Crypto is a swamp full of scams and rip-offs – but so is Bitcoin. Bitcoiners should stop dissing Crypto and be proud of this proof that Bitcoin is good money. By Christoph Bergmann
Bitcoin, some say, is not Crypto: there is Bitcoin, and there are the other cryptocurrencies. These so called Bitcoin Maximalists consider all of them shitcoins, scamcoins and rip-offs, without any exception. You can hardly avoid this way of thinking today. Wherever Bitcoin and Crypto are discussed, you are confronted with it.
Maximalist podcaster Niko Jilch says: “All other blockchains except Bitcoin are, at their core, centralised companies that have issued (illegal) securities.” Influencer Gigi expresses it even more simply: “Bitcoin, not Blockchain. Bitcoin, not crypto. Bitcoin, not distributed ledger technology. Bitcoin, not DeFi. Bitcoin, not Web3.”
Bitcoin Maximalists sing this tune over and over, again and again: Bitcoin is not Crypto. These Bitcoiners are ashamed of their relatives. But aren’t Bitcoiners supposed to be supporting a free competition of money? Isn’t it better to have many backups rather than one single point of failure? Why do Maximalists pick on Ethereum so obsessively instead of real scamcoins? Why do they have such an aversion to decentralised finance?
This has always been a mystery to me. In my eyes, such an intolerant attitude is truly anti-Bitcoin.
Medicine and Poison
I assume that most Bitcoiners are idealists. They are not against Crypto because they care about their portfolio or their ego, but because they care about a better future. They fear that Crypto threatens the grand vision that Bitcoin has opened. The window of opportunity to make the world a better place is narrow, and Crypto doesn’t help, it hinders.
Bitcoin is the great simplifier: Bitcoin divides the world by 21 million and puts everyone on the same chain. One world – one coin. No cacophony of currencies, no complex financial constructs with leverage and derivatives, no inflation and hyperinflation – just 21 million Bitcoins. This radical simplification of finance is attractive for some people.
They don’t like that other cryptocurrencies, most notably Ethereum, copy the technology behind Bitcoin, but replicate the financial system. Even worse, they make it decentralised and thus unstoppable. In their view, Bitcoin attacks the financial system, while Crypto strengthens it. Bitcoin ends the mania of speculation – Crypto drives it into total escalation.
Bitcoin simplifies the monetary system to a currency with a fixed quantity. Crypto is pouring tens of thousands of copy-paste currencies onto the world. Bitcoin makes money more scarce, Crypto makes it more arbitrary. Crypto perverts what Bitcoin created. Bitcoin is the medicine – Crypto the poison.
It is understandable that idealistic people are upset about this, right?
Individual and Collective Morality
However, I think there is a categorical mistake in this way of thinking.
If Maximalists believe that Bitcoin will free us from the abysses of finance, they have the hope that better money will also change the way people deal with money: that Bitcoin will make individuals’ behaviour more ethical. And this is a grave misunderstanding.
Money legitimises the exchange of property without the need for violence. That is one of its most important functions: It objectifies transactions. This abstraction is ethical. It is what makes it possible for people to live in peace and build wealth. But this moral quality is collective. On the individual level, it removes morality from the transfer of property. What you pay for is legitimate.
Good money allows individual immorality to be tolerated because it turns it into collective morality. This seems self-evident today, but it was perhaps the most important achievement in human history. Money that does not do this but tries to morally improve the individual is not good money. It is a bad educational project, like the Chinese Social Credits.
Individuals will react to money as they always did: greedy, stingy, immoral. A significant number of people will use all legal and illegal means to grab as much money as they can at the expense of others. This is regrettable, but necessary. The individual abysses are an integral part of the moral service that money provides to the collective. Without them, money becomes useless.
The Crypto Swamp and its Source
The idea that Bitcoin is not part of the Crypto swamp is relatively new. It only got popular around 2017, when altcoins, tokens and DeFi became more successful. In the years before, fraud and rip-offs were the norm in Bitcoin. The ecosystem virtually consisted of it. When you weren’t buying drugs on the darknet, you were using Bitcoin to invest in unregulated bonds, bet on stock prices with CFDs, gamble in online casinos or test the endless Ponzi games and pyramid schemes.
Pirate@40 aka Trendon Shavers had accumulated 500,000 Bitcoins with his pyramid game in 2012. Later the ponzi scheme MMM Global created a previously non-existent demand for Bitcoin in emerging markets in 2015. And when the Chinese government busted another ponzi called PlusToken in 2019, it confiscated nearly 200,000 Bitcoins.
