Nov. 23, 2021: BTC Maximalism is a Disease 🚀💥
Held vs. Taleb, and Why Reductionist Thinking is Infectious and Harmful
We’re living in a pandemic of toxic maximalism. Maximalism is a disease that spreads rapidly. It impairs proper brain functioning.
If you’re careful, it may deliver some benefits. Yet you should be very careful. Maximalism closes your mind and inhibits a healthy understanding of the world. Always be on the lookout for signs of maximalism so you may mitigate the symptoms.
Today we’ll examine the most common kind in cryptocurrency: Bitcoin maximalism. It’s the filter through which most normies see cryptocurrency. Watch any cable news channel and notice they cover cryptocurrency through a simplistic lens of Bitcoin maximalism. All they cover is Bitcoin, and as a result they miss the most interesting stories. Imagine LARP-ing as a “news” channel and missing something as important as the Curve Wars. NGMI…
We’re looking today at two extremes of the Bitcoin maximalist spectrum: people who are strongly pro-Bitcoin or anti-Bitcoin, but neglect the rest of cryptocurrency. For the pro-Bitcoin side, it’s still a mostly advantageous strategy, certainly better than holding dollars, but it still has its issues. For the anti-Bitcoin side, the no-coiner tale is simply tragic, get some handkerchiefs ready.
CASE A: Dan Held
I’ve had the privilege of knowing Dan Held for several years. Today he’s arguably the most famous pure Bitcoin maximalist.
What about Michael “There is No Second Best” Saylor? Even he later begrudingly acknowledged the value of other coins. Held remains steadfast in his maximalism, only referring to the Ethereum community with the utmost of derision.
Now I give Held a lot of credit because he’s a smart guy. His maximalism is arguably more of a learned heuristic than a rigid ideological stance: BTC maximalism has worked for him in the past, so why not stick with what works?
The bitter orange pill for ETH maxis to swallow is that Held has mostly been right in his arguments. If price is all you care about, ETH has traded between 0.01 to 0.10 BTC for most of its history. If Held is correct on this point, why not just keep things as simple and go all in on Bitcoin?
Moreover, Held explicitly declares price to be the critical component to Bitcoin. His entire argument is simple, cogent, and intellectually consistent.
It’s a clever bit of reductivism that takes all of Ethereum’s innovations — web3, DeFi, NFTs — and sweeps them right under the rug. Bitcoin is best because it’s worth the most, and it’s worth the most because Bitcoin is best. On the moon, there’s no such thing as a post hoc fallacy.
I studied Held’s approach very carefully before declaring myself a $CRV maximalist. Maximalism makes communications so much simpler. Simpler communication is better. It’s not just a rule of rhetoric, but backed by physics. Complex agglomerations of information contain too much entropy. People can better understand lower entropy systems.
So Held’s staked out a great position for himself. For as long as Bitcoin is growing, he’ll see his influence and wealth continue to grow.
The downside to Bitcoin maximalism? It must hurt one’s soul to have to post threads like this:
Bitcoin DeFi in 2021 is a cruel and unusual form of torture. Meanwhile, DeFi on Ethereum is magical. Protocols like Badger exist entirely because wrapped Bitcoin on Ethereum is so much better than native Bitcoin.
Maybe Held genuinely believes Bitcoin DeFi is the real deal. If so, that’s sad. Or maybe he knows Bitcoin DeFi sucks, but still feels compelled to pretend it’s good for the sake of consistency. Either way it’s sad.
Even outside of DeFi, using Ethereum for any amount of time makes Bitcoin feel obsolete. Slow block times, few good applications.
Newcomers to cryptocurrency quickly gravitate to Ethereum or other new chains. It’s easy to see where the intellectual energy and development talent is going. Bitcoin people are smarter than no-coiners, but the Bitcoin ecosystem feels relatively staid and inactive.
If you just care about price, I’ll also give the edge to Ethereum going forward. Maybe it’s the same sort of energy that would have seen me betting on Betamax over VHS, but there’s simply too much cool stuff going on within Ethereum to bet against it.
Bitcoin is about a $1 trillion market cap. Ethereum is half of that at $500 billion. Yet you can’t ignore the value of the ecosystem built on Ethereum. About $300 billion worth of ERC20 tokens (mostly stored in DeFi). The nascent NFT market is about another $7 billion. By my math, the. market cap of everything on Ethereum is just a bit under the market cap of everything on Bitcoin. It’s easy to imagine this particular flippening happening very soon.
So much of Bitcoin maximalism is simply calculating what something would be worth if it was all on Bitcoin — ie, there’s only X millionaires, so if everybody used Bitcoin they could only own Y BTC. Seductive and simple. But it’s not happening. Some ETH-heads will become plenty wealthy without ever writing their wealth to the slow and clunky Bitcoin blockchain. BTC is great, but it won’t achieve universality.
