Olivia
Online
Justiin Bons
@justti_bons
Founder & CIO of @CyberCapital Europe’s Oldest Cryptocurrency Fund, full-time crypto researcher since 2013. My words are my own & are not investment advice.
The Netherlands
Joined May 2012
2.1K Following
2.1K Followers
7.7K Posts
Satoshi Nakamoto was a big blocker!
This contradicts maxi narratives, as it exposes the capture & resulting pivot of BTC
The truth is that Satoshi would oppose everything that BTC stands for today!
As the facts of history expose BTC for abandoning its own founding principles:
Satoshi Nakamoto was a big blocker!
This contradicts maxi narratives, as it exposes the capture & resulting pivot of BTC
The truth is that Satoshi would oppose everything that BTC stands for today!
As the facts of history expose BTC for abandoning its own founding principles:
The proposal for EGLD passed; no surprise, given that most voted with their feet instead!
This is how to ruin a crypto with great tech through terrible governance & economics
When most try to reduce inflation, EGLD is increasing it & calls that "growth"
https://t.co/TBTlIui0gp
Communism killed over 100 million people in the 20th century!
This one ideology led to unimaginable suffering on a scale human beings cannot even comprehend
Even if @VitalikButerin meant this as a joke, it is not okay
Cypherpunks oppose communism & tyranny in all its forms! 🗽
Blaming SOL for the fraud & scams that occur there is a brain-dead take;
This always happens to permissionless chains that rise to a dominant position 🔥
In 2014, it was BTC scams & criminal markets. In 2017 ETH ICOs & in 2021 it was ETH NFTs!
SOL is the BTC & ETH of 2025: 🧵
Scammers & criminals will always seek out the cutting-edge, as it is on this frontier where they can extract the most, just like the Wild West of old
Does that make the frontier bad? Ofcourse not, in the same way, that BTC & ETH were not bad during their heydays
A truly decentralized, permissionless & public blockchain cannot block criminals, scams & fraud...
That is the trade-off we make for freedom, truly making it the home of the brave; if you cannot stomach that, go back to centralized products!
The early internet was much the same, with a much higher proportion of criminal activity, scams & fraud that we see today. Over time, with mainstream adoption, this was watered down & consumer protections were improved. Making the internet a much more respectable place today compared to when it was in its infancy
Most also do not realize that pornography drove a lot of the internet's growth, specifically the acceleration of innovation around capacity, speed & more:
I have never endorsed memecoins & I likely never will as a research-led fundamental value investor
However, the analogy to pornography & the early internet is uncanny, even if it is often distasteful. I am not in the business of denying reality; I am in the business of uncovering & discovering reality
A major difference to the internet is that crypto is not a single protocol, but thousands all competing over dominance & adoption. This free market dynamic is powerful & even though it drives a lot of evil in our world, the net effect is still positive. Free market competition drives innovation & exerts "evolutionary pressure". This, however, does mean we are cycling through dominant chains over time. First, it was BTC, then it was ETH & now it is SOL! I value freedom & am willing to accept a certain degree of chaos & danger in return
The truth is that SOL is now leading the cryptocurrency movement, whether we like it or not!
The high frequency of scams & fraud are only additional signs of this dominance, along with the undeniable usage metrics, where SOL is clearly leading
SOL's leadership has also been relatively responsible, as they have been putting their audience's attention & focus on real projects, for which there are plenty on SOL. As a matter of fact, the application revenue for SOL is now higher than all other chains combined! (5.8M in the last 24H!)
Again, I have never endorsed meme coins & never will. However, one of the reasons for PumpFun's success has exactly been because it is more fair than most of the alternatives out there. The platform itself guarantees that there is no pre-sale & no team allocation; this is why some of the biggest meme coin scams were not launched on PumpFun! We all need to inject a bit more nuance & detail into these conversations; nothing is ever clearly black or white, good or evil:
I also suspect that the recent meme coin mania was driven by the sorry state of our industry. a lot of people perceive meme coins as a less rigged game compared to the VC-infested waters of "mainstream" crypto. Where the majority of the supply is now often controlled by insiders...
