We shall be discussing the following on this website: What Is Bitcoin’s Decentralization Maximalism? The Blockchain of Bitcoin. Justifications for Bitcoin Maximalism. The Bitcoin Network. The Impact of Bitcoin on Altcoin Trading.
Definition of Decentralization Maximalism
Decentralization maximalism is the view that decentralization is the best option and way of life to the point that any sort of policy is unnecessary.
Maximalism generally emphasizes the beauty of abundance and an attitude toward things in order to display one’s dominance. In contrast to minimalism, which encourages maintaining things simply, it has a detrimental effect in the realms of decentralized finance (Defi), blockchain, and crypto, as it takes a similar attitude to a greater level of excess.
Maximalists assume that their idea, construct, and technology is better comparing the point where others are obsolete and unnecessary. A typical example will be Bitcoin or Ethereum maximalist. He assumes that he will only need their various blockchains and digital currencies which are the only digital assets, with all others being obsolete).
Decentralization maximalism relates to the concept that decentralization is the ideal technique and attitude to the point that any form of regulation is unnecessary.
Furthermore, there is an overemphasis on the advantages of decentralization like liberty, independence, lack of censorship, a more solid society structure, and efficiency that is not vulnerable to ruling entity breakdown or dishonesty.
While this is accurate to some level. Decentralization maximalism overlooks the disadvantages of decentralization, such as a clear division of tasks, a loss of a single vision, inefficiency, and, in severe cases, mayhem and disorder caused by a lack of regulation and control agencies.
Therefore, it is the acceptance of a concept that can only exist in theory, because the truth is that they require some sort of governance and regulation to guarantee some type of protection, safety, or penalty for harmful activity arising from the confidentiality provided by blockchain and DeFi.
The Definition of Bitcoin Maximalism
Bitcoin maximalists claim that Bitcoin, the most prominent cryptocurrency in the globe, will be the sole digital money required in the future. All other digital currencies are incomparable to Bitcoin. Other cryptocurrencies, according to the maximalist philosophy, are not in line with the goals pseudonymous Satoshi Nakamoto articlated. Pseudonymous Satoshi Nakamoto founded Bitcoin in 2009.
Like government-issued currencies, known as fiat currencies, which are managed by a centralized body, Bitcoin is decentralized. On the other hand, Bitcoin is decentralized, and its blockchain is an openly distributed ledger, which means that all activities are visible to all members.
Despite its prominence as a widely traded digital asset, Bitcoin has sparked the establishment of several other new digital currencies. These alternative cryptocurrencies, known as altcoins, are considered useless and substandard by Bitcoin maximalists.
Bitcoin maximalists think in a few years, Bitcoin will be the only digital asset required.
Many other cryptocurrencies, according to Bitcoin maximalists, are incomparable to Bitcoin.
Bitcoin’s scalability problem has prompted the creation of new blockchain networks that can manage higher transaction volumes.
Although Bitcoin maximalists would claim that Bitcoin’s flaws can be fixed, interest in other blockchains keeps increasing.
Though, Bitcoin was not the first attempt at decentralized digital currencies. But it is without a doubt the most accomplished so far. Bitcoin maximalists believe that the Bitcoin network will satisfy all of their needs. Eventually, investors wish to invest in digital currency. In this approach, maximalists are blatantly in favor of (or at least in agreement that) a Bitcoin dominance at some time in the future.
In 2014, Vitalik Buterin, an Ethereum developer, remarked on the concept of Bitcoin maximalism. Buterin used the phrase “Bitcoin dominance maximalism” to define Bitcoin maximalism. Buterin went on to explain the maximalists’ point of view.
An intention to encourage Bitcoin and improve it; such intentions are undeniably helpful, it is a belief that creating something on Bitcoin is the only ethical way to do things, so anything else is immoral. Bitcoin maximalists sometimes mention “network effects” as a justification, claiming that fighting them is pointless.
