There is no division between Bitcoin and the others

The bankruptcy of FTX is an interesting probe into the behaviour of cryptocurrency communities. Bitcoiners immediately started claiming that FTX is not their problem. Indeed, the fault was not on Bitcoin's side and it continues to produce blocks. Is it possible to separate Bitcoin from its surroundings this strictly? Bitcoin is not just a protocol, but an entire ecosystem in which there are many interdependent services and actors. The blockchain industry is evolving dynamically and changing literally every day as new projects are created, new entrepreneurs and new users come on board. What position can Cardano and other blockchains have in the Bitcoin ecosystem? And how do different communities view this?

TLDR:

• Bitcoin and all blockchains are dependent on their environment.
• The goal of decentralization is not just having decentralized money but also the creation of reliable financial services.
• PoS, DeFi, stablecoins, DID, NFT is an important technological advancement in the blockchain industry.
• The development of new technologies does not threaten the status of Bitcoin.
• The Cardano ecosystem can enable greater opportunities for the use of BTC.
• Blockchain communities must not see each other as competitors but as allies.

Bitcoin and FTX

We are in a bear market, geopolitical events are negative, and some countries may fall into recession. More negative news may only deepen the crisis.

The collapse of a major exchange like FTX could cause billions of dollars in loss and trigger a cascade of further collapses. Many other CeFi services collapsed before FTX. FUD affects all cryptocurrency holders, including the big ones. They may start selling their assets which will affect the market value of all cryptocurrencies including BTC.

Those who hold private keys are not directly at risk of losing cryptocurrencies. The reality is that the purchasing power of held assets is declining. HODLers will weather the bear market, but the fall in the market value of BTC has a direct impact on miners. They are in big trouble and some are likely to go out of business. As the hash rate drops, Bitcoin security drops. It is okay that some miners will not survive the bear market. They may be replaced by someone else. But what if decentralization also goes down? Collapsing miners sell ASIC miners to more powerful players. This cannot be seen as a positive development.

The market value of BTC coins affects the security of Bitcoin. Many may disagree, but the FTX crash is affecting Bitcoin. Bitcoin is influenced by regulation, the media, big investors, the ESG movement, teams, communities, adoption, technology development, centralized exchanges, and many other things. Bitcoin does not live in a vacuum. Every single thing matters.

The spot value of BTC is created on centralized exchanges. Miners need to sell BTC on them to get fiat. Only this allows them to cover costs related to mining. To be able to sell, they need liquidity. Regulation is forcing exchanges to have a KYC/AML process, the EU and the US are considering banning PoW, the media is influencing interest in cryptocurrencies, adoption has a direct impact on the fees collected - one of the pillars of the security budget, and I could go on and on.

FTX crash attracts regulators' attention and may impact another market crash. CZ says it will set us back a few years. To say that FTX has nothing to do with Bitcoin is, from my perspective, a misunderstanding of the context and a gross oversimplification. All blockchain networks are dependent on their environment.

Bitcoin, not blockchain. Really?

Some bitcoiners are trying to draw a thick line between Bitcoin and other blockchain projects. They say that Bitcoin is the only blockchain and everything else is a scam or a money grab. They are distancing themselves from their surroundings, not only from other blockchain projects but also from stablecoins, NFT, from DeFi, DID, centralized exchanges and states.

I think they should make more of a distinction between who is their ally and who is their opponent. Bitcoiners have unrealistic expectations of Bitcoin. They believe that the statement "Bitcoin fixes this" will really solve every problem in the world. It is not going to happen, sorry.

Bitcoin is positioned as a digital store of value. It is not intended to replace centralized exchanges, create stablecoins, enable the use of decentralized identities, or tokenize other assets. That's perfectly fine, and we all know what Bitcoin is.

If we realize this, we must realistically admit that Bitcoin has no chance to solve FTX-like problems. To put it more generally, create decentralised financial services that become an alternative to the banking system.

Without smart contracts, it is not possible to create even a basic financial service such as exchanging two tokens. The blockchain network can only send coins unconditionally from address A to address B. The blockchain network cannot play the role of a custodian and send coins conditionally based on some other on-chain or off-chain event.