We should bring ICOs back at scale now that the regulatory environment can support that again. Since at least that gave retail the same opportunity as the VCs participating at a ground level
Either way, blaming SOL for this recent mania is completely misguided; if anything, we should be thankful that somebody was able to pick the ball back up after ETH fumbled it. We should care about the adoption of decentralized blockchain infrastructure; I am not so petty as to oppose this adoption surge by totally opposing SOL
There is plenty to criticize SOL for, but supporting fraud, scams & fraud is not it. That is a tired argument that I have countered for over 12 years now, both in defense of BTC, ETH & now SOL in turn. Do not be like the sour BTC maxis of 2017, denying reality as their usage metrics are flipped by ETH. Constantly moving the goalposts of success until they became a pet rock
Realism & an adherence to empirical evidence inform our position, love or hate SOL. You cannot deny its prominence; this is why Trump launched on SOL; no other chain had the infrastructure to support that sort of scale overnight
Based on crypto's history, there is a good chance that there will be a different dominant blockchain, in a few years from now. That blockchain will also most likely host the majority of fraud, scams & criminality. This has always been the case & most likely always will
SOL is no angel, but it is also certainly not a devil ☯️
Ethereum is still not scaling; the narrative is false
That is why Solana has 72x the usage (TPS) compared to ETH!
Even when we include L2s (who keep most fees). SOL still has 7x the TPS than all L2s combined!
Chase hype all you want, the reality that SOL is winning remains 🔥
EGLD's fall from grace:
Going from a capped supply to a yearly inflation of 8.75% is reckless
What is even worse is that 40% of that is being funneled directly to a "fake DAO"
While they plan to mint an additional $250M worth of EGLD to GIVE directly to private companies! 🧵
Including "MvX Labs US LLC," which is owned by EGLD's leadership; clearly a massive conflict of interest!
A real shame, as they have some of the best sharding tech; however, none of that matters if they wreck the economic model in this way
Inflation Is Not Growth:
Within the context of blockchain token economic design, inflation should be seen as a cost that is paid by the investors
That means when you mint new tokens to GIVE to private parties. What you are really doing is redistributing wealth, from everyone, to these private parties...
That is why what is being proposed here is not just terrible from a blockchain design & economics perspective but also from a moral one. It is, in other words, a type of "hidden tax"; a trick governments have played on the public for centuries
Something that crypto should move away from, not return to...
It would not be so bad if all this new inflation were used to secure the network (paying validators) & other decentralized L1 purposes (like a L1 DAO treasury). However, that is unfortunately not the case here
That is also how this proposal inevitably introduces corruption by combining potentially massive payouts with centralized decision-making:
Fake DAO:
DAOs are supposed to be governed through stakeholder voting. That is not the case here; that is what makes this a "Fake DAO"
The stakeholders will only get 40% of the vote! While the foundation gets 30% & xAlliance (funded by the foundation) gets the last 30%...
That is not a DAO, as it is not decentralized or autonomous!
Builder "Growth" Fund (20% of Inflation):
Governed in a centralized manner. As I just described, this fund will pay out applications. Again, opening up countless more opportunities for corruption. As they will whitelist projects that get paid, creating an unfair competitive environment
Whitelists are never justified in a decentralized context, as it always implies a type of permissioned gatekeeping. Whitelists & blacklists for that matter are something we would ussuelly associate with centralized systems instead...
User "Growth" Fund (20% of Inflation):
This is basically an incentive program for EGLD DeFi. Something we have seen many times before.
However, there is a big difference between a foundation spending its initially agreed-upon capital vs allocating new emissions after the fact...
This will again impoverish investors in favour of DeFi traders, who tend to be highly mercenary, jumping from chain to chain chasing such incentive programs. Another crooked game that is unlikely to create lasting growth for EGLD; quite the opposite: As it will create even more downward pressure on price as mercenary traders sell all these tokens back into the market...
Protocol "Sustainability" (10% of Inflation):
Looks like this bucket will be paid directly to the Core team (the authors of this proposal)
I have opposed this style of Core dev funding for many years, as it is basically a "blank check". There should instead be a decentralized treasury that is voted on through governance proposals (competition). Not a hardcoded address that goes directly to the Core team...
The document itself does not describe the exact implementation of this bucket, but I suspect it will be as I just described, which is again terrible.
