Altcoins are a way for people to trust altcoins, but they're just a reimagining fiat incentive alignment.
This opinion editorial is by Jimmy Song, a Bitcoin developer and educator, programmer, and entrepreneur with more than 20 years experience.
"We are all in it together." Altcoiners agree when regulators come after them. Altcoiners also say that Bitcoin is wasteful, obsolete and toxic.
It is both confusing and arbitrary to see Bitcoin as an altcoiner's frenemy. They try to be united because Bitcoin adoption is more than any other altcoin or the whole space of altcoins. They also criticize Bitcoin whenever they have the chance to gain interest in their coin. Altcoiners engage in self-interested mental gymnastics worthy even of the most partisan politician.
Their inconsistency in flip-flopping is due to monetary incentive and it's easy to see why. They will fight for what will pump their coins. Altcoiners will not excuse a grave sin, a security exploit that is so large, or rent-seeking that is so obvious.
While some Bitcoiners find their behavior irritating, others find it to be completely irrelevant. Altcoins are a different kind of Bitcoin. This is understandable. They are causing a lot of damage and it would be foolish to ignore them.
That harm is what I am writing about today. Altcoins may seem to do little damage, but you might think that those who lose out are just suckers. It is possible to maintain some distance from their antics. However, their actions can cause a lot more collateral damage and that is why we have to make the case against altcoins.
Altcoins have faced many criticisms. From a technical standpoint, they don't offer anything. They are terrible investments. They are poor security assets.
We often look at their shenanigans with dispassionate eyes and laugh at their obvious failures. But to convince people about altcoins' futility, we need to argue at a higher level.
Altcoins must be condemned morally. This article will discuss how altcoins hinder Bitcoin adoption, destroy Bitcoin's value, and foster bad habits. I will briefly explain why altcoins have been proven to be unmoral.
Altcoiners Are Rent Seekers
Most people are confused when they hear about Bitcoin because they believe altcoins are similar to Bitcoin, or even belong in the same category. This is understandable. This confusion is understandable. Media organizations lump Bitcoin into the same category as "crypto." But, more importantly, altcoin founders and VCs greatly benefit from altcoins' association to Bitcoin. This category is legitimized by the Bitcoin price rise and its long history as a security-oriented cryptocurrency.
Altcoin founders and VCs are therefore motivated to associate altcoins, such as Bitcoin, with their own venture capital. It's almost impossible to duplicate the main feature that makes Bitcoin so interesting, which is its decentralization. It's also very difficult to value-capture or get rich without a trusted third party. So they create the fiction that they are "working towards decentralization."
Even if they were able to add decentralization to the project, which they don’t know how to do yet, they don’t want to because it would make them lose any potential profit. They keep on claiming that decentralization is a spectrum, and that they are not in the middle of the value theft, but they do continue to maintain this fiction. Two functions serve the fiction of decentralization or being decentralized in title only (DINO), which reveals their rent-seeking.
It first associates them to Bitcoin. This legitimizes the project in the eyes the public or at least the extent that Bitcoin can be legitimate. Marketing is done using the halo effect. Their coin is whipped into a frenzy by the halo effect. They make superficial copies of the real thing and sell them as the original.
It also absolves them from any responsibility in the event of an error. Altcoins make the ideal rent-seeking job. All of their salary comes without responsibility. Although their token sale terms are very clear about this fact, few people actually read these legal documents. These documents don't define it as security. It's not a share in any securities.
These actions are extremely immoral and a fraud. These are similar to counterfeit brands from China that try to fool the customer into believing they are the real thing. This has implications for Bitcoin, as you might imagine.
Bitcoin adoption is hampered
Because of altcoiners' muddying the waters, explaining Bitcoin to normal people has been 100x more difficult. Altcoins can create confusion by saying things such as "Decentralization is an array" and "Blockchain technology can be used in many different ways." Books such as "Blockchain Revolution" by Dan Tapscott and "Cryptoassets", by Chris Burniske, provide enough detail to make blockchain appear like the secret sauce that made Bitcoin so successful.
Any technical person who has ever studied the concept of a blockchain knows it is a restricted database that is not like any other data. There is a lot of confusion around the term blockchain, just like decentralization. Blockchains are now being touted as having magical powers such as being able solve supply chain issues, HIPAA compliance, or click fraud.
Altcoiners make verification very difficult despite the "verify but don't trust" ethic that is Bitcoin. Instead, they rely on people trusting them and then abuse that trust to their advantage. All manner of broken promises about price, adoption, and development are made to break that trust. We have huge disasters such as LUNA, and Bitcoin is thrown in with the incompetence of altcoiners.
Sins Of Fiat Money
People should be aware that promises are made. In a decentralized system, who is making a promise? What are these promises worth?
Fiat money has a problem because promises to pay later can be confused with money that is available now. Fiat money can be expanded infinitely by issuing many promises. Hyperinflation occurs when the trust in these promises is lost. Altcoins function in the same manner. They can be considered fiat money with a central bank and monetary control.
Altcoins inherit all moral problems associated with fiat money. They take advantage of monetary expansion and change the rules without consenting to everyone. They practice a different monetary expansion than traditional central banks. However, it is very similar to fiat currency printing in that it has a huge premine that's released at a time.
The effects of the muddying water have been devastating. Many people could greatly benefit from the ability to save money without theft or debasement. Many people fall for the degenerate gambling trap of altcoins. While speculation on altcoins is not worth anything, saving can allow for capital accumulation. Capital accumulation is the key to civilization. However, this is slowing down because so many resources are devoted to these value-destroying projects.
