Ethereum's Hard Fork Is Live

What you need to know today in crypto and beyond

August 5, 2021

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Today's must-reads

Top Shelf

LONDON IS LIVE: Ethereum’s latest hard fork upgrade dubbed “London” was officially activated. This backward-incompatible hard fork also marked the rollout of five new Ethereum Improvement Proposals (EIPs): 1559, 3554, 3529, 3198, 3541, which aim to improve the Ethereum network’s user experience, value proposition and more. Most notable is the new burn mechanism that has been touted as a way to deflate the amount of ETH in circulation.

TRANSITION: JPMorgan Chase has started pitching Private Bank clients on a passive bitcoin fund offered in partnership with NYDIG. Announced internally to wealth advisers, the fund signals Chase’s transformation from the never-bitcoin mega-bank to a genuine player in the digital assets space.

FIGHTING BACK: Senators Ron Wyden (D-Ore.), Cynthia Lummis (R-Wyo.) and Pat Toomey (R-Penn.) are working to ensure miners, node operators, developers and other non-custodial crypto industry participants are exempt from a crypto tax reporting provision in the U.S. infrastructure bill. The provision, which seeks to pay for $28 billion of the $1 trillion spending package, sparked backlash from the crypto community due to its imprecise language.

BIG STEP: A senator from Uruguay has introduced a bill to allow businesses to accept cryptocurrencies as payments and would regulate their use. The bill, presented on Tuesday by Sen. Juan Sartori, will provide “legal, financial and fiscal security in the business derived from the production and commercialization” of cryptocurrencies.

BITCOIN TRACKING: French asset manager Melanion Capital won regulatory approval to launch an ETF tracking the price of bitcoin for investors across the European Union. The fund will track a basket of up to 30 stocks with a 90% correlation to bitcoin’s price, according to a statement.

–Helene Braun

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Overheard on CoinDesk TV

Sound Bite

“Imposing any of these obligations would be a huge invasion into personal financial privacy.”
—Blockchain Association Executive Director Kristin Smith on reporting requirements placed on crypto, speaking on CoinDesk TV’s “First Mover.”

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Off-Chain Signals

–H.B.

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Putting the news in perspective

The Takeaway

I Don’t Understand Bitcoin Maximalism

I don’t understand bitcoin maximalism. I understand Bitcoin: the grace of its design, its founding myth and principles, the community’s undogged pursuit of a sound monetary system. I like Bitcoin and own a bit of the currency. But I don’t understand the insistence that it’s the only cryptocurrency project past, present or future worth supporting.

Bitcoin maximalism is a phrase often attributed to Ethereum co-creator Vitalik Buterin who – as a bitcoiner in 2014 – described the emerging belief that the only desirable outcome of this “quiet revolution” is a Bitcoin monopoly. All other coins are at best a distraction and at worst a wrench in the chain.

Then as now, the phrase is pejorative. It’s meant to evoke a certain closed-mindedness or lack of imagination in the Bitcoin community. Sometimes it suggests that “maxis” are only out to maximize their profits.

But it’s been embraced by the Bitcoin community, worn by those who are skeptical of anything “crypto” that is not BTC. At the recent Miami BTC conference, organizers hosted a “"Toxic Maximalism: A Feature, Not A Bug,” panel. I asked a number of self-described bitcoin maximalists to give their side in this ongoing war with those who seek to minimize Bitcoin’s (capital b for the network) importance.

In general, the best arguments break down into a few categories: network effects (networks tend towards one), social impact (superfluous, silly or scammy “altcoins” denigrate Bitcoin’s reputation) and opinions about the historical circumstances of Bitcoin’s creation, adoption and purpose.

“Network protocols tend toward one, and Bitcoin won the race long ago,” Cory Klippsten, CEO of Swan Bitcoin, said in an email. Klippsten is a Bitcoiner’s bitcoiner, who is preparing and advocating for a world where the cryptocurrency is adopted as the global, base monetary standard. His service allows customers to buy and hold – but not sell – bitcoin.

