Thread by @LeeWallisUK

Thought I'd share my Slack reply to my boss who said "My only concern is that something better could come along and replace #bitcoin (like MySpace!)"

It's my first ever thread! 👇 I hope I did the community proud.

#Bitcoin isn’t just code. Bitcoin is a monetary policy that can’t be changed, and every day that goes by increases the trust in this monetary policy. Similarly, bitcoin has various user groups who use bitcoin for differing things.

There are every day users of the network who use bitcoin as an non-seizable store of value (hodlers) and users who use it for every day transactions.

Then there are miners who point their millions of dollars worth of mining equipment at the bitcoin network because it provides the best return on their investment and is also the safest long term bet on them making a profit.

Then there's the development community who dedicate their lives to contributing to this project and have full conviction in doing so.

Finally, you also have the institutions/businesses who have bought into bitcoin specifically, or run businesses that rely on bitcoin at their core.

So, looking at the "Facebook taking over MySpace" analogy. All someone had to do was create a better social network, and the user base jumps ship.

For the users, there isn’t any risk of jumping to the new network, it’s quite a trivial decision to create a new account on the new website and see which one plays out as the winner.

With bitcoin, it’s currently protecting $350B+ worth of wealth for its users.

Convincing users to jump to a new network is a HUGE ask, and is very risky because they have to vote with their money by moving it over to the new network and hoping that it does in fact flip the old network.

Being wrong, however, would be catastrophic for them because the new network would fail to flip bitcoin and decline in value as the users quickly jump back to the safe option (bitcoin).

Then there’s the immaculate monetary policy that the bitcoin network protects...

Because bitcoin has been so decentralized and trusted for longer than any other network (partly because it was first) and has never changed its monetary policy, it can be trusted to continue with its monetary policy for decades to come.

It's been battle tested multiple times on this front and has survived hostile changes to its monetary policy. No other network has been through the same level of threat and survived like bitcoin has.

And even if a network did create a sound monetary policy, it has to start from day 1 and prove to the world over years and years that the monetary policy is sound and no one can come along and force a change on the network.

Then, we have miners.

For a network to be secure and have a protected monetary policy etc. you need a lot of decentralized mining power to point their millions of dollars of resources at the network. For them to do that, their needs to be an incentive, otherwise they’re wasting their mining power.

So the incentive to mine on a blockchain is that they will be paid a block subsidy (plus transactions fees) in the token that is attached to that blockchain, and those tokens have market value that allow them to pay their electricity bills and make a profit.

But for the token of any monetary network to have value, it needs users to value it and use it (even if that use is for hodling).

And for users to value it, it needs to have a sound and trusted monetary policy, along with security (so they can trust it as an SoV), utility, and plenty of speculation to create liquidity for the token (so miners are able to cash out with little "slippage"), among other things.

This becomes a chicken or egg situation where the miners have no incentive to mine unless the token has value, but the users won’t assign value to a coin unless there is a heavy amount of mining power securing it.

Then, you have speculators who help with the price discovery and create liquidity for these networks, who favour tokens that already have a strong market, and liquidity behind them. Because otherwise they can’t quickly cash out of their gains without slippage on the market price.

Then you have exceptionally talented developers who are dedicated to bitcoin and don’t want to jump ship on a whim unless they truly believe that bitcoin is a failure and a new blockchain is going to be the horse that wins.

That's in addition to all the developers who are already building Layer 2 applications on the top of the bitcoin blockchain.

It would be similar to trying to convince the open source developers at WordPress that they should forget everything they contributed there to instead go and contribute to Drupal instead (not a perfect analogy but you get my point).

The best and most trusted blockchain will attract the best developer talent, which is massively important for innovation to continue to happen.

Then, last but not least...

You have the institutions/businesses that have bitcoin at the core of their business operations. Some of which are heavily bought into the store of value thesis of bitcoin and have allocated capital for decades. Shoutout to @michael_saylor 👏 and @BarrySilbert

They do this because they trust the monetary policy and believe that their wealth will be worth more than it is today in 10+ years time.

These guys don’t want to chase the "next best blockchain" because bitcoin already does everything they need it to do.

So, to conclude and come full circle on the Facebook/MySpace concern...

Unlike Facebook, who simply had to convince users that their network was better, without risk for the users to jump over to the new network, for another blockchain to compete and beat bitcoin, they have to attract... 👇

Users, mining power, developers, speculators, institutions and businesses CONCURRENTLY, or none of the incentives will align for any of these groups.

Not impossible, but highly highly highly unlikely.

Not to mention, if another blockchain flipped bitcoin as the new, "better" store of value, in my opinion the whole crypto SoV experiment has failed. Because who wants to store their wealth in something that is easy to be flipped by the next thing boasting "better" features?

There can only be one store of value winner in crypto, and bitcoin has already won that fight. There may be other use cases of blockchains, like the "world computer" use case Ethereum is trying to be. But they aren’t competing to be money.

There are competing to be a platform to build decentralized apps on top of.

They don’t have a sound monetary policy and they are highly experimental considering the amount of wealth sat on the network, which is a much higher risk to store your wealth on.

A final thought I'll leave you with...

If I could get a complete copy of the code that runs Facebook, or Amazon, or Google, and made it better in some way. Is my version worth more? No. Because it doesn’t have the network effect.

No users, no distributors, no investors, no brand, no reputation, no trust etc. copying the code and making it better isn’t enough to win the market. There’s so much more to it when it comes to networks.

Then, add in the complexity of it being a network that stores wealth, not just data, and you’ve got one hell of a challenge to try and flip #bitcoin.

A special and heartfelt thank you to these people for helping me (for FREE!) expand my knowledge and understanding about bitcoin (and money altogether) over the last 6-7 years 👇

@aantonop @Breedlove22 @danheld @real_vijay @pierre_rochard @MartyBent @matt_odell @Excellion

Cont:
@naval @chamath @adam3us @PeterMcCormack @APompliano @johnkvallis @PrestonPysh @MustStopMurad @TuurDemeester @AriDavidPaul

...and so many more of you legends!