Fortunately for Held, the craftiness of his maxi strategy is that even if ETH completely flippens BTC, he’s still in a good place. Having a ton of wealth and prestige within the second largest chain would be a fine outcome. If he’s tired of the hustle at that point, he can just retire and be better off than any nocoiners. If he wants to keep hustling, he can get a bunch of attention for announcing some sort of pivot. He may be missing the action, but all outcomes are good for Held.
When your project is winning, maximalism may have its drawbacks to watch out for, but it’s still a great way to be.
CASE B: Nicholas Nassim Taleb
If Held holds the extreme position that Bitcoin is everything, Taleb asserts all of cryptocurrency is properly worth nothing. His maximalism takes the other end of the extreme: he agrees with Held that Bitcoin is the entirety of cryptocurrency, and therefore believes if he proves Bitcoin is worthless this would doom the entire ecosystem.
Taleb wrote some great books back in the day. Sadly, reading through his work nowadays you grow concerned in the way you might worry for an elderly relative displaying symptoms of dementia.
Earlier this year he released his “Bitcoin Black Paper,” a horribly cliched, reductio ad absurdist screed. Ordinarily such trite arguments would not even merit response from the community, were it not for the excellence of his prior work.
Several people tried to point out the manifest flaws in his paper. He responded by ignoring or blocking them. Then he laughably claimed nobody bothered to refute the paper, therefore it was substantiated. He even locked his entire account throughout the release period, ensuring his narrow worldview continued to collapse in on itself.
In one illustrative example of the destructive power of his maximalism, over the summer the highly respected Lyn Alden arranged to moderate a debate with him and Peter McWarren over his paper.
The results would spiral into a Dubai-level slugfest, but far bloodier. You can read the full details of the story yourself, but here’s how it ended…
Taleb’s demonstrated fragility throughout the proceedings notably disappointed a crypto community who are frequently outspoken proponents of antifragility. For this reason the debate feels more personal. So many people who would seem at first blush to be natural ideological allies with the crypto community (Elizabeth Warren is another) happened to fall on the wrong side of the line when the cognitive dissonance hardened.
Taleb has made this debate so personal, it’s tough to imagine him ever coming around, even after the net effect of his “Black Paper” was for Bitcoin to double in price (which, in a prosaic CYA aside, he acknowledges could happen). Where Held’s outcome is rosy, Taleb will likely go to the grave bitterly believing he was right all along.
You may object that Taleb is acting as a minimalist, not a maximalist. Yet the most egregious error he commits throughout his laughable black paper is accepting the frame of Bitcoin maximalism. He dismisses Ethereum from the first footnote because his discussion is focused on “proof of work,” either intentionally or unintentionally neglecting the fact that Ethereum is presently proof of work.
Taleb’s paper simply falls apart if other cryptocurrencies are successful. One rebuttal to his paper is merely to claim Bitcoin has value, a better retort is that it’s too reductionist to claim Ethereum and other protocols have no value. His paper would fall apart even if Bitcoin somehow fell to zero but Ethereum survived. With hundreds of billions of stablecoins stored on Ethereum, it’s also trivial to argue a proof-of-work network can easily store value. He may not have bothered to even learn this fact, a sad fate for somebody who was once such an intellectual flaneur.
To any non-maximalist, Held’s “Bitcoin as DeFi thread” doesn’t look right or wrong, it merely looks silly. Similarly, to anybody who acknowledges the existence of Ethereum, Taleb’s arguments look silly. Even ETH maxis would agree with Taleb that BTC is worth zero, but they would hardly think such a collapse would undermine the concept of cryptocurrency. So many incredible innovations are emerging from the wider cryptocurrency space, it’s clear the genie is not going back into the bottle.
The Bitcoin maxi / mini debate is wholly reductionist, yet absurdly dominant in the macro culture. Avoid maximalism at all costs, if you want to be able to see the wider picture.
If you want to gain an audience and a following, maximalism is a good strategy. Nocoiners are a huge audience Taleb can tap. Bitcoiners will find their way to Held. In this sense maximalism resembles a disease in that it’s highly contagious.
If you’re searching for truth in this world, maximalism is also like a disease in that it can be damaging. Once you enter the safe haven of maximalism, you can simply filter out so much other information. Life is just easier, but you’ll risk missing out on new truths as they emerge.
In both cases the maximalist universe is a self-contained bubble of comfortable absolutes, in a reality that rejects such absolutes.
Disclaimers! Ironically, author is a $CRV maximalist, and long BTC.