This article was published in Bitcoin Magazine. “The Half Problem”. Click here here To get your copy.
Every morning at 6 a.m. in Punxsutawney, Pennsylvania, cynical weatherman Phil Connors wakes up to live the same day over and over again. Stuck in a time loop, Connors tries everything to get back to normal—he gets stabbed, shot, burned, frozen, and electrocuted—only to wake up the next day as if nothing had happened. Connors quickly comes to the only reasonable conclusion: he must be God.
Believing we are invincible has never been a particularly smart strategy, in times of war or otherwise. If we believe in cosmologies, from Nietzsche to Hinduism, time is a loop, a finite universe of possibilities that repeats itself endlessly—and the only thing we can really do is change how we respond. Unless we learn from our mistakes, we are doomed to experience the same things over and over again.
While we often pride ourselves on our exceptional intelligence – I discovered Bitcoin early, I must be very smart – learning from mistakes seems difficult even for the most seasoned “Bitcoiners”. The public discourse seems to have shifted from discussing the challenges and limitations of technology to post-job conversations at Deutsche Bank – anything is possible, we just need the revenue to stay on track.
When Bitcoin was first discussed in the German parliament in 2014, “experts” highlighted the ease with which Bitcoin payments could be de-identified through network analysis, and spoke of the dangers of widespread Bitcoin adoption leading to mass financial surveillance. Today, ten years later, as Bitcoin returns to the German parliament, the “experts” have been replaced by influencers who propose Bitcoin as an alternative to a central bank digital currency. One can’t help but think of the current “political debates over Bitcoin” as Bart Simpson running in circles and hitting a frying pan on his head.
As we continue to edge closer to the echo chamber of opportunists, we have succeeded in replacing academic discussion with cheerleading squads. Things will go well as long as you are willing to get your tits out. “We are winning!” has long been the mantra—between ETF approvals, stablecoin issuances, and potential nation-state adoption, we are so confident in Bitcoin’s success that we seem unable to recognize that this is precisely how it loses. Hubris precedes most downfalls, and it has always been exploited intentionally. By cultivating delusions of invincibility, even the most trained leader will lead his sheep to the slaughterhouse.
Groundhog Day
Long ago, in a galaxy far, far away, we connected our computers to landlines to access the Three Great Commands. For anyone who didn’t live alone, this practice was often doomed to a fair amount of chaos – step away from the computer, your mother is waiting for a phone call.
So we can all agree that this was a bad thing. But due to the lack of technological advancement and the lack of access to wireless communications over long distances (think of your favorite mesh network here), this was the most convenient option we had. The only problem: it led to the monopoly of access points to the web in the hands of telecom providers. Twenty years later, we now know that telecom providers monitor, analyze, and report everything we do online to government authorities under the guise of national security. The technology we thought was invincible to liberate people quickly turned into its greatest enemy.
We can’t really talk about the success (and failure) of peer-to-peer technology without talking about Linkin Park. Linkin Park’s music, then called Hybrid Theory, was widely distributed on the peer-to-peer music sharing network Napster. Linkin Park’s music was completely free to access when downloaded from other people’s computers. Yet their debut album, Hybrid Theory, remained one of the top five best-selling albums of all time, selling 15 million copies in its first three weeks alone.
Napster was a true Internet revolution—and the music industry was in a tizzy. With people happily infecting their devices with a potential AIDS virus, bands, rappers, and songwriters like the Arctic Monkeys, Dispatch, or Eminem were building fan bases before they even recorded their first major releases, and the music establishment wasn’t buying it. When Metallica sued the peer-to-peer platform for copyright infringement, clearly unhappy that its cult status and royalties were under threat, peer-to-peer music sharing didn’t exactly die. It was just quickly integrated into more corporate-friendly formats—from buying music on iTunes to streaming music on Spotify.
While it seemed inconceivable to put technology like Napster back in the box, convenience is, once again, king. Today, the majority of listeners don’t own the music they listen to, but rather subscribe to corporate databases that don’t benefit artists, labels, or producers. Instead, the biggest winner in the music file-sharing industry has turned out to be surveillance. Just last week, when Spotify updated its cookie policy, a push notification let EU users know which of the 695 data brokers would have access to their information. Downloading files like ClapYourHandsSayYeah.mp3.exe (RIP) was clearly a risky business, but the dangers of surveillance capitalism extend far beyond a broken computer.
