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Bitcoin Maximalism is Naïveté (A Call To Reality)

Updated: Jul 7, 2022

If only your preferred crypto could be the last one standing, your profits would be absolute. Wouldn't that be glorious? Sorry, I'm here to tell you that it will never happen. Why not? Individuals and organizations with more power would have to stop trying to gain an advantage over those with less, something entirely incongruent with history and human nature. The world is currently moving away from currency hegemony and its underlying assets. You would never know this from Telegram and message boards within the cryptosphere, where this growing fantasy of coin maximalism threatens to weaken our overall asset classes' ability to fight against the coordinated threats of more traditional assets.

Crypto has rapidly moved through the various paradigms of an asset class and finds itself now at the doorstep of institutional acceptance. Nation-state acceptance will follow, but this phase provides us a window of how asset allocation strategies will shift as we progress to organizational decision-making. Institutional investors cannot afford to operate the same as retail investors, who are more prone to emotion and less affected by accountability. Maximalist tendencies are for gamblers, not those in large companies who desire a sustainable career. While you might get the occasional individual who runs a fund, or even a country, most organizations reach their decisions through consensus and with a healthy appreciation for risk management. For crypto maximalism to be possible, that could never be the case. All countries and corporations would have to be run solely by one individual willing to rest their entire success upon a singular asset. Such instances are so rare that the names and examples come readily to mind.

Enter Litecoin. A cryptocurrency over ten years old, with a perfect 100% uptime that the current Chairperson of the SEC, Gary Gensler, has already stated would not come under threat as a security. With no founders-stash or eccentric centralized leader, it is the sensible choice for a large organization seeking asset diversification. For anyone who has worked in a large corporation, you are already well aware that it is preferable to make the defensible decision than the risky one that could be potentially more lucrative. Asset maximalism and meme coin adventurism are not for someone reliant on a paycheck to fund their mortgage—not if they'd like to avoid being called into their boss' office on a Friday afternoon.

Eventually, we will move into a paradigm in which nation-states become significant players. As the stakes increase, such considerations become even more applicable. No longer will the fate of your favorite coin be decided in a Twitter battle or on the fields of Reddit. Do you know how nation-states achieve currency hegemony? Violence—or the threat thereof. However, even during the Greek and Roman empires, absolute currency hegemony was never achieved. Despite the U.S. being the last remaining superpower, the dollar is constantly under threat of losing its status as the world's reserve currency. The lengths required to achieve total hegemony are undesirable and unnecessary. There are many more advantageous ways to exercise power short of war with your friends and neighbors. The most common means—currently derided in crypto—is central to the human experience; cooperation. Cooperation is the alternative to conflict, and in that spirit, Litecoin was created to work in harmony with Bitcoin.

Litecoin has always favored reality since its inception, seeing itself as a partner rather than a challenger to Bitcoin. Its maturity is further reflected in its methodical and measured development. While other projects rush to activate features that invariably crash their network, Litecoin refuses to bend to the pressures of the market or even its supporters. Perhaps this is why it has preserved its 100% uptime, something even Bitcoin—whose network has been down twice—can not claim. In the past, Bitcoin maximalists have been happy to accept upgrades from its brother, recognizing the value of maturing together as part of the same crypto family. Lately, however, BTC maximalists have questioned this notion of cooperation as they have seen their dominance increase. Perhaps this is because many of its most ardent proponents, who are often developers and engineers, lack the historical background to understand the consequences of eschewing your allies in an attempt to achieve absolute hegemony.

Up until now, wash trading rules have not applied to crypto. This means that currently, you can sell your bitcoin, log the tax loss, and then buy back the same amount of coins at a lower price. This practice is illegal in the stock market as per the Commodity Exchange Act and Securities Exchange Act of 1934. Having a similar asset to trade both in and out of is essential in overcoming this limitation. LTC closely tracks BTC, one halving cycle behind, divided by four. Were BTC maximalists successful in destroying LTC, they would be cutting off their noses to spite their faces. Even if their only goal is to repurchase the same BTC, they need LTC to continue to track BTC accordingly; otherwise, they risk losing a significant amount of their position due to taxes in the future. Do BTC maximalists honestly think this loophole won't be closed? Have they not heard the rattling of sabers towards this particular asset class?

Additionally, Litecoin is about to become the largest decentralized liquidity bridge for legal, KYC-free bitcoin. Those who say they value anonymity will have difficulty maintaining it without Litecoin. This could occur through cross-chain atomic swaps, but MWEB is the real game-changer for the average user. In development for over two years, MWEB provides improved privacy and fungibility (another feature bitcoin lacks).

While critics will point out that other privacy options exist, Litecoin is a far more readily available coin; one that has not been delisted from most major exchanges. Again, this is because Litecoin took a more conservative approach to privacy. These are just a couple of ways in which, even if you are a BTC maximalist, LTC is essential to your ultimate goal of increasing your position in that asset.

Eventually, maximalists must come to the same realization as even the most powerful of nations. It is much more advantageous to cooperate with allies than engage in currency wars. Those who imagine a world in which only one cryptocurrency exists fail to recognize essential components of human nature. Everyone dreams of absolute hegemony, but, thankfully, few are willing to go to the lengths necessary to achieve that goal—and the ones who do are invariably poorly regarded by history. It is a tyrannical impulse, and especially in free societies, there is an economic incentive to pursue cooperation. Even now, as sanctions are imposed to restore global order, allied countries are diversifying their underlying assets in an attempt to avoid inflation. They know well that if they relied solely upon the dollar, they would be at the mercy of a supply shock that could lead to the fall of their government. For all its posturing about the situation in Ukraine, Europe immediately sought ruble-euro trade agreements. Large organizations will always seek an advantage, regardless of the alleged superiority of an asset class or the involved ethics. Maintaining a diversity of currencies and underlying assets is an essential strategy. If BTC solely existed, the asset class would lack the necessary variety integral to risk management, making crypto a challenging entry for more conservative financial institutions.

This brings us to the real issue that bitcoin maximalists have failed to consider. Currency wars are not usually about violence but competitive devaluation and currency engineering. In the case of nation-states, a currency's value is intentionally suppressed to gain a trade advantage over its competitors. However, as it applies to crypto, competitive currency engineering is about manipulating a project's value through its tokenomics. Centralized projects print billions of tokens out of thin air, filling the pockets of their angel investors and relying upon maximum supplies too absurd for most retail investors to comprehend. Artificially inflating their standing on coin ranking sites, they further mislead small investors about their actual success or perceived cost of entry. The temptation of quick profits has led many within our community to embrace such projects, putting crypto's central and most compelling thesis at risk. BTC maximalists would do well to ask themselves if their opponent is really a proof-of-work cryptocurrency with a fixed/deflationary supply—like LTC—or the very centralized projects in which they have willingly taken positions, under the justification that they will roll their profits back into BTC. A new form of competitive currency engineering—one built into the tokenomics—is the currency war of the Twenty-First Century.

It would do well for PoW coins to stick together. Even solitary superpowers do not see currency as a zero-sum game but prefer to seek mutually beneficial relationships with their allies.

So ultimately, this is a call to reality. It is disturbing to see the tribalism and acrimony that is becoming commonplace in the crypto sphere, as one group attempts to gain an advantage through misinformation campaigns that primarily hurt small investors. There is another alternative—cooperation. In this spirit, Charlie Lee created Litecoin to provide a complement to Bitcoin. So let us reason together and form a future in which the crypto community stands together against threats from older asset classes and those who would seek to undermine its original promise through currency engineering and centralization.

Ōishi Yoshio


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