This feels especially greedy as the same leadership is also planning to give itself an additional $100M worth of EGLD by GIVING it to their own private for-profit company:
Conflict of interests ($100M):
MvX Labs US LLC will be a private for-profit company, presumably owned by EGLD's leadership. Just like its Romanian counterpart
I only say presumably here, as the company does not even exist (based on the US company registry). Yet in the screenshot below (from the official docs), they propose GIVING this company $100M in EGLD!
This is the most insane aspect of this entire plan. As it breaks multiple "sacred" rules of blockchain design. Breaking the social contract & all future trust in the process
As this sets a precedent that big "one off" emission events can occur under EGLD's leadership & governance. Destroying any & all scarcity guerentees that investors useully look for when doing fundemental analysis
Emissions (inflation) should only ever be used by an L1 for itself, not to pay off private companies!
DAT & ETF deals ($150M):
I keep repeating that they are "GIVING" these newly minted tokens away, because unlike BTC, ETH, & SOL, DATs & ETFs. Who have to buy these tokens on the open market based on the demand for these products, thereby creating positive price pressure
These organizations will be "gifted" these tokens instead of needing to buy them. This is another area where there should be massive corruption concerns
This means that EGLD's leadership is now in a position to appoint people to extremely lucrative positions. Even giving them shares worth many millions of dollars, the possibilities for bribes & favoritism are endless...
This is another reason why an L1 should have nothing to do with such matters, thereby maintaining credible neutrality!
DATs & ETFs should instead evolve organically based on the merit of the project, as happened with BTC, ETH & SOL; those L1s had nothing to do with setting up these companies, let alone directly GIVING them freshly minted tokens!
Builder Revenue Share (90% of Fees)
Another terrible design decision; as builders can always allocate more of the application fees to themselves via the smart contract. The reason why they do not do so in most ecosystems is that it makes the application way less competitive!
The total fees are based on what the validator is willing to accept, by arbitrarily returning 90% of the fees back to the smart contract developer. It forces validators to raise gas prices to meet their costs
In effect, this will make all applications on EGLD 10x more expensive. In reality, most competitively minded devs will program this revenue share out; however, that also creates massive inefficiencies in the smart contract itself...
I never liked the initial 30% revenue share, which means I obviously dislike a 90% revenue share even more!
Economic Design
EGLD's major competitors, such as ETH & SOL, both have a low long-term inflation rate combined with a 50% fee burn
That EGLD is introducing a high inflation rate, combined with a 10% burn, makes it massively inferior from an economic perspective. As the goal with these designs is to have the burn exceed the inflation rate...
However, given how much worse these figures are, for EGLD to achieve the same level of deflation (price appreciation based on burn), it would need at least 10x the economic activity...
As this plan will give EGLD 5x the inflation with 1/5 the burn! That is what makes this design so objectively bad when compared to ETH & SOL
The fact that EGLD's leadership has repeatedly stated that EGLD's burn will exceed inflation when this plan is implemented is also incredibly irresponsible. As that is not even the case with ETH & SOL now, which have a far better economic model & orders of magnitude more usage...
The latest trend for big chains is to reduce their inflation rates, as ETH & NEAR did, or as SOL attempted to do, since most are still overpaying for security. The fact that EGLD is going in the complete opposite direction tells us how disconnected they are from established industry blockchain design principles
Political Blunder
This was also very badly handled from a political perspective. It is almost as if the leadership has ZERO knowledge of the last decade in crypto governance developments, or even basic political common sense...
Attempting so many changes all at once was a terrible decision for multiple reasons:
As it allows critics such as myself to focus on the worst parts of the plan, while also making it trivial for the Core team to control the narrative through sleight of hand
As they can, for example, focus on discussing inflation rates while avoiding the topic of them minting new tokens that they plan to GIVE to private companies, including their own...
It is not dissimilar to what happens in US politics, where many unrelated issues are pushed into a single massive bill. Forcing politicians to make massive compromises, as passing something they want will also imply passing something they do not want that the bill's creators might have snuck in!
That is what makes these current discussions so unhealthy, as it quickly becomes a chaotic mess. What they should have done was introduce these new concepts one at a time, so the community can focus on that issue without additional & unnecessary noise
Another major mistake was releasing a "half-baked" proposal where so much still remains unspecified, critical details where many devils can hide. As it muddies the conversation even more! Yet the core team is still actively promoting this & gathering consensus, while critics like me are not supposed to critique because it is unfinished...
