Bitcoin ATH doesn’t mean the maximalists are right

From cointelegraph by Jordan Yallen

Bitcoin  BTC$93,547  reached a new all-time high. Again. 

Holders remain excited, though perhaps not as enthusiastic as the Bitcoin maximalists, who  evangelize  the technology to the point of arguing that all Web3 technologies should be built exclusively on Bitcoin.

Setting aside the technical reality that Bitcoin wasn’t designed to be built upon, the maximalist attitude is also fundamentally against what Bitcoin is and is meant to do. Bitcoin’s blockchain, at its core, was created to decentralize finance. Ethereum was designed to be the foundation for decentralized applications and smart contracts.

Take Bitcoin Puppets , for example. 

People are paying over $17,000 for images supposedly  drawn by a child. They are intentionally sloppy and basic but shouldn’t exist. Bitcoin Ordinals , while a creative and novel solution to representing information onchain through inscribing data on single satoshis, are inefficient and clog the Bitcoin network . Binance’s decision to shut down support for Ordinals  indicates that, while attractive to a purist — or maximalist — Ordinals are merely novelties.

The Bitcoin maximalist belief influences Bitcoin adoption, the development of all blockchain-related technologies, and the broader narrative around the Web3 industry itself. 

Not everything needs to be decentralized or onchain. Bitcoin reaching another new all-time high doesn’t mean the maximalists are suddenly right about the future of our nascent industry.

The blockchain isn’t right for everything

The reality many Web3 builders continue to ignore is that the blockchain isn’t right for everything. It isn’t true that every industry would benefit from decentralization or that an immutable ledger would improve every organizational system. 

Some things work perfectly fine with the technologies we have today, and the blockchain should complement the technology powering those systems rather than replace it outright.

It’s also not as simple as pointing to an industry, system or methodology and saying, “The blockchain would fix it.” It isn’t easy to strike the right balance of decentralization or to know when it would be beneficial to record transactions immutably. If it were, our industry would likely have more use cases than it does today.

While the trend over the past few years has been to “bridge” Web2 and Web3, we should instead shift our focus to blending the two worlds to take what works from each and have the best user experience possible. It’s good to evolve and try new things, but it doesn’t help when Web3 builders fight complementary Web2 technologies.

All technologies exist on a spectrum

Another reality Web3 builders, particularly Bitcoin maximalists, need to accept is that all technologies exist on a spectrum and work together in one way or another. 

The internet still serves as the basis for everything we do, Web2 technologies will continue to be the dominant online infrastructure for the foreseeable future, and the need to transact fiat currency is unlikely to ever go away. Even Web1 technologies like static pages and fillable forms are still alive.

Any blockchain system, particularly those in finance, will have to find a way to coexist with other, more traditional systems that represent the current standard.

Humans will always be involved

Another fundamental reality that escapes some maximalists is that blockchain technology will always require human administrators and institutions to run the systems, at least to some degree.

Indeed, if done right, we should be able to create trustless systems that require minimal human input. Those will only be as good as the underlying code itself. In a similar vein, humans still need to be able to intervene when things go wrong. The  recent Pump.fun disaster  is an excellent example of when humans were especially needed. 

They’re also confusing the concept of “trust” with “verification,” which is what the blockchain does. Records on an immutable ledger enable you to see the history of whatever was put onchain, but that doesn’t mean that thing onchain is trustworthy. 

Trust as a concept is much more malleable and almost emotional. It stems from things like reputation, history and community acceptance. The blockchain might be the ultimate verification form, leading to improved trust. Still, implementing the protocol itself will always come down to creating a genuinely trustless interaction. While the trustless nature and verification based on an immutable ledger makes reliance on other humans less necessary, it doesn’t make it obsolete.

More distributed than decentralized

In any case, blockchains today are far more distributed than decentralized, and Bitcoin is a perfect example.

As of July 2024, just 1.86% of Bitcoin addresses  held  90% of the total supply in circulation, which is not only far from any notion of “decentralization” but mirrors the distribution of wealth worldwide.

At a more practical level, many people don’t even know their wallet holds the cryptographic key to access their tokens rather than the tokens themselves.

Finally, blockchain technology often relies on the systems it’s designed to replace, which is more akin to shifting the work elsewhere, not actually decentralizing the processes, rules and access underlying the system. 

Web3 builders should focus on establishing a durable, flexible, wide-ranging ecosystem, not overly relying on one blockchain or another at the expense of the wider industry, even if that chain’s token  has surpassed $100,000 .