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The Blockchain Of Bitcoin
Bitcoin’s blockchain system is established on distributed ledger technology. The distributed ledger is useful because it allows members on a shared network to share transactions by delivering documented copies of data to them. So, this openness aids in the enhancement of safety and the prevention of fraud. If a rogue actor modifies a section of the blockchain, other parties with exact copies of trades can figure out what the scammer modified and restore the legal deal.
Though, the success of Bitcoin (BTC) has helped usher in cryptocurrencies, resulting in the emergence of loads of new cryptocurrencies. Most of these digital currencies are based on Bitcoin’s core structure in a certain form, while others use blockchain technology but not solely Bitcoin’s network.
Expressed in different words, Bitcoin’s distributed ledger has been changed to allow it to be used for more than just peer-to-peer monetary payments, as it was initially designed.
Revised/ Modified Blockchains
The huge trend of blockchain technology has led to private blockchains, which are modified versions of Bitcoin’s global ledger. Businesses and governments can construct private blockchain networks in which only a limited number of members are permitted access after being confirmed or validated.
These private blockchain networks can be allowed to access nearly fully, allowing for a combination of public and private traits. In these networks, particular rights are assigned to individual users, causing them to undertake only specific network activities. Participants’ ability to perform certain duties, such as read-only and modifying access, may be restricted by the network. A municipal government that provides specific taxpayers and businesses access to legal titles and record-keeping while limiting general public access to such records is an example of a semi-private blockchain network.
While public blockchains are decentralized, indicating there is no higher authority with oversight power, private blockchains are managed and controlled by a centralized body, such as a government or enterprise.
Decentralization is a major feature of Bitcoin’s blockchain network, according to Bitcoin maximalists. Decentralization is a major feature of Bitcoin’s blockchain network, according to Bitcoin maximalists.
Bitcoin Maximalism’s Justifications
The maximalists are a strong group of Bitcoin fans who believe that Bitcoin should be prioritized over all other digital currencies. The justification why maximalists feel Bitcoin will prove all other cryptos ineffectual are listed below.
The Bitcoin Network
Many Bitcoin maximalists now believe that a digital currency’s growth is driven by the blockchain network that underpins it. Although other digital currencies may provide revisions to the bitcoin Core basis, which are meant to address difficulties pertaining to the Bitcoin network, the greatest marker of achievement is the duration and power of a blockchain. The theory goes that because Bitcoin’s underlying network is so robust, and because attributes of any digital currency can be readily co-opted by another digital money, the system is the most significant aspect.
Maximalists can cite the sovereignty of Bitcoin and Bitcoin Cash on the scoreboard of cryptocurrencies by capitalization as proof of this theory. In comparison to many newer altcoins, Bitcoin Cash and Bitcoin gold have limited functionalities. Altcoins, on the other hand, have a greater value due to their relationship to the Bitcoin system. The richness of the Bitcoin network distinguishes it from other blockchains, the volume of its number of subscribers, and its track record of performance.
Bitcoin Has A Strong Foundation
One position in support of the maximalist viewpoint is that fresh financial products must confront a big challenge to gaining investor confidence. Despite the fact that digital currencies have grown in popularity tremendously, many large financial institutions and private investors opt to stay out of the market.
The task of completely incorporating digital cryptocurrencies into the world of conventional finance and investing. According to Bitcoin maximalists, will be slow. As a result, strangers are more inclined to pay close attention to the networks that are the oldest, most popular, and most established. Bitcoin is the most well-known of the cryptocurrencies.
With numerous new, unproven cryptocurrencies on the horizon, Bitcoin has a significant advantage in terms of stability and success. When they hack rival cryptocurrency networks or receive poor attention, Bitcoin maximalists interpret this as more proof in their favor.
The Impact of Bitcoin on Altcoin Trading
Variety within a cryptocurrency or bigger portfolio is the last argument for the maximalist worldview. Investing in altcoins may be a risky approach to diversifying one’s cryptocurrency holdings because the price of Bitcoin appears to influence the price of the altcoin world more widely.