Week after week new ponzi schemes appeared. On the Bitcointalk forum, two sub-forums were most active: in one, investments were presented – in the other, warnings against scammers. The legendary Mircea Popescu, the father of toxic Bitcoin Maximalism, accused everyone at the time of being a scammer. He was usually right – but he ran a pyramid scheme himself with his exchange MPEX.
Bitcoin is not only as swampy as Crypto: Bitcoin is the source of the Crypto swamp. This is where the toads hatched, and this is where they return. And that’s a good thing. The alternative would be much worse.
Scarcity and Complexity
Many things can be done with money beyond payments: loans and credits, interests and spreads, tokens, stocks, derivatives, options and futures, bills of exchange, collaterals, swaps and so forth. All this is called finance, and it arises for two reasons: because people are who they are – and because they MAY freely and greedily use what money allows them to do. Finance is a natural consequence of money and freedom. And that is a good thing, too.
Finance allows scarcity to be organised in a more complex way. Money does not abolish scarcity – but it helps us to deal with it. The same is true for finance. Individual greed becomes collective surplus value; complexity creates risks, but also efficiency.
Just like money, finance can lead to abysses. Cold-hearted traders earn from the losses of investors with weak nerves. People are ripped off, risks are concealed, figures are fudged, prices are manipulated, debts are repackaged, and the end result is the Frankensteinian monstrosity we call our modern financial system.
And yet: our world would be much poorer and less free without all this.
Let’s Embrace Progress!
When Bitcoin maximalist Giggi depicts the “FTX clusterfuck” as a “symptom of Crypto”, it tells one thing about his way of thinking: he is overwhelmed with complexity and wants a simple solution.
I think this is a waste of a wonderful technology. Instead of throwing in the towel to the complexity of life, we should celebrate its achievements and do everything we can to make it better. There is no going back to a world before modern finance.
History is not a one-way street. Bitcoin is progress, not money for Amish people or for the museum. It makes finance more effective, more transparent, more open and more democratic. DeFi makes it more decentralised and give users more autonomy. Both of these things are already happening today and should be a reason to rejoice instead of getting bogged down in trench fights.
A technological advance in finance can improve people’s lives. But it cannot improve people. Money and finance will trigger the same impulses in them as they always have: they will gamble and speculate and manipulate, and the strong will screw over the weak without feeling scruples. Nobody likes that, but those who want to change it would need a dictatorship.
If a technology or policy claims to “improve mankind”, one should run away as fast and as far as possible – it will always end with food stamps and gulags. Technology, however, can make money and finance better: more resilient, more democratic, more autonomous, more efficient. Technology does not improve people, but it can improve their circumstances.
And that is the fabric from which progress is woven: not from rejecting complexity and escaping into simplicity – but from better control of complexity.
Be Proud of Bitcoin!
Bitcoin has always been Crypto and will forever be Crypto – and Bitcoiners should stop being ashamed of the fact that Bitcoin is good money. Be proud of it!
All the stuff that altcoins, DeFi, tokenomics and FTX are doing, all the fraud and rip-off and manipulation, the stuff that is supposedly destroying so much trust at the moment – all that has always been in Bitcoin. Because that’s simply what people do with money. The more effective money is, the more they do it.
Bitcoin is permissionless, decentralised, censorship-resistant, global and irreversible money. This is exactly what Bitcoiners love about Bitcoin. But they find it hard to accept that these qualities also make Bitcoin perfect money for fraudsters and speculators. That’s why they call their unwelcome relatives “shitcoins” and pretend they never had anything to do with them.
But the truth is: if Bitcoin were not used for all these ugly things, it would not be free money. It would be no different than the Chinese central bank’s digital coin. If Bitcoin’s technology did not give rise to a new, unleashed financial system, it would not be decentralised, sound money.
This does not mean that one should love the scammers, as some anarcho-capitalist schools demand. On the contrary: the freer the money, the greater our responsibility; the deeper the abysses, the more important it becomes to warn against them. Be proud, but be loud!
Christoph Bergmann is the editor of Bitcoinblog.de, Germany’s leading publication on cryptocurrencies.
Swamp image based on a picture from the GRID-Arendal resources library, provided by Peter Prokosch. Toad images generated by Dall-e-2