There will never be a DEX on the first layer of Bitcoin. That's all right. But why do bitcoiners think it's wrong if decentralized financial services are created elsewhere? Like on Cardano?

The goal of the blockchain industry has always been to create peer-to-peer services enabling the self-custody of assets. Satoshi wrote in the very first sentence of the Bitcoin white paper that he wants to create digital cash that does without financial institutions. He wrote only about the payment system, but money cannot do without other more advanced financial services such as loans or exchanges.

It is not viable to have decentralised money and continue to use centralised services for everything else forever. FTX taught us another important lesson. SBF abused its middleman’s position. It should be in the interest of all decentralization fans, including Bitcoin fans, that similar dramas do not occur in the future.

If we don't agree on this, the middlemen will rob us of our cryptocurrencies over and over. Bitcoiners cannot expect everyone to just hold BTC in their wallets. People want to use the money not only for payments but also for other things including trading, lending, insurance, savings, investment, etc.

Unfortunately, some bitcoiners have started to claim that all these services are nonsense. Not just the centralized ones, but also the ones that are decentralized. The need for people to borrow money from someone else isn't going to disappear from the world just because Bitcoin can't do it, or because someone says it's nonsense. That's not how the world works. The goal of decentralization is not just having decentralized money, whether it's BTC, ADA or something else, but also the creation of reliable financial services.

DeFi is here to stay and it doesn't matter if anyone likes it or not. It would be good if opponents accepted reality and realized that DeFi is in line with the principles of decentralization, unlike CeFi.

Technological progress cannot be stopped

The 3 largest stablecoins in the top 10 have half the market capitalization of Bitcoin. They manage to maintain stable purchasing power, which is very useful for people who don't want to deal with the high volatility of cryptocurrencies. It can be expected that in developing countries, stablecoins will be more useful than native volatile coins when adopting blockchain technology. All major centralized exchanges use stablecoins. They are held by retail and large investors.

Decentralized Identity (DID) needs blockchain to function. In principle, it doesn't matter what kind, but services for DID are mainly created on smart contract platforms. For example, Cardano has an identity management solution called Atala PRISM. DID finds use in developing countries where people still have no ID. It may also be useful in Western countries and will be essential for some financial services on the blockchain.

NFT will be a relevant industry. We'll find them in games, in the metaverse, and people will buy them. The world is becoming more and more digital. Global brands and artists know this and will use NFT. Maybe only a small percentage of the population, or maybe the majority of users of the Internet. What is certain is that NFT is here to stay in some form and will continue to evolve.

DeFi is an increasingly relevant industry. Even banks are issuing reports saying that the real reason for the bankruptcies of firms like Celsius and FTX is centralization and that DeFi protocols are running on and have no problems. This can be seen as a huge shift in the perception of decentralization and I believe that banks will want to leverage public blockchains within their business.

Bitcoin and Dogecoin are the last PoW projects in the top 10. Cardano and Ethereum use PoS or another consensus. PoS is more than 99% more environmentally friendly. Regulators, environmentalists, and many young people are rejoicing that the blockchain industry is greener.

Communities hate each other

One of the big problems in the blockchain industry is that communities hate each other. Bitcoin maximalists refuse to accept technological progress within all other projects. They resent it, they vilify it, and they don't use it. Unfortunately, they don't do proper research and have no relevant arguments for their behaviour. They often say some general things. For example, many do not accept the existence of PoS. The worst thing is that they try to tell newcomers what is good and what is not. Unfortunately, other communities do this as well. It creates a very toxic environment that is very hard to navigate.

People naturally use technologies that make their jobs easier or are fun for them. I believe the vast majority of blockchain fans have used stablecoin at some point. I have no idea why bitcoiners mind using NFT as profile pictures on social media. Many IT giants are working on creating decentralized identities, and it's easy to track down information on the usefulness of this innovation. DeFi users are increasing and some services are considered reliable and safe.

