Nassim Nicholas Taleb published an advance forward to a new book on Bitcoin today that is worth a read. It’s nothing particularly new, but it’s good.
This is the most highlighted passage on the Medium article:
Which is why Bitcoin is an excellent idea. It fulfills the needs of the complex system, not because it is a cryptocurrency, but precisely because it has no owner, no authority that can decide on its fate. It is owned by the crowd, its users. And it has now a track record of several years, enough for it to be an animal in its own right.
The claim Taleb makes in the last sentence is one that is mentioned often by Bitcoin Core [1] supporters: Bitcoin has a several year long track record of success. It seems so obvious that the answer is yes that few people give it a second thought. But does Bitcoin Core actually have a several year long track record of success?
A version of the Ship of Theseus tale can help us understand that it does not.
Suppose that the ship returns home to Athens after years at sea. Sailors tell stories of how the ship held together during battles, storms, and all matter of hells the world threw at them. The ship, everyone says, has a track record for success.
But what if some citizens of Athens decided that they wanted to start replacing certain parts of the ship? What if they decided to add a new type of wood to replace the old, or oars of a different design to replace the old ones. Could we say the ship in its new form has a “track record for success” in any meaningful sense? Sure, it’s still the same ship, but certain foundational components of that ship have been changed forever.
This is exactly what happened with Bitcoin Core. For most of its history, Bitcoin functioned as fast, low fee, and decentralized digital cash. You could send money to anyone in the world cheaper and more quickly than any form of money and you knew it was secure and trustworthy. Bitcoin was able to accomplish this because it processed transactions “on-chain” and it never experienced full blocks. Because it was so spectacularly useful, Bitcoin gained rapid adoption from merchants and users around the world and over time it became a “store of value.”
Then recently things started to change. Bitcoin began experiencing full 1mb blocks and developers refused to raise the block size. Fees went through the roof and transaction speeds slowed daily. In order to help fix this, developers pushed through a soft fork called Segwit and began working on the Lightning Network project. These two projects fundamentally altered Bitcoin forever. Bitcoin would no longer be digital cash. It would be a digital gold settlement layer and transactions would happen off-chain.
It is this version of Bitcoin that we have today, not the one of yesterday that was fast, low fee, on-chain, and usable around the world on transactions small and large and that achieved such incredible success.
This version of Bitcoin is very new. We have absolutely no proof that a high fee coin that sometimes takes days to confirm can last long term just as the citizens of Athens in our story had no proof that ship would still sail so well after changing its core materials. We have no proof off-chain transactions can scale effectively or responsibly.
Fortunately for Taleb and the rest of us who care about the original function and purpose of Bitcoin, there is still a version of Bitcoin that does have a track record for success: Bitcoin Cash. Bitcoin Cash is a hard fork of Bitcoin Core that shares the same chain but preserves Bitcoin as digital cash by scaling the block size as Satoshi Nakamoto originally intended. It is the version of Bitcoin that was so successful these past 10 or so years and if by Taleb’s own admission, that should mean it is “an animal in its own right.”
Taleb jokes at the end of his forward that:
In its present state, it [Bitcoin] may not be convenient for transactions, not good enough to buy your decaffeinated expresso macchiato at your local virtue-signaling coffee chain.
He’s right. Bitcoin Core is no longer useful for daily transactions, and that should make Bitcoin Core users very, very uncertain about the future.
[1] I’m using the term Bitcoin Core instead of Bitcoin like Taleb does in his article because there are two versions of Bitcoin now, Core and Cash.
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