A Sobering Strategy For Scaling Bitcoin To Billions
July 9th 2022

I speak plainly. I don’t use big words. I’m not a talented writer. Nevertheless I think there is a message to be conveyed here.

Mostly, I ramble about how Bitcoin can't just be hodl'd it must also be useful.


Most ideas I come across go in-one-ear and out-the-other, but a few catch my eye to the degree I find myself inadvertently thinking about them in my free time. This piece from Mario Gibney is one of those ideas.

Okay… so… I will decompose Bitcoin down into three pieces.

  1. Bitcoin-the-asset
  2. Bitcoin-the-network
  3. Bitcoin-the-normie-thing

The word “Bitcoin” is often used in an amorphous way, which leads to people talking past each other (at which point no progress is made), so for the purposes of this piece I will be precise in my terminology. Bitcoin-the-asset is the monetary good, of which there are 21 million. Bitcoin-the-network is the peer-to-peer digital network, composed of computer nodes across the globe. Finally, I introduce Bitcoin-the-normie-thing which is the sort of naive, normal-person speak when they refer to Bitcoin.

That third one is the interesting one.

The idea that everyone in the world is going to come to worship our lord Satoshi (I love how Arthur Hayes frames this), like the annoying (and frankly destructive) self-appointed plebs on Twitter, is beyond foolish. Instead, in order to scale Bitcoin-the-normie-thing to billions of humans, we must think from the perspective of the normal person. The normal person does not care in the slightest what Bitcoin is, nor its history, nor its technical fundamentals, nor running their own node, nor how it competes with other currencies, nor how it’s performing in the market, nor the memes, nor the projected “moral values” the culture hijacks (this one is actually guaranteed to be a net negative because it’s an induction of divisiveness). None of these things. The normal person cares, and only cares, about one simple question… “what can Bitcoin do for me?” They ask themself this single question, and give themself three seconds to come to a conclusion, and if the answer is a net positive, then they will adopt Bitcoin-the-normie-thing and if the answer is negative then they won’t. The normie is brutal like this.

Okay so getting back to this piece from Mario… Bitcoin-the-normie-thing offers two economic goods. Most people think of Bitcoin-the-normie-thing and they think of Bitcoin-the-asset. And of course they think this way because the BTCUSD price is the thing all over news headlines. But, as Jack Mallers has promoted on numerous occasions, Bitcoin-the-normie-thing offers a second economic good, which is Bitcoin-the-network.

You see, the sobering reality is, Bitcoin-the-asset is insufficient in scaling to billions of humans. We will never reach billions of humans solely on this concept of “monetary maximalism.” The idea that all fiat currencies will go to zero over time, and all humans will escape the horror by adopting Bitcoin-the-asset is wrong. That’s not to say the monetary qualities of Bitcoin-the-asset aren’t valuable, and in my opinion Bitcoin-the-asset still has plenty of room to grow in its role in the global financial system (not financial advice). Instead, I’m presenting the sobering reality that Bitcoin-the-asset alone will most certainly not scale to billions of humans.

If you want to read more on this topic, I recommend this piece from @fnietom. The TLDR is a fixed supply monetary system will always be too volatile in comparison to an elastic supply monetary system and therefore will not be useful as common currency for the masses (my own words, not his). Again, the point I’m highlighting is Bitcoin-the-asset is insufficient in-and-of-itself in reaching billions of humans. There’s a time-and-place for Austrian Economics in the global financial system, but the idea Austrian Economics will scale to capture 100% of the monetary goods is totally incorrect, and arguably religious.

So, in order for Bitcoin-the-normie-thing to scale to billions of humans, we must also rely on Bitcoin-the-network.

The cool thing is... Bitcoin-the-asset has a reflexive relationship with Bitcoin-the-network. The more one grows, the more the other has the opportunity to grow.

