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Vitalik Buterin claims that Bitcoin was initially designed to work as digital cash, then, secondly as digital gold. He says that just as Bitcoin’s narrative changed from p2p cash to digital gold, there has also been a shift in the narrative of Ethereum.
Ethereum co-founder Vitalik Buterin was recently involved in a quarrel with a Bitcoin developer on Twitter when he suggested BTC was originally designed in order to act as P2P cash, not digital gold.
Replying to Blockstream employee Zack Voell who claimed that Bitcoin was, is, and always shall be digital gold, Buterin pointed out this point changed since 2011.
I joined bitcoin land in 2011 and back then I remember a clear vibe that bitcoin was p2p cash first and gold second. pic.twitter.com/jSdkXPwSiE
— vitalik.eth (@VitalikButerin) April 1, 2020
Buterin believes that Bitcoin was originally intended to be peer-to-peer electronic cash is a pretty popular one and, let’s not forget, the one that is backed up by the very title of the Bitcoin whitepaper, published by Satoshi Nakamoto in 2008.
If we just take a look at the first line of the Bitcoin whitepaper it clearly says:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
Why This Is Important Issue?
The main argument between the two views comes in the second when one side considers the difference between P2P cash, and digital gold.
Gold is limited by its quantity and therefore valuable but it is pretty much “clumsy” as an everyday transactional currency. It can’t be carried or divided easily, and, for micropayments – it is practically useless. In order that this is done, the gold has to be managed and supervised by a giant centralized network of processors and sorting offices (banks). In such a scenario, high transaction fees become a problem.
P2P cash, on the other hand, is exactly what it sounds like: a currency that can be transacted between two people without the need of an intermediary.
In practice, these philosophical differences come in the form of the Bitcoin block-size debate. The defiance of Bitcoin developers to enlarge the block size in order to scale on-chain resulted in high transaction fees and incited a pretty big piece of the community to hard fork the code into a new chain — Bitcoin Cash (BCH).
Bitcoin Transaction Fees are High
But, to say the truth, Bitcoin fees are still one of the highest in the crypto space. On March 1st, the average transaction fee was $0.40. By March 20th, it had risen to $1.76.
In the past 24 hours, average BTC transaction fees were hovering between 617% and 645,900% higher than other major cryptocurrencies (ETH and XRP for example).
However, supporters of the digital gold narrative accept Bitcoin’s high fees and see it as a demonstration of the network’s high security which comes from Bitcoin’s dominant hash rate. High fees are more acceptable to users of ‘digital gold’ because they are used to transact in larger amounts.
Likewise, Buterin accepts the reality of BTC’s high fees, and suggests that now the digital gold use case has been established, people should simply use a different cryptocurrency for other use cases.
“It was a controversial pivot executed without many participants’ consent. It’s certainly reasonable to be upset about it, though yes, now the pivot has happened, and if you don’t like it you should just use one of the other blockchains whose community expresses different values.”
For over 11 years on from the mining of Bitcoin’s genesis block, Satoshi Nakamoto’s original blueprint has been interpreted on and on and built upon by a bunch of individuals, entrepreneurs, and wanna-be pioneers.
Hard Fork – Solution to All Philosophical Differences
The point is simple – in blockchain space, mechanic such mentioned philosophical differences can be solved easily – by hard forking.
Leading blockchain intelligence firm Chainalysis found out that the COVID-19 pandemic and global economic recession is affecting Bitcoin consumer habits in surprising ways.
Chainalysis said that one such change in trend turned out to be pretty much flexible among Bitcoin merchant services in the current crisis.
For example, the firm’s data for Bitcoin spending using merchant services from July 2019 until March 9, 2020, shows that there was a strong positive correlation between price and expenditure: the more Bitcoin is worth, the more likely holders are to spend it.
Darknet Takes Hit from Recession
It’s also interesting to see the change in user behavior on darknet marketplaces, which usually has only a weak negative correlation to Bitcoin’s price. Since the outbreak, however, this correlation has reversed and strengthened — leading to a significant decrease in darknet market revenue.
“Recent reports point out that Mexican drug cartels are having a harder time sourcing fentanyl, as China’s Hubei province — a hub of the global fentanyl trade — has been hit hard as the epicenter of the outbreak. Such disruptions […] could be hampering darknet market vendors’ ability to do business,” revealed Chainalysis.