Destruction of Value
It's hard to see the contrast between Bitcoin and other altcoins. There's a tool that allows people to keep more of what they have created over time. The other side is a trap which extracts any value they have in indirect or obscure ways. Bitcoin is decentralized because it is verified. Altcoins can be easily abused to the advantage of the VCs.
These VCs buy altcoins at huge discounts and market these coins through marketing. They trade on the trust the public implicitly grants them to exploit them. Because retail is discounted, they make a lot of money. These retail investors don't only reside in Western countries. Investors are often among the most vulnerable and poorest people on the planet. Ripple is an example of one of the most popular coins traded in Iran. Bitcoin would be a huge benefit to Iranians, as it allows them to save money and is not subject to theft by their central bank. Many of them gamble instead.
Similar to central-bank-backed fiat money the clear Cantillon winners in the West are the wealthy people, while the least fortunate see their hard-earned savings taken away.
Altcoin trading is a waste of capital. Not just money. Developer time, marketing and all the effort that went into it are also wasted. Given that most of their investments end in failure, VCs have a poor record of investing. Altcoins make even failures profitable for VCs.
Unfortunately, many VCs are happy to play the role of Altcoin central banksers. They don't mind exploiting the poor and deceiving the public as long as it makes them money. Altcoin pumpers don't differ much, even though they participate in pay for play.
Trust in exchange for money is the tradeoff. Multi-level marketing is a similar tradeoff. Personal relationships can be leveraged to sell products that buyers would not ordinarily buy. Multi-level marketing still allows people to get some product, be it food, vitamins, or clothing. Altcoins are a pure exploitation of trust. There is no product provided.
Destruction Of Virtue
Altcoins exploit the basic instincts of people to get something for free. The goal of people is to work as little as possible for the greatest amount of money. The current system allows people to choose the exact positions they want. Investment banker, fund manager or venture capitalist are all examples of these positions. These positions are known as rent-seeking because they tax transactions but don't provide any value. These people are a drain on society, and most jobs have a rent-seeking component.
Rent seeking is morally questionable. Rent seeking is a form theft. Altcoins allow people to rent-seek, as long as they trust them. Altcoins can be referred to as a way of monetizing trust.
Too many people chase rent-seeking jobs and fail to realize that they are destroying value. Consider all the effort, time and labor that is put into altcoins in comparison to the value it provides. This is a huge waste and ultimately decreases capital accumulation, trust included.
Altcoins can inflame high-time-preference behavior, which started with fiat currency. Because the rules are constantly changing, you can't plan with fiat currency. Altcoins also have this problem. Rules can and do change frequently. Trading is an integral part of altcoin's ecosystem. Before the rules change, you need to be able to trade.
Altcoiners not only create confusion and hijack Bitcoin's legitimacy but actively attack Bitcoin. They claim that proof-of work is harmful because it consumes too much energy. As I have explained, this is a foolish technical statement and a baseless moral claim. However, it has an effect on those who don't understand the process of energy production.
They also claim that mining is centralized. They mistakenly confuse mining operators and mining pools, and ignore the fact that users have the ability to refuse a block of bad-faith. This is similar to a journalist who accepts a bribe and blames the journalist for not having good moral standards.
These assertions are not the only ones. All these are ways to increase fear, uncertainty, and doubt in Bitcoin and make it look better than the altcoin. Altcoiners use FUD to attract people to their altcoin, which they can rent-seek. They are trying to convince people to drink mercury rather than water by pointing out all the negative aspects of water.
Altcoins are being destroyed
Altcoins can be a swarm of thieves, cronyism, and rent-seeking. Altcoins are built on the reputation Bitcoin has earned. They make a lot of money for VCs and altcoin pumps at the expense and the vulnerability of the poor and weak and encourage the fiat system's high-time preference behavior. They stop Bitcoin adoption by their very existence, and they exploit those that Bitcoin could benefit. Altcoins, in short, are evil.
Altcoiners believe that saying positive things about Bitcoin is enough for them to get rid of their altcoin vice. Altcoin owners believe that having Bitcoin gives them the freedom to pump altcoins to whatever they want. This is not the way morals work. It is normal to do the right thing and be good. Even one mistake or negative thing can be a problem and you will have to face it.
Altcoins delenda est.
Top Ten Rationalizations by Altcoiners
- Altcoin founders have a premine that is completely consistent with a leaderless, decentralized system.
- A developer tax is not theft of any value.
- Turing's complete smart contract will not have bugs, even if I am told otherwise. I don't have the time or resources to verify.
- My drooling chimp DB Row designation is worth more than a patent and a copyright.
- Trustworthy influencers who are getting paid by crypto companies.
- Even if the founder contradicts himself, he is 100% correct each time and anyone who says otherwise is a hateful person.
- You can vote for whatever money you like and they won't be affected by the laws of economics.
- People who initially sold tokens and made all the decisions were not the single source of failure.
- My token's market cap is going to exceed $500 trillion.
- Information security is irrelevant because no one will do anything wrong with all of their power.
This is a guest post by Jimmy Song. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
By: Jimmy Song
Title: Bitcoin Songsheet: How Altcoiners Use Bitcoin To Rent Seek
Sourced From: bitcoinmagazine.com/culture/how-altcoiners-use-bitcoin-to-rent-seek
Published Date: Mon, 19 Sep 2022 16:54:32 GMT