A ridiculous political situation, that comes across as if the Core team is attempting to dominate the narrative & discussion through manipulative tactics
Chasing imaginary demons
I noticed a lot of EGLD community members & leadership pointing to SOL as a justification for these changes
Basically saying if SOL can do such evil & corrupt things that EGLD also has to do those things to compete... (two wrongs do not make a right)
What is even crazier about that is that SOL never did anything even approaching the level of controversy these changes represent:
SOL never increased its inflation rate, never paid private companies from new token emissions, & never paid its own leadership from new token emissions
As a matter of fact, all of SOL's "ecosystem funding" comes from the foundation (non-profit). Which got all of its funds from the initial token allocation. That is entirely different from what is being proposed here...
The Alternative Solution:
The real technical solution is incredibly simple & has been done many times before: A decentralized L1 treasury governed by the L1 stakeholders
Similar to what governance innovators like DASH, XTZ & DCR have done. Modern examples also exist, such as APT & SEI!
For that purpose, I would propose an inflation rate of 2% which is more economically sound. Which should be split as such:
45% to the validators
45% to the burn
10% to the treasury
These numbers are well established within the broader crypto research community
In truth, this entire proposal is far more complex than it needs to be. In fact, the entire proposal could be replaced with a single-page document, which would also be far better at achieving the stated goals
As a single L1 native DAO can easily fund anything imaginable, while doing it in a fully decentralized, transparent & credibly neutral way
The difference is that in such a design, power & authority flow directly from the stakeholders rather than from the centralized leadership, as is the case in the current proposal
There are more details & nuances we could discuss as part of this ideal design, such as weighting based on time-locked, native delegation, on-chain proposals systems, & additional checks & balances. However, these are all minor details in comparison with the grander ideal design, which is elegant in its simplicity
The Future of EGLD:
The leadership will get its way, that much seems clear to me, as they have ZERO genuine interest in real feedback & debate. Literally refusing to debate me, or even engaging with these topics & opting for ad hominem attacks instead...
The community calls are a joke, a form of theatre, as I am not welcome, considering they muted me after speaking for less than a minute...
They will continue to compromise on some of these decisions & likely meet the critics halfway. However, it would not surprise me at all if that was always the plan. Even if the figures are cut in half, this is still a terrible plan
EGLD is dead to me. I cannot support a project with such atrocious token economics & a leadership that shuts down debate with character assassination
Perpetual Motion Machine:
It is funny to me that the document itself refers to this plan as a "perpetual motion machine". A machine that cannot exist as it breaks the laws of thermodynamics
A concept that has a long history with scammers promising people the moon, only for them to lose everything in the end
The analogy is kind of perfect in the economic sense, even though that is clearly not how the author meant it
Refusal To Debate:
My challenge for a debate to the founders remains open!
So far they have refused my challange & even refuse to engange me on these topics, instead they are attempting to destroy my credibility through constant ad hominen attacks. Calling me a liar & a scammer, even from the founders themselves, setting the example for what is remaining of that community...
Even if I was a liar & scammer, which I am most certainly not, the best way to shut me down would be a debate. As that would allow reason & logic to triumph
That is why it is the side unwilling to debate that is the least likely to have truth on its side... An incredibly weak response considering that I might just be their most prominent critic!
As I am open to have a productive discussion with the leadership about these points, they clearly are not
Conclusion:
I am sad to see another great cryptocurrency fall, especially one that had so much positive potential
As again its sharding implementation is one of the best we have ever seen, so I have no doubt about the technical proficiency of the team
Unfortunately, as is often the case in crypto, these same engineers also think they can design economic & governance systems... Which in reality requires an entirely different area of expertise. Explaining how I am so easily able to tear their plan apart, as that is in fact my own area of expertise
What bothers me the most is how they are promising people growth, when in reality all they are bringing to the table is dilution...
That is part of the reason why I have completely lost faith in the team. As they are promising massive growth as part of this plan, yet all they will do in reality is impoverish investors & enrich themselves more in the process
That is not the crypto dream; it is a nightmare!
