donu2019t own the plane in question, 2. it is being flown via remote control from the ground, and 3. the planeu2019s owner can freely make a near-infinite number of copies.

u00a0
The Altcoin ideas are judged, appropriately, by the user. Bitcoin, in contrast, is now tending to choose its ideas based on how impressive they are to other members of a pseudo-academic pseudo-bureaucracy. The emphasis is not on scientific progress, it is instead on racketeering u2013 in other words, on generating a need for u201cexpertsu201d (paid consultants), and building a justification for an endless series of prestigious u201cconferencesu201d (all-expense-paid parties in exotic locations).
Let me be more constructive with my criticism. Scientific peer review departing from Bitcoin
A scientific environment requires Karl Popperu2019s demarcation for science: that in addition to looking foru00a0 confirming u00a0evidence of theories, we must try tou00a0 falsifyu00a0 (or break) our favorite theories.
Altcoins represent one method of falsification u2013 trying the idea and watching to see if it fails.

Sidechains are an even better method. u201cPeer reviewu201d is only science if the peers are helping the author meet someu00a0objectiveu00a0external criterion – one that exists independently of the peers and their opinions. Otherwise, peer review becomes a self-referential popularity contest. The point of peer review is to be au00a0 cheaper u00a0realistic u201csimulationu201d of reality. It is not a popularity contest!
Unfortunately, for the significant questions, the atmosphere of science is departing from Modern Bitcoin. A Contempt for Measurement
One smoking gun is the reaction of both LargeBlockers and SmallBlockers to the idea ofu00a0 fork futures .

Futures prices, (unlike u201ctweetsu201d or u201cconference presentations), have the unique ability to speak for everyone, and not just their author. For that very reason, they have the unique ability to singlehandedly predict the fate of any fork .

u00a0Despite this, there was no interest in creating such markets. When they were created anyway, the losing side refused to acknowledge them as legitimate.u00a0
This disinterest parallels the shameful behavior concerning theu00a0 u201cbitcoinocracyu201d u00a0numbers andu00a0is a root and branch rejection of the value of experimental testing that acts to establish a u201ctechnocracyu201d of ruling bureaucrats accountable to each other, and not to the customer.u00a0 Partisan Media
As the scientific atmosphere declines (and, please,u00a0 do not confuse science with engineering ), standards of discourse have declined as well.

Today, it is impossible to express any view on u201cscalingu201d without it being immediately pigeonholed into a u201cRepublicanu201d (SmallBlocker) or u201cDemocraticu201d (LargeBlocker) category. We even have our own RNC and DNC, and our own party leaders and campaign managers.
Clever Altcoiners have noticed these deficiencies (and the insecurities they inspire) and exploited them. Buterin, for example, is careful to back the minority side in the BTC BCH conflict; and Dash started up a meme about their u201cgovernanceu201d solution (whatever that was) to profit off of dissatisfaction with Bitcoin governance.

One can dismiss these maneuvers are mere campaigning, but they areu00a0onlyu00a0possible because of real flaws that actually exist in the Bitcoin community. 3. Sidechain apathy
Finally, what of the hope that sidechains u00a0will obliterate the Altcoins?u00a0After Blockstream gave up on sidechains in 2015,u00a0I wrote my own idea in November of that year.u00a0My view is that the scaling conflictu00a0 is u00a0important, and that sidechainsu00a0 are the best way to resolve it . In fact, my current view is thatu00a0sidechains are the only wayu00a0to resolve the conflict. This is because the disagreement is actually about u201cnode costsu201d, and not about transaction throughput.

Blockchain technology is inherently consensus-based. But since each person is different, there is a limit to how large a community can grow before there is infighting.

Sidechains resolve these issues. Despite this, interest in Drivechain has consistently been low, so what explains this profound apathy for sidechains? “Optimistic” reasons for sidechain apathy 1. Sidechains Are Hapless / Useless
Perhaps sidechains are just a bad idea? And, since thereu2019s no point wasting time talking about a useless feature, people rightly donu2019t talk about it.u00a0I think that the causality here is reversed: people become disinterested first, and this disinterest drives them to make lazy, error-prone comments. 2. Sidechains Are Inherently Boring
Perhaps sidechains are inherently boring.

u00a0But this does not square with the attention they get from Bitcoin Media, and their disruptiveness to the competitive landscape and to peopleu2019s investments. 3. People are Busy
Perhaps people are just too busy with everything that is going on.u00a0But this explanation would apply equally well to every new idea. And drivechain is a veryu00a0 old u00a0idea, it is much older than SegWit and was published in 2015.
So theu00a0 potential for interest u00a0in sidechains is there, but the inherent interest is just disproportionately low.

So, then, why is that? Here I present what I feel are the real reasons. “Pragmatic” reasons for sidechain apathy 1. Reputational downside/different risk profile
Crypto-commentators care a lot about their reputation, as it can lead to lucrative job offers (in every sense u2013 paid well and nou00a0worku00a0required), access to capital, invitations to luxurious conferences, and personal fame/prestige.
And sidechains, along with their benefits, do present a scary new risk. Unlike the u201ccode risksu201d in, for example, P2SH or CLTV, these risks can not be systematically hunted down and eliminated. So, commentators may see themselves as in a similar situation to the FDA [in the US], or an academic IRB: they will be disproportionately blamed if something goes wrong, but will not disproportionately benefit if everything goes well.
2.