Bitcoiners are worried that PoS exists and that proponents of this consensus say it is 99% more environmentally friendly. That's why they said PoS would never work. Now that it is working they say something bad is about to happen. Cardano has been using PoS for over 2 years and there has been no problem. PoS mint a new block every 20 seconds. Just like bitcoin does every 10 minutes.

None of these technologies detracts from the importance of Bitcoin. It is not a competitor to it, but rather a complement. If we had more reliable DEXs and people used them more, people wouldn't have to trade and hold BTC on CEXs. The whole ecosystem would be more robust. The market value of cryptocurrencies would be more stable. The miners would appreciate that.

Even PoS is not a competing consensus for PoW. It's just a consensus used in Cardano and other blockchains. PoW may have a problem with security budget depletion and its security may decrease. It should be no problem for Bitcoin fans to discuss this topic openly and acknowledge the potential future risk. Isn't it good that PoS exists as an alternative?

I believe the Cardano ecosystem can be useful for BTC.

Once a reliable bridge is built in the Cardano ecosystem, it will be possible to tokenise BTC. You can use the Hydra fast payment network. You can sell BTC on DEX for stablecoins or use it as collateral. You can even lend it to someone and profit from the interest. Everything would work peer-to-peer and be self-custody. No one could freeze the account, censor transactions, or abuse their position.

BTC users will open the door to buying NFTs, other tokenized assets (stocks), stablecoins and DIDs. None of this will ever be on Bitcoin. And again, I say this is a good thing. Some maximalists try to predict the future and think that every loyal BTC holder will never buy NFT or use a lending platform. From my perspective, this is a naive perception of the world.

It makes no sense to resist and not support this vision. I don't understand why Bitcoin fans aren't happy that Cardano and other blockchain networks are emerging to expand the possibilities of how BTC can be used.

I believe the biggest harm is done by a small group of influencers who have a lot of power. That's a shame for all of us. Toxicity prevents wider adoption and prevents greater use of decentralized technologies. BTC holders have no choice but to rely on centralized services. They should not be surprised when an exchange like FTX crashes and causes a market crash. Have these people thought about what would happen if Binance went bust in a similar way? Would they continue to claim that Bitcoin is not affected? This is not the way to go. We all have a common goal and that is decentralization. We must all want DEX to replace CEX.

Communities need to start working together. It is not possible for bitcoiners to lobby the White House for a ban on PoS, or want lawmakers to make everything but BTC unregistered paper. This is making enemies. The bitcoin community is large, but other communities are growing relatively fast as well. Maximalism has driven many people out of the Bitcoin community. These people have gone elsewhere and are using other networks. The irony is that many of them continue to use Bitcoin but do not consider themselves part of the community.

Maximalism at the technological level makes no sense. It should be common and welcome that people to use multiple blockchain networks and share their experiences. No one should make a drama out of it, and certainly not try to drive such people out of the community. It's like asking Twitter users not to use Facebook. If someone asked you to do that, you probably wouldn't understand why.

It would be positive if DeFi services were being built in the Bitcoin ecosystem, but it's not happening. We can see some efforts, but the pace is significantly slower compared to the growth of other ecosystems. There is nothing wrong with BTC holders using DeFi in another ecosystem.

Blockchain communities must not see each other as competitors but as allies. Our common enemy is inefficient and unreliable middlemen. First and foremost are CeFi and CEXs.

Conclusion

Blockchain is a disruptive technology and experts believe it will have a greater impact on society than the advent of the internet has had. This means that people will change their habits and use different services. Some companies will go bankrupt and some services will disappear. This will open up space for something new. Bitcoin, Cardano and all other blockchains live in a complex environment that is full of events and unexpected surprises. This environment affects cryptocurrencies in the same way that cryptocurrencies affect their environment.

For blockchain networks to succeed, a functioning ecosystem must form around them. The reliability of the ecosystem will be key, and if we are to honour the principles we are fighting for, we must cling to decentralization. Collaboration between communities will speed up development, competition will slow us down. The need to use centralised services will take us back to the past. Think for yourselves about what kind of future you want.