Essentially, the same thing happened to search engines. Going online in the early days of the World Wide Web was like going to Yellowstone National Park without a map. There were thousands of places to go, but you needed to know where they were. With their extensive link collections, platforms like Yahoo, AskJiffys, or Google provided enormous value to those less familiar with their way of navigating the World Wide Web. Instead of asking your peers where something cool was on the Internet, you simply had to ask Google. But as we moved away from word-of-mouth formats, we ended up with what is now called the Great Shift. The first few links are paid affiliate sites, and the ones that follow are those that figured out how to run Google’s SEO formats efficiently, all of them packaged and customized to your supposed needs. Today, Google is one of the most valuable surveillance companies in the world. A program originally intended to help free up free information has become a tool for surveillance.
The belief that “technology has won” has exacerbated this phenomenon. We choose what’s convenient now only to stab ourselves in the back in the end. Before we know it, we’re hearing the belly-whistling sound of a high school talent show when the meteorologist beats us up again. Honestly: We’re making a huge mistake.
It’s the filters, you idiot.
In today’s pop culture discourse about Bitcoin, ignorance is rampant. Telegram works until it doesn’t, let’s spend millions to put dollars into Bitcoin; it’s called priorities, my dear, look it up.
When cryptocurrencies hit Bitcoin — call it what you will — we suddenly realized we were in trouble. In the Global South, people were rapidly becoming unable to conduct non-custodial transactions. Suddenly, everyone who had been notified by a cryptocurrency watchdog found themselves facing exorbitant transaction fees and unable to move their money. For those who valued their privacy even for the smallest of spends, participating in CoinJoin rounds became prohibitively expensive. No matter where we looked, we still had a scaling problem. And this problem didn’t exist because of cryptocurrencies. It existed because we were so convinced we were winning that we lost control of our ignorance.
Over the past four years, most people have been more interested in promoting their own narrative — everything is great and Bitcoin is the best currency on Earth — than confronting uncomfortable truths. Then we proceeded to respond with an excessive amount of shortsightedness: It’s the filters, stupid.
Filtering out arbitrary transactions is a short-term solution to a long-term problem. Sure, banning arbitrary data on the blockchain would necessarily lower fees, but if global Bitcoin adoption is what you want, you’re doing yourself no favors by proposing selective solutions to systemic issues. The truth is, getting angry about JPEGs is easy. But dealing with problems that challenge the “greatness” of Bitcoin, which some seem to have made their entire persona, is not. For every tweet claiming that Bitcoin will bring world peace — apparently through pure magic, or what Wall Street’s loser Bitcoin economists call a backward form of game theory — a small part of the system dies.
We don’t need your hopes; we need real solutions to real-world problems. That includes quitting smoking weed and talking about uncomfortable things: We’re not winning—only the opposite, because our “long-term preferences” extend to our portfolios. You can kill Bitcoin. It’s easier than you think.
embrace, extend, extinguish
Over the past few years, the discussions about Bitcoin’s “victory” have looked pretty much the same. Senators embrace Bitcoin: Look, we’re winning. BlackRock embraces Bitcoin: Look, we’re winning. First they ignore you, then they laugh at you, then they realize that all you want is a pat on the back before the cops come take your toys. The laughter doesn’t stop, it happens behind your back.
The most likely death of Bitcoin will be not in name so much as in complete integration, at a point where the technology is not yet ready for mass adoption—just as we killed all the peer-to-peer technologies that came before it. The death of Bitcoin is not the death of the technology, but the death of its usability.
At the heart of Bitcoin’s demise, at least in substance, is the debate over scalability. When Gigablocks were first proposed, it seemed fairly obvious that a blockchain that took 10 years to sync would lack decentralization. The Lightning Network came along, which seemed to solve all our problems: off-chain scaling, on-chain security. Smart. Except that we could only accommodate about 5,000 transactions opening and closing a channel within a block — barely enough to allow 8 billion people to use Bitcoin without custody.
Unfortunately, that didn’t stop the influencers—or anyone else, really—from declaring their despair; Bitcoin scaling is clearly a problem for me going forward. The thrill I felt when I finally got to sit down at a company dinner table and express my willingness to give up was overwhelming. Putting the nonbelievers in their place was paramount; if Bitcoin isn’t there to feed our fragile egos and inflate our sad little bank accounts, what’s the point, really? Freedom, Karajo! Welcome to your involuntary conversion to the Church of Satoshi Witnesses, where we preach about saving the world from tyranny more often than Biden changes diapers.
So here we are. Six years after we bought our first stickers from the Blockstream store — the only thing we could buy when the first Lightning apps launched, besides beer — we’re still struggling. Instead of fostering a broader discussion about the covenant proposals, which come with real tradeoffs and risks, we’re busy labeling anyone who doesn’t want to freeze a specter, when freezing Bitcoin at this point would surely be the safest way to kill it.
Sometime in the near future, we hope to return to a time when fees were a few hundred bytes. By then, we will have no choice but to use Bitcoin as a reserve currency. Goodbye freedom money: Bitcoin as we know it will die, unless we stop making the same mistakes.
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