It always hurts to see our communities, our favorite chain go up in smoke. It takes strenght & bravery to admit we were wrong & move on
Please do not be one of those bag holders who becomes more extreme as the price continues to crash, diversify your portfolio & your mind now! Escape the cult!
I was not even able to cover everything that was wrong with the proposal in what has now become a massive critique... This might be one of the worst governance proposals I have ever seen in over decade of full time research into cryptocurrency
That is how I went from EGLD supporter to critic overnight when this proposal dropped. That is why I needed to deploy harsh rhetoric quickly. As we, especially as influencers have a responsibility to warn people of irresponsible behavoir within the crypto sphere, especially if we have also promoted the project in the past
If you also once supported EGLD, then the healthiest response is to view this debacle as an expensive but incredible valuable lesson, that we can carry with us towards whatever chains we choose to support next
That is how we grow as people, as an industry & as a community. Breaking the cult like cycle toxicity. By replacing it with true intellectual honesty, logic, reason & love! ❤️
Privacy on Solana is thriving!
That is where we truly can continue the cypherpunk dream 🗽
For the sake of freedom & human flourishing, support, use & integrate @theprivacycash app now
Without anonymity, tyranny is guaranteed; like "a boot stamping on a human face—forever.” 🧵
Fast, cheap & easy to use because it is built on SOL. This unlocks so much more freedom for the masses!
Because we must have privacy where the majority of usage is!
Think @TornadoCash or @RAILGUN_Project, but on a highly scalable L1, making it faster & cheaper, since the truth is that such privacy tools are prohibitively expensive on ETH's L1!
What is even better is that this can be implemented seamlessly within any SOL app with just 10 lines of code!
We need to push for this to become the new norm; at the very least, it has to be an option for all major applications on SOL!
Why Not ZEC, XMR, or ZANO?
Even though these chains offer far more robust privacy tech, it does not move the needle when the majority of users are on other chains
There are good reasons for that: These "privacy chains" are neither scalable, fast, nor programmable. Which means true DeFi is a non-starter, a very serious limitation. That is to no fault of their own, as that is simply the trade-off that must be made for such robust privacy tech
So if your life depended on it & you only need to do a simple transfer, use specialized privacy chains instead!
However, for the masses, which in the grand scheme of things is far more important. Applications such as Privacy Cash that are built on top of scalable blockchains are the best solution
User Experiance
The user experiance is great; simply go to their website & in 3 clicks & under 10 seconds you can do private TXs! As the next 3 screenshots clearly demonstrate:
What would obviously be far superior is native integrations with more SOL apps! As that would not require a user to navigate to the website & then it could all be done within 1 click! (a checkbox)
That is why I am writing this article —to get more attention for this project & hopefully encourage more integrations!
The Tech
The anonymizing tech behind Private Cash is based on zero-knowledge proofs (ZKPs) & Merkle trees
The protocol also leverages SOL's native token extensions, such as "confidential balances" for native privacy support
Privacy Cash also incorporates compliance features, such as selective disclosure & integration with Anti-Money Laundering (AML) systems & Know Your Transaction (KYT). Making it fully OFAC-compliant!
The AML & KYT is, ofcourse, all optional. So you can take it or leave it. From my perspective, that is an overwhelmingly positive thing, as it allows more parties who do still wish to remain compliant to be private if they so choose
As the choice between compliance & privacy is a false dichotomy, privacy is a keystone, a human right!
Limitations
Privacy Cash obscures the links between TXs & hides balances! However, since standard addresses on SOL are still transparent, extra care must therefore be taken not to "taint" these standard addresses in the process
However, by keeping the sender/receiver addresses public. It still allows for complete compatibility with DeFi applications without requiring off-chain workarounds!
Some "privacy coins", on the other hand, are fully private by default, making them superior tools for hardcore privacy. However, having transparency as the default while keeping privacy as an option is the ideal from my perspective. Because we want institutions to be more transparent, not less! In that sense, Privacy Cash is more similar to ZEC than it is XMR & ZANO
Additional measures such as IP obfuscation & more are not default in wallets such as Phantom either, so for serious privacy, it is not be best possible tool out there
However, it is certainly good enough for most people & we can actually scale this system for the masses, unlike other "privacy coins"
The moment it becomes technologically viable to merge this tech so we can get the best of both worlds, I would obviously advocate for that instead!