Training oneu2019s replacement
For existing Bitcoin Core developers specifically, the above position might be taken even further.u00a0Instead of the example of the FDA commenting on a drug, we might instead give an example where some of the worldu2019s most prestigious doctors are asked to comment on a u201cmagic infinite health pillu201d that was invented by a non-doctor.
It is a clear conflict of interest u2013 if society adopts the pill, the doctors will be out of a job.u00a0Hence it really is true that the scaling debate isu00a0 u201cabout controlu201d .

Since sidechains take control away from current elite Core developers, we would expect them to oppose sidechains.

3. Extreme polarization
Human disputes, of all kinds, will reliably collapse onto a single dimension. This is simple math: a large unified group has the muscle to sequentially crush a set of smaller uncoordinated groups.
Those who are audacious enough to vote third party have a vague awareness of this, and usually know that they are u201cthrowing their vote awayu201d and hurting their own causes. If you join one of the two major groups, your influence will be very small. But if you join neither it is likely to be zero.

To support a largeblock sidechain would be to oppose the party leadership. But as Iu2019ve just explained, this leads to one being rejected by oneu2019s own party, and being unable even to join the rival party.

So commentators (wisely) downplay their interest in a sidechains solution.u00a0 4. Free rider problem
This one is very simple. Theu00a0 free rider problem u00a0is a one of immense practical importance.u00a0For Altcoins, of course, there is no free rider problem, because there are alt-owners who profit (disproportionately to everyone else) from the success of the Altcoin.
But with sidechains, we have a situation where someone must do the work, at some cost to themselves, and yet the benefits are diffused across all Bitcoin owners.u00a0But this problem is common to all Bitcoin R&D, so I donu2019t see why it should apply especially to sidechains. Misaligned Incentives in Bitcoin Generally
Incentives in Bitcoin are not always perfectly aligned.

Below I present some Bitcoin ideas/events/projects, and sort these into the groups that support them: Miners, Users, and [Republican] Developers.
u00a0Alignment G u2013 All Bugfixes; u201cScaling Bitcoinu201d 1 and 2; CheckLockTimeVerify; Fraud Proofs (?) Some Alignment D u2013 High txn fee-revenues 9 u00a0(seeu00a0 here ); the unending scaling conflict (think 1984 u201cWar is Peaceu201d, and govt u2018racketeeringu2019) E u2013 Lightning Network (miners prefer on-chain); u201cScaling Bitcoinu201d III; Blockstream/ChainCode/etc; soft forks (miners prefer hard, although I honestly donu2019t know why) F u2013 Decentralized Sidechains (devs prefer bitcoin-dev-based permission, and federation/subscription); SPV/SPY Mining (devs prefer FIBRE) Less Alignment A u2013 Federated/subscription-based sidechains ; u201cScaling Bitcoin IVu201d ; high txn fee-rates (?) B u2013 [SegWit-Incompatible] ASICBoost (althoughu00a0 I/others strongly dispute the relevance ); SegWit2x Project (users prefer 1x, according to data from futures markets) C u2013 Low fee-rates; The SegWit UASF;u00a0 Fork Futures ; Spinoffs/Altcoins (empirically) I could have included more groups, especially u201cIndustryu201d, u201cDemocratic Developersu201d, and u201cCults of Personalityu201d, but of course a two-dimensional figure simply cannot capture all of that. My point is that incentives do not always align.

Network Effects as u201cRule of the Averageu201d The fact of the matter is that anything with network effects is going to ultimately be ruled byu00a0 the middle u00a0of the bell curve: the average people.
The centrality of timing
In these analyses,u00a0timingu00a0is important: every project starts with zero users, so networks effects are small (and meritocratic effects dominate). But as time goes on, the project will attract more users, and so the network effects will become more important. Eventually, the network effects outweigh the meritocratic effects.

Now,u00a0 Iu2019m just guessing here , but I think we have reached the post-expert phase.u00a0
Secondly, theu00a0 marginal u00a0meritocratic effects do not seem to be that significant. By this, I mean that the u201cBitcoin vs Altcoinu201d differences are very tiny compared to the u201cBitcoin vs Traditional Moneyu201d differences. Someone whou00a0 needs u00a0financial sovereignty must abandon modern fiat currencies, but whether they transact in BTC or LTC or ETH will make no difference to them, and investors will need to invest in whichever money is the most recognizable. The differences in node cost, or in privacy, are not as relevant (most lay users care about neither). Conclusion
u201cPost-Maximalismu201d doesnu2019t need to mean u201cAltcoin Pluralismu201d u2013 instead it can just mean u201ctwo competing Bitcoinsu201d. So we donu2019t need to go from 1 to infinity, we can stop at 2.

And perhaps we only stop at 2 for a short time, before returning back to 1 (for example if sidechains do, in fact, eliminate Altcoins).
The emphasis onu00a0twou00a0competing projects reminded me ofu00a0 Karl Popperu2019s argument in favor of a two-party state . He argues that a system can become healthy, as long as the losing team becomesu00a0 desperate u00a0upon their loss, and willing to take risks and make changes. Pretty good advice!
The post Arguments for Bitcoin maximalism are starting to falter .

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