The history of technological adoption is often one of picking and choosing between standards, the theory goes. Consumers chose VHS over BetaMax, the World Wide Web over Xanadu, Facebook over MySpace. The same will be true of the choice between Bitcoin and the U.S. dollar.

I know what you’re thinking, didn’t MySpace outcompete other social networks only to become irrelevant? Isn’t Facebook also losing people’s attention? Does anyone besides the artist Sarah Zucker use VHS?

“The appropriate comparison for a global digital monetary protocol is another protocol we all use, the internet, not a company or an application,” Klippsten said. This was a point echoed by Till Musshoff, a bitcoin evangelist active on YouTube, who compared the cryptocurrency to the foundational TCP/IP protocol needed to communicate over the internet.

Bitcoin was the first system to solve the double-spend problem, which in effect was a solution to how to securely transmit value digitally. “You only need one protocol for value communication,” Musshoff said. “Every other implementation takes away resources from the main one.”

Apart from competing for resources, like developers or capital, bitcoin maximalists also believe other cryptocurrencies steal mindshare from the original coin or provide an excuse for governments to try to shut the whole crypto industry down.

Crypto, like the internet, is a place for scams and ridiculous projects. Many consumers lost money trading “dog tokens.” It’s difficult to grasp why jpegs could sell for millions of dollars. The word “token” conjures up images of carnivals. For hardcore bitcoiners, “crypto” is damaging to Bitcoin’s brand.

“Bitcoiners are deeply troubled by fraud and unreliability. We are creating and joining a system of unstoppable, unbreakable, honest money,” Klippsten said. It sounds self-serious, but he has a point about dishonest actors and unreliable code.

Trust is engendered in Bitcoin by its near-immaculate conception and history of development. Bitcoiners are wont to note that Satoshi Nakamoto, the pseudonymous founder, stepped away from the project without profiting from their work. Bitcoin was released into the world without a premine or a series of founders hanging around with money at stake.

“By contrast, we know the names of all of the founders of all major altcoin projects, who hold tremendous power over the participants in their projects,” Klippsten said. Even “well-intended” projects run into this problem.

All of these points can be argued. The idea that BTC is the TCP/IP for sending “value” is confronted by the general acceptance that bitcoin is more of a “store-of-value” than a currency. Bitcoin is just as often a means to speculate and gamble than something like DOGE. And is it fair to say Vitalik today has more influence on Ethereum than, say, Greg Maxwell, who suggested the Taproot upgrade, on Bitcoin?

The final point Klippsten made supersedes all of this: “Everything Bitcoin does should not be reinvented, and the things altcoins” claim to do could be attained by using a database. “The essence of the Bitcoin vs. ‘crypto’ debate,” amounts to a wholesale refutation of the entire crypto complex.

That means attempts at creating an intermediary-free financial system like DeFi is redundant. That general purpose technologies like NFTs, which make digital goods besides money scarce, pointless. And a competing field of secure, freely-tradable digital currencies moot.

It’s a hard pill to swallow. For the most part, crypto and Bitcoin share the same aims and confront similar issues.

As Eric Voskuil, one of the developers of Libbitcoin, the first implementation of Bitcoin, said: “Speculation on BTC has led maximalists to lose sight of the reason for Bitcoin. ... I don’t generally spend much energy on [the question of bitcoin maximalism], because it is moot. Other coins are here, there is no reason to conclude they are going away, and they are limitless substitutes for each other.”

Sometimes bitcoin maximalism is meant metaphorically rather than literally: it's a stand-in phrase for open protocol money rather than literally about the Bitcoin network/asset. It could just as easily be called “crypto.” To the extent that Bitcoin is a big, open, public infrastructure that seeks to maximize access for all, I support it.

–D.K.

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Crypto State 2021: Middle East

Even though many countries in the Middle East restrict or outright ban activities related to blockchain technology, the region is having its crypto moment. From Dubai’s first-of-its-kind Bitcoin Fund listing to the Bank of Israel’s trial of a digital shekel, interest is picking up in the region as crypto companies work closely with regulators in the Middle East and North Africa (MENA) to gain some clarity about oversight of digital currencies.

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