Privacy is Thriving On Solana
Broadly speaking, privacy projects on SOL can be divided into four major categories:
Transaction Privacy & Mixing Protocols:
Privacy Cash
Umbra
Elusiv
Voidify
LockIn
Encrypted Compute & Programmable Privacy Platforms:
Arcium
Light Protocol
Bonsol
Zera Labs
Darklake
Messaging & Communication Apps:
Secretum
SolMail
Identity & Compliance Tools (Privacy-Preserving KYC/AML):
Solana ID
Dust Protocol
Lit
Obviously, I was unable to vet all of these projects as I just did with Private Cash. I am also sorry in advance if I missed any key projects. So, please drop anything I missed in the comments, as I want to learn!
The trend is clear: Privacy tech on SOL is thriving! Something that is to be expected, especially in the long term, for a highly scalable network such as SOL
Conclusion
Privacy is a human right, essential for a free society. As without privacy, we cannot even think clearly
It is that fundamental to human psychology, the very idea of "big brother is watching" stifles human creativity & flourishing
This will be the second time I am quoting George Orwell's great book, 1984. So, if you have not read it yet, do yourself a favour & get it!
Privacy is an absolutely critical aspect of the cypherpunk revolution; without privacy, we are only LARPing as "freedom fighters." I feel the same way about scalability. Forcing us to make some hard choices in terms of technological trade-offs
The question for me becomes whether "privacy coins" will scale & add programmability first. Or whether high throughput chains such as SOL, SUI & NEAR will add more hardcore privacy features first. I am betting on the latter scenario
That is because my thesis is that highly scalable chains, such as SOL, SUI & NEAR, are naturally suited to support privacy. Because, with sufficient scale, programmability & low costs, it makes such privacy solutions highly viable
So if you are an application developer on SOL. Please consider integrating Privacy Cash as an option! I will also be happy to promote your project on this account if you do so
As cypherpunks, we must put our weight where it matters, to change the world for the better & help preserve the freedoms we inherited from our ancestors & continue to push the envelope even further towards maximizing liberty. For the sake of freedom & human flourishing! 🔥
Figured it would be fitting to end this article with another quote from George Orwell's 1984: “We shall meet in the place where there is no darkness” ❤️
Algorand is still centralized!
Their own official documentation clearly describes permissioned elements within its design...
ALGO's community can call me a "dumbass" & a "caveman" with "brain damage" all they want
That does not change reality, as denial only prevents change:
I was wrong about Solana! As I claimed that SOL had a Nakamoto Coefficient of 21
In reality, SOL's NC is 11. A major mistake I am owning up to now!
Credit to @mert for proving me wrong with good arguments & data
My new NC methodology is based on stake instead of validators:
BTC will collapse within 7 to 11 years from now!
First, the mining industry will fall, as the security budget shrinks
That is when the attacks begin; censorship & double-spends
Core will then have to increase inflation beyond 21M, splitting the chain & that will be the end! 🧵
The code & math do not lie; as this can all be verified independently. We must prioritize the truth, no matter how much we love the idea of Bitcoin; BTC is an emperor that wears no clothes:
Broken Security Model
As it stands now, BTC must either double in price every four years for a century or sustain extremely high fees. Only to maintain the present level of security...
That is because each halvening exponentially lowers the security budget derived from inflation until it is practically nothing & price is failing to keep up:
If you have a basic understanding of economics & exponential functions, then you should know that this is entirely impossible! As it would exceed global GDP within decades. That is why BTC's security is fundamentally unsustainable!
Fees will also never reach sustained extremes due to the "ratcheting effect" of the fee market. Paying hundreds of dollars for a single TX is not realistic in a competitive free market. When fees spike, users leave, all due to unnecessary & arbitrary capacity limitations
This means that BTC's long-term security is unsustainable without extremely high transaction fees...
Fees that have so far failed to materialize, with the exceptions of fee spikes, which are insufficient for sustained long-term security:
That is why the security of BTC will inevitably continue to decrease until it becomes profitable to attack. This is also how we know the approximate timeline for this collapse (7-11 years) as it is based on the halvening cycle. Therefore, in other words, BTC will most likely collapse within 2-3 halvenings from now!