The theory goes on to say that instead of staking their money on other coins or tokens. Investors would be better off investing in the greatest attribute like Bitcoin. But, while Bitcoin’s value gain hasn’t always pushed altcoins higher, maximalists can argue that this is because of altcoins’ lesser priority.
Worries Regarding Bitcoin Maximalism
If Bitcoin wants to be the only digital money, it must overcome several obstacles. Because of the limits of the Bitcoin network and its cryptocurrency, many altcoins and later variants of blockchain networks have arisen. The following are some of Bitcoin’s drawbacks and limitations:
Scalability Or Expansion
To verify transactions on the blockchain, cryptocurrencies like Bitcoin employ a proof-of-work (PoW) procedure. Miners are those who are in charge of confirming transactions and guaranteeing that they are accurate. Miners operate as network investigators, confirming the validity of transactions and assisting in fraudulent activity.
When adding the new transactions to the network, all nodes receive copies. These nodes are the network’s members and computers. Therefore, as Bitcoin grows in popularity, the number of operations increases as well. If we consider a blockchain network to be a shared database, the more data contributed, the slower the system becomes, resulting in delay.
Thus, processing the expanding volume of transactions necessitates a tremendous amount of energy. To give you an idea, the amount of energy required to protect the Bitcoin blockchain is growing and it consumes more energy than Pakistan’s whole energy consumption.
The delay or inefficiency of Bitcoin’s blockchain is hindering the cryptocurrency’s scalability. To put it another way, Bitcoin’s scalability problem prevents it from wide adoption for financial transactions since it can’t handle the volume. Thus, new blockchain networks and cryptocurrencies are required, piercing the Bitcoin maximalist worldview.
Another obstacle to Bitcoin being a commonly used payment method is that its price swings too much. This is a phenomenon known as volatility. Companies and individuals will find it difficult to use crypto as a means of exchange for day-to-day commercial transactions if the price varies too much.
Bitcoin’s use was limited in the initial periods. It lacked tools for creating smart contracts and decentralized apps (dApps), which other blockchains are built to assist. A smart contract is a self-executing contract defined in computer code that includes the terms of a contract between a buyer and a seller. The terms and execution of the transaction are controlled by the digital code.
Smart contracts let two parties conduct transactions, like the buying or selling of a car. Since the contract can only be carried out if both parties fulfill their contractual obligations. There is no need for centralized authority
Smart contracts, which are employed on the Ethereum blockchain network, are gaining traction in the banking industry. Despite the fact that Bitcoin’s blockchain network has expanded its capabilities by adding smart contracts. It still trails Ethereum in terms of financial activities.
Businesses and sectors have been developing blockchain networks for years. These alternative blockchain networks do not necessitate the use of today’s popular cryptocurrencies. Rather, these companies are developing their own networks and coins.
For instance, a banking team led by the Union Bank of Switzerland (UBS) has created a sandbox. This is to test the use of blockchain technology for payments in the financial sector. By so doing, UBS launched its own cryptocurrency, the Utility Settlement Coin (USC), which is also known as the Fnality project. The project is in collaboration with other global banks.
The USC would function similarly to cash since it might turn into a fiat currency the US dollar, on a one-to-one basis. In addition, unlike Bitcoin’s cryptocurrency, a central bank will back the USC. This is to say, the financial sector has created its own network, that people can use for payments. Involving customers, businesses, and bank-to-bank transactions, bypassing Bitcoin’s blockchain and cryptocurrency.
Bitcoin Maximalism’s Long-Term Prospects
Bitcoin maximalists argue that are working on any problems facing the Bitcoin blockchain. If governments, businesses, and investors prefer Bitcoin’s blockchain. Then other alternatives will likely determine whether Bitcoin maximalists prevail in the end. But, considering the amount of money invested in other networks and cryptos. It appears that there will be many more cryptocurrencies in the future.