There is a compelling narrative which states Bitcoin-the-asset merely needs to be a store-of-value, which would imply the velocity of money (how frequently it transfers between people) should be low. John Pfeffer wrote about this here back in 2017. I want to be clear… I think this is the most compelling case for Bitcoin-the-normie-thing. But again, it is insufficient in scaling to billions of humans.

It's spooky how often I see the Pareto Principle. TLDR basically, 80% of one thing makes up 20% of the other things, and vice versa. You see, nothing in this world is black-and-white. Personally I find it to be maddening, but pragmatic truths rule the world.

Pragmatically, if we’re scaling Bitcoin-the-normie-thing to billions of humans, then I think it intuitively makes sense that 80% of the use cases are as a store-of-value and 20% of the use cases are as a medium-of-exchange.

All of this to say, we want Bitcoin-the-normie-thing to be useful in ways other than hodling. Said differently, Bitcoin-the-network must enable some degree of economic productivity. The sad truth is, right now Bitcoin-the-network practically enables zero amount of economic productivity (relative to the broader crypto industry).

Censorship resistant money is a good use case, but marginal in terms of industrial economic productivity. Lightning is cool and has a place. There are cool things being built around Bitcoin-the-network but the value isn't directly acreting back to Bitcoin-the-asset.

Technically, the holy alter that is the economic good of Bitcoin-the-network is the blockspace. It’s the immutable data. Once a piece of data is written to Bitcoin-the-network’s blockchain, it is written in stone for eternity. This is what Ethereum and other "smartcontracting" blockchains get wrong. The value isn't in decentralizing compute, but instead in decentralizing data. Compute is temporary, data is forever ❤️ Bitcoin-the-network's blockspace is valuable to use cases where maximal trustlessness is required. And to be clear, most consumer storage use cases do not require maximal trustlessness — these use cases are reserved for high-value and high-stakes use case.

This all may seem obvious when I put it this way, and I’m not saying anything new. I think the reason I felt compelled to write this piece is to shout from the rooftops to the self-proclaimed Bitcoin Maximalists that there are things to be learned from the broader crypto industry. It’s about time Bitcoiner’s start expressing some humility in accepting the success of other digital assets! And the way we do this, is we don’t shun the altcoins as “scams” or “morally corrupt” but instead we humbly ask ourselves… “okay there’s clearly a market demand for this thing, so how could we leverage Bitcoin-the-network to capture this market?” Because ultimately, if we can do so, the value will accrete to Bitcoin-the-asset 😉 Whereafter Bitcoin-the-network will become more valuable. Thus the reflexivity.

This may also seem contradictory to a previous piece of mine, Ethereum’s Founder Dilemma where I criticize the value proposition of bandwidth. I make the claim “bandwidth is a race-to-the-bottom.” To which I would say, the bandwidth of Bitcoin-the-network is fundamentally different than the bandwidth of the Ethereum network (or most other altcoin networks, which mostly are modeled after the ethos of Ethereum).

The point being, the bandwidth of Bitcoin-the-network (aka the second “economic good” of Bitcoin-the-normie-thing) is fundamentally different than the bandwidth of the Ethereum network, and therefore cannot be valued in the same mechanism. The bandwidth of Bitcoin-the-network is unique relative to any other cryptocurrency network.

In my opinion, Bitcoin-the-network’s blockspace is untapped land, filled with seemingly endless economic opportunities. Waiting for developers to come in and capitalize on this massive potential economic opportunity. It’s time to buidl!

Finally, we must ask ourselves, “okay so what can we put in the blockspace which’ll capture economic value?” What indeed! Something to think about, and I suspect I’ll write more about this in the future. It’s pretty simple, just look at the non-Bitcoin crypto industry as a sort of giant R&D department. Spacechains are the most interesting idea to me at the moment see here and here if you want to learn more, and specifically creating a stable value asset on a spacechain. Maybe more on this later.

Oh and one more thing, is this post from Paul Sztorc.