When I talk to bitcoin and crypto sceptics that have a bit more knowledge and don't just call bitcoin a scam or ponzi, there are usually bringing two arguments. First that bitcoin is intrinsically worthless. This is easily debunked as almost all forms of money are fundamentally worthless, even gold.
The more problematic criticism is that bitcoin is not limited. Of course there are only 21 million, but you can simply fork it to create an infinite amount of clones. And this is something that you cannot do with gold. There is no second gold that we can invent.
I heard many responses to this claim, but most of them have their own logical flaws. Therefore I will present my argument why bitcoin is in fact limited. But before we need to learn a bit about the dynamics of power in bitcoin.
Miners produce the blocks and keep the chain running.
Most people think that they have the ultimate power. This is a fundamental mistake. Miners only have power as long as everything works as intended and they do what they are supposed to do. And since there is no real incentive to attack, this is almost always.
But miners have no power to enforce their will onto the network. All they can do is produce valid blocks that the network will accept. In reality they are almost powerless.
Nodes validate the blocks and fulfil a critical role in the network. But they have even less power than the miners. The node operators choose the software to run. While they have the total control to force consensus changes, they do not create any work themselves. Without miners producing conforming blocks nothing happens. And without users that connect the node is meaningless.
Developers also have very little power. They provide options that could be implemented. But they do not decide what happens. Any change must first be approved by the nodes and then the miners.
When Miners, Nodes and Developers have no power, then who is in charge? The answer is simple. We are in charge. When there is a fork, we choose if we want to hold both, or dump one of the coins. We choose which networks we want to use and only our usage gives value to the network.
When we buy coins from a miner, then we pay for the mining. By choosing a wallet we choose which nodes to trust. Developers, Miners and Nodes provide us with options for possible networks, we decide what we find valuable and want to use.
In the recent fork of BCH, who was in charge? There are two camps that are composed of a mix of developers, nodes and miners and they initiated a fork. They feel that they are in power and can decide who is the real BCH doing some funny hash wars. But did any of that really matter?
In the end both groups provide two alternative products and the users have decided to dump BSV and value BCH. That is all that matters. The winner is chosen at the market.
Back to the initial question. Now that we know that we are in charge of crypto, does a fork really introduce additional coins?
In essence a fork is nothing but asking the users to choose between two different versions of a coin. It is a governance tool. It does not create additional coins, just as much as a malicious miner does not create new coins or a node that has fallen out of sync. In the case of a fork the winner is not immediately declared and maybe there will never be a clear winner. But a fork does not dilute the underlying asset, it diversifies it.
And I think we can go even further. The entire crypto space is providing a selection of different visions for what could be money. And by our financial decisions we vote which of these visions we support. These are the coins that will hold value. Not value because an asset is unique, but value by adoption. And right now bitcoin has about 51% support, while alternative visions have around 49% backing.
The correct way to look at crypto is that there is only one crypto economy. This economy can capture a certain value by being a form of money. This value is then subdivided on different projects by user choice. Bitcoin does not have value because there are only 21 million. Bitcoin has value because most people think that it is a useful form of money and the hard cap is an essential part in that decision process. It has value by of adoption.
A fork or a new crypto does not change this. Unless the new concept convinces people that start to use it.
There is only one gold, there is only one bitcoin. And there is also only one of each possible other metal, fork or form of seashells. What has and does not have value does not depend on this, but only on adoption. Gold is more valuable than bitcoin simply because more people choose to store value in it.
Gold is a good money because of its superior properties. But Silver is almost as good. Still the marketcap of gold is significantly higher than that of silver. Simply because people choose in this way by their economic actions. And there are many additional rare metals that could challenge gold. Yet they have not.
Now we have crypto and the properties to be money are even better than those of gold. And we have a huge space of alternative cryptos that have similar properties. But they are not bitcoin because they have less adoption. And that means that they are less stable, which solidifies the advantage of the market leader.
Money has value just by adoption. And that adoption is a consequence of a need for money. Crypto is the best money we know and therefore money should slowly converge towards crypto. But overall the need for money may disappear. The store of value property is nice, but there are many other ways to store value. The medium of exchange is great, but in a future where we can tokenise everything, why do we need a separate token just as money? A unit of account is useful for humans, but when machines make most financial decisions, it becomes redundant.
Right now we still need money and I think that crypto is well set up to disrupt our broken fiat systems. But I think that we may disrupt money altogether and move towards tokenised property and a word without money. In a properly digitalised word there simply is no more need to have specialised money. But this is a rather long term vision.
A vision that is not possible in the current slow and inefficient permissioned financial markets, but that can thrive in a decentralised market. Crypto might disrupt itself, at least it's usecase as money.
