This article is based on a Twitter conversation with Adrian X and Tao Jones, two of my favorite Bitcoiners.
I am consistently impressed with their creativity, open-mindedness, and articulation of arguments; they are worth following.
Transaction Volume and Decentralization
Each of Bitcoin’s three major forks can be summarized by their ideological preference for these two characteristics: transaction volume, and decentralization.
All of Bitcoin’s forks agree that censorship resistance is desirable. However, Bitcoin, Bitcoin Cash, and Bitcoin Satoshi Vision have different ideas of how to achieve it.
And to varying degrees, they’ve all lost sight of the original goal: a peer-to-peer electronic cash system.
Censorship Resistance
Bitcoin started as a way to make payments which couldn’t be censored. We call this quality ‘censorship resistance.’
Censorship resistance is achieved through Bitcoin’s incentives, which encourage a level of decentralization.
Bitcoin (BTC)
The fork of Bitcoin which kept the BTC ticker is mostly focused on decentralization.
BTC achieves decentralization at the base layer, but the community has become so fixated on decentralization, it’s forgotten the original goal.
Rather than peer-to-peer electronic cash, BTC is becoming a settlement layer – too expensive to use in daily transactions.
While the main chain is still ‘decentralized,’ using BTC for payments will soon require the trusted third parties Satoshi sought to eliminate.
The BTC community’s fetishizing of decentralization keeps forcing it further and further from its original purpose as a permissionless medium of exchange.
Bitcoin Satoshi Vision (BSV)
Bitcoin’s latest incarnation, Bitcoin SV aims for censorship resistance of everything.
BSV doesn’t limit censorship resistance to just transactions. It wants to include all types of data – photos, videos, documents – the whole internet on BSV.
This is entirely possible, but at the cost of significant levels of decentralization.
Bitcoin SV advocates frequently and aggressively assert that BSV can scale.
Of course it can – as can Facebook Coin, JP Morgan, and Hashgraph.
They all sacrifice decentralization.
Decentralization
Decentralization is necessary to offset systemic risk.
Unfortunately, in the hostile environment of the modern world, incentives within the protocol are not enough deter bad actors from outside it. Because all BSV miners will be known at scale, they could be forced to censor transactions.
Bitcoin Cash (BCH)
BSV sacrifices decentralization for censorship resistance of increased transaction volume.
BTC sacrifices its utility altogether.
BCH strives for sufficient levels of each in order to maximize its utility as a medium of exchange.
Decentralization exists on a spectrum; transaction throughput is high enough when all demand for payments is filled.
BCH is not perfect – it suffers from the same governance problems as the other forks.
But it’s the only fork of Bitcoin which has its priorities straight.
For different reasons, BTC and BSV miss the forest for the trees.
BCH is solving for Bitcoin’s intended use, as a medium of exchange.
Valuing Cryptocurrencies
BTC and BSV advocates also rationalize that their use cases will give their coin value.
These are topics for another post, but utility as a data store doesn’t make BSV very valuable, and Metcalfe’s Law is mostly relevant to BTC because it’s a pyramid scheme.
Currencies get their value from use as a medium of exchange.
This is not a unilateral endorsement of BCH; each of these three currencies could succeed in their own way.
However, BTC and BSV don’t create futures worth supporting.
Of the three major Bitcoin forks, only BCH can retain decentralization and censorship resistance at scale.
Furthermore, valuations of medium of exchange currencies far exceed utility token (BSV) or commodity (BTC) valuations.
A case can be for the success of other coins, but the cryptocurrency that dominates the market in the future will be the one which is used as a medium of exchange.