TL;DR: BTC maximalists have long championed the plight of Ross Ulbricht while vanquishing so-called “shitcoiners,” defined as anyone who embraces any project other than BTC. High on their list of awful is the present decentralized finance (DeFi) movement and anything to do with Ethereum. Welp.
BTC Maximalists Have Another Hero to Hate
A BTC maximalist is an absurdity on her face, and it doesn’t take much to see that, of course. They’re immediately confronted with contradictions and paradoxes. The supposed freedom of open source collaboration and iterating on ideas must cease, immediately, at this one juncture, BTC. To be fair, economists have long understood organic adoption toward a single currency is necessary for more frictionless transacting and ease in commerce.
But the tension remains: something around the corner lurks to pressure whatever given medium of exchange, unit of account, store of value is in vogue to keep its earned qualities. That something is competition. Carl Menger, widely considered founder of the Austrian School of Economics, argued in On The Origins of Money how market competition is the mechanism to reach emergent money — the only way to tell which is superior for it to earn a top spot.
BTC maximalists struggle with this truism. They’ll even go after community heroes like Edward Snowden because Snowden dared questioned privacy innovation surrounding BTC, for example, looking elsewhere to other projects like Zcash. BTC maximalist company Blockstream CSO Samson Mow dismissed Snowden out of hand, posting, “Before you throw away money for @Snowden’s book, just remember he recommended #Zcash for people needing privacy at a time when nearly all $ZEC transactions were unshielded.”
Ross Ulbricht Praises DeFi Darling Maker as a “Cool Concept”
Orwell’s dystopian novel Nineteen Eighty-Four outlines Two Minutes Hate as a daily public outrage display aimed at perceived enemies. Oceanians become emotionally unglued and turn their focus away from failings of the principal leadership. BTC maximalists often find and manufacture enemies, and one wonders if it’s necessary, ultimately vital, for their very existence. Turning on Snowden, and really anyone who is caught dabbling in other projects, vilifying them in convenient ways, allows precious little time remaining to focus upon how BTC is being lapped, passed up, lacking, and becoming antiquated tech.
Ross Ulbricht is arguably one of the most important figures in Bitcoin history. His involvement in Silk Road essentially proved cryptocurrency could be used and thrive in a freer environment as money. Bitcoin itself runs counter to the very BTC maximalist ideal as it is potential competition against fiat. Ulbricht’s fate ended behind bars for life, no chance of parole, for showing the world money competition’s power and how unnerving it is to those in government.
Recently, in Remaking the Maker Protocol, Ulbricht from prison examined the phenomenon of DeFi. CoinSpice has plenty of problems with its hype and never-ending promises, along with its continual hacks, but we also recognize that’s the go of innovation. It can get messy. And, after acknowledging the limitations of being in prison, Ulbricht sets out to evaluate DeFi through its most visible and popular project, Maker, MakerDAO, and its DAI token, itself considered at times so complicated as to be numbing.
“The people behind Maker have created a cryptocurrency that tracks the value of the US dollar (a stable coin),” Ulbricht began. “You get all the benefits of a cryptocurrency without the crazy price swings.” He then goes on to examine DAI and its mechanics with regard to recent collateral problems by way of incentives. Stability fees for those “collateralizing the system” and the DAI token are “constantly being added to by the savings rate,” creating logical perversity: “no one wanted to give up their stable, high-yield DAI for a crashing, negative-yield ether in the liquidation auctions.”
This meant recently the Maker token itself needed backing by way of a stablecoin linked to a direct fiat peg, seemingly thwarting the entire point of DeFi. To curb this dependence, Ulbricht urges “abolishing the savings contract and stabilization fee,” and in fact suggests a negative stability fee. “A simple fix to the current system would be for MakerDAO (who already sets the stability fee and savings rate) to reduce the savings rate to zero and the stability fee to some small negative number, perhaps -1%. This would have to be done such that DAI would simply disappear at a rate of 1% per year, leaving that much more collateral unencumbered than would be otherwise.”
He goes further still, and advocates for collateralized holders competing “for the interest from DAI holders, with the lowest rates winning. This would keep rates low generally, but when there is a serious collateral shortage, rates will automatically rise via market forces, encouraging more collateral to come in and discouraging DAI hoarding,” Ulbricht explained.
He delves deeply into technical and financial issues involving spreads and arbitrage, but in the end maintains, “The Maker Protocol is a very cool concept, and I hope it succeeds, but I fear it will meet with the kind of crisis we saw in mid-March 2020 again if these fundamental issues are not addressed.” It’s a sobering look at a hinge of finance innovation from a real Bitcoiner, from a significant builder and doer. And it’s a reminder of how necessary it is to remove ourselves from silly polemics and dumb tribes like BTC maximalists in order to help grow a financial system independent from the whim of politicians. Maybe Ross can lead BTC maxis to sanity.
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