Nic Carter and the Case for Bitcoin Mediumism
Most Crypto Twitter fights are bouts of sound and fury, signifying nothing but the allure of tribalism and the varieties of mental illness in the human animal. But sometimes a Twitter fight is the tip of a much deeper and more substantive iceberg.
We witnessed one of the substantive fights over the past week, as stalwart crypto analyst and venture investor (and CoinDesk columnist) Nic Carter clashed with so-called bitcoin maximalists. Carter thinks the fight might signal the end of bitcoin (BTC) maximalism as a respectable ideology, and I think he might be right. It illustrates, above all, an increasingly vapid anti-intellectualism and shallow performativity taking over what was once the single most powerful body of thought in crypto.
The fight began when Carter and his fund, Castle Island Ventures, announced an equity investment in a start-up called Dynamic. Dynamic is building a wallet with decentralized identity features, one of the most interesting applications of Web3 technology.
The problem is that Dynamic is multichain. For self-declared bitcoin maximalists, this amounts to heresy. That's almost literal, as we'll get into, because bitcoin maximalism possesses many features of a religion – and maxis were under the impression Carter was one of them. Turns out, not so much: "From the very start, I've been a pluralist when it comes to blockchains," he laid out in a post responding to his critics.
What is bitcoin maximalism?
Bitcoin maximalism is a lot of things. On the surface, as Carter outlined in an appearance on the "Bankless" podcast Tuesday, it's the belief that owning, touching or in any way supporting any crypto asset other than BTC is not just a crime but also a sin, with all the hard-line religious implications of that word. Merely mentioning such an asset can count as "support."
Carter argues convincingly that many of the maximalists who attacked him are Johnny-come-latelies who are merely a cargo cult blindly aping the vitriolic rhetoric and bullheaded stubbornness displayed by partisans in the circa 2017 "blocksize war," when there was a real sense that changes to bitcoin were potential threats to its long-term stability.
There are real ideas behind bitcoin maximalism, and substantive reasons for adherents' blanket hostility to altcoins, even if they've been watered down by today's self-identified maximalists. Most fundamentally, maximalism holds that BTC should be the only cryptocurrency because it is the only one that's truly decentralized. Certainly, it's objectively true that most altcoins have been either failed experiments or outright grifts, draining money and enthusiasm from crypto as a whole to enrich feckless or corrupt founders.
Some maxis also argue the Bitcoin platform will eventually run all the same decentralized utilities we now enjoy on smart-contract platforms like Ethereum, because it will absorb innovations from other chains. (Others are skeptical of any use for a blockchain other than running the currency.) Finally, when they really get going, maximalists will argue that BTC will become a world reserve currency, displacing all filthy and fragile fiat.
I find Carter's fight fascinating because I, like him, love bitcoin and believe that many maximalist ideas are directionally correct. But also like Carter, I think the all-or-nothing nature of the extreme maximalist position discourages thinking through the real-world complexities that will inevitably face those broad predictions.
What the maxis get right
For instance, there is compelling economic logic and empirical evidence that BTC acts as a safe-haven asset for people stuck in truly hyperinflationary monetary circumstances, on the order of Turkey's current 54% inflation rate. This safe-haven feature is established and objectively observable in the real world. Over time, BTC will become a kind of global disciplining force on fiat currencies. That is not the same, though, as believing that it will inevitably replace all global currencies.
More fundamentally, the maximalists' most compelling point is that BTC is the most truly decentralized digital asset. This is broadly true, and ultimately what makes bitcoin fascinating – it is something like a force of nature that has emerged from the global computer network. This is why even U.S. Securities and Exchange Commission Chair Gary Gensler is willing to consider it, and no other crypto, a commodity – it is a protocol, not a product.
I often think of bitcoin as something like a mycelium – the invisible, underground network from which mushrooms grow. A mycelium spreads relentlessly but invisibly, finding opportunities to thrive where it can. Bitcoin is like that: universal and unstoppable, yes, but more tailored for some situations and applications than others.
If maximalism has become a refusal to think through the material subtleties of bitcoin's actual usefulness, it has become an intellectual dead end. As Carter points out, a scad of smart bitcoiners have already figured that out and headed for the doors. That includes longtimers like Udi Wertheimer, Eric Wal, and pseudonymous analyst Hasu, all of whom were at least loosely in the "bitcoiner" bucket until their curiosity and open-mindedness earned them the maximalists' ire.
Who's left – Tom Brady and Saifedean Ammous? As Oscar Wilde said of Niagara Falls, it would be more impressive if it flowed in the other direction.
Voodoo economics
Carter also highlights another bizarre belief of contemporary maximalists: that BTC's price in dollars can be confidently predicted. I've never really bothered to dig into the "stock to flow" model advocated by some maximalists, but apparently many really, really believed in it – and its prediction that BTC would hit $100,000 by … well, by some imminent but frequently shifted deadline. (Changing the goalposts on confident predictions is also, by the way, how cults work.)
It's remarkable how much stock to flow, on its face, reveals about the creeping simplemindedness of the maximalists. It's effectively technical analysis extended to the nth degree – that is, well beyond any possible time horizon of validity. If the BTC price is based on adoption, it's ridiculous to assume that the process will be linear or predictable.
That's just not how technology – or money – works, especially at a global scale: There are fits and starts, changing circumstances, and most of all, bubbly spurts of enthusiasm broken up by fallow periods of disenchantment. Carter believes that maximalists have attacked him not just because they mistakenly thought he was one of them, but also because their faith in this simplistic, pseudo-religious schema of total and linear BTC dominance has been disproven by the current crash.
By contrast, every genuinely seasoned crypto observer knew a crash was coming sooner or later, because they're attuned to the nuances of the market rather than committed to a narrative that Carter perfectly nails as a form of "millenarian eschatology." Bitcoin maximalists effectively believe, like evangelical Christians, that the end of the old (fiat) world is inevitable, and that all rewards in the next (crypto) world will go to those who remained pure in their beliefs.
But purity is, at least in this case, the enemy of real-world victory. That's illustrated in a small way by all the maxis who believed in stock-to-flow or the supercycle theory and are now sitting on huge losses because their unsophisticated analysis led them to buy the top of a manic retail bubble.
Bitcoin maximalism is an attack on bitcoin
Longer term, the maxis are increasingly a threat not just to their own bottom lines, but also to bitcoin itself. Because while bitcoin's relatively conservative design and upgrade process is definitely part of its long-term appeal, maximalist commitment to the idea that it's already perfect is another case of Manichaean (black or white) thinking that leads to oversimplification.
The sterling example here is the question of bitcoin's long-term security. In brief, coinbase (small c, as in newly minted BTC) rewards for miners are scheduled to eventually expire, and there's a lot of uncertainty about whether fee revenue will be enough to incentivize sufficient mining to keep the chain safe in the far-flung future. It's not clear how serious a threat this is, but it absolutely needs to be discussed, and that discussion needs to include the serious possibility that (gasp) bitcoin needs to change in a fairly dramatic way.
Bitcoin is good but it's not perfect, and rigid ideologues' refusal to let it change when it needs to could strangle their favorite digital pet with the sheer force of their love.
- David Z Morris