However, this crisis could also be triggered before that time period, especially as what I am explaining here becomes more widely known. Other parties are likely going to attempt to front-run this disaster as well, making any attempt to time this a very dangerous game
Measuring Security
This chart of miner revenue shows that BTC's security is actually lower now than it was five years ago! Proving the decline of BTC's security, as it shows how miner revenue (block reward), not hash rate, is down:
Hashrate does not equal security; most bitcoin influencers do not understand how PoW works, leading to a profound public misunderstanding of BTC's failing security model
That is because hashrate is a mostly meaningless metric in regard to calculating security, as miner revenue can go down while hashrate goes up. This is because, as hardware improves, it costs less to produce these same hashes. That is why we cannot simply count hashes to determine the security budget!
Because it is not these hashes that secure BTC: It is the cost that goes into producing these hashes that secures BTC! In other words, what matters is the cost of attacking BTC, which is not determined by hashrate! It is instead determined by an attacker's cost/benefit calculation
In other words, the security budget of BTC is best measured by how much is being paid out to the miners (block reward), as we would expect a Nash Equilibrium to form based on this direct economic incentive. So that covers the "cost", the "benefit" is based on what is to be gained from attacking BTC:
Attacking BTC
Crypto-economic game theory relies on punishment & reward, carrots & sticks. This is why miner revenue determines the cost of an attack. When it comes to the reward side of the calculation:
Double-spending, with 51% attacks targeting exchanges, is a highly realistic attack vector due to the massive potential rewards
An attacker could make billions from such an attack, especially as they could target multiple exchanges, defrauding them of at least $100M+ each. Especially, if we also include simultaneously carrying out "exploits" on decentralized protocols that would also be vulnerable once such double-spending starts to occur
The basic premise is that if an attacker sends their own BTC to an exchange, trades it for another asset, & then sends that back to themselves. The attacker is then able to roll back the chain (due to 51% control of the hashrate), at which point they would regain their BTC, & whatever they traded it for, effectively doubling their money, & defrauding the exchange in the process!
This puts the lowest attack threshold at a few million dollars per day. Something that can easily be reached within this 7-11-year timeframe. For the sake of argument, if price & fees remain stable then the cost to attack the chain for 1 day will be $2.88M in 11 years. Well within the threshold at which such attacks become feasibly profitable
This also means that in this scenario, a blockchain network worth over $2T can be taken down with a $1B investment. This might even be a worthwhile endeavor for a statist competitor or even a crypto competitor. Especially considering that this would even be a profitable venture
Hypothetically, for example, it would be quite a blow if China were to wreck the US's BTC reserve in this way, as from a cost-benefit analysis perspective, that would make a lot of sense!
Keep in mind that the more prominent BTC is by this time, the more profitable such an attack becomes... As the below chart also demonstrates, the security budget relative to market cap is falling off a cliff:
This means that BTC can never be too big to fail, as long as it fails to generate fee revenue to sustain its own security budget; in fact, this attack only becomes more viable, not less, with increased adoption!
The Math 🎓
The TPS calculation is based on Max Theoretical TPS: (Block size (1.66MB)/Transaction size (374B)) / Block time (10M) = TPS (7.75)
The figure for on-chain BTC holders was taken from glassnode's analysis from March 2023
We use the P2PKH TX format with 2 inputs & 2 outputs, to better represent an "average user". Even though Segwit allows for 4MB blocks, this cannot all be filled with TXs. Historically, the largest BTC block filled with TXs was 1.66MB, so we will use that number:
(1740636.16/374) / 600 = 7.75 TPS (rounding down to 7 as BTC cannot execute partial TXs). 7x60 (minutes) = 420x60 (hours) = 25200x24 (Days) = 604,800x30 (Months) = 18,144,000 (Monthly TXs) 33000000
(Current Users) / 18,144,000 (Monthly TXs) = 1.818 (months)!
(7T (Global Users) / 18,144,000 (Monthly TXs) = 385 (months) / 12 = 32 (years))!
These are all extremely conservative estimates, which assume zero network activity outside of these on-chain users exiting with a single TX. While also basing this on user numbers from three years ago...
The security budget calculation is based on "cost to attack"
BTC: 16.42B (inflation) + 0.14B (fees) = 16.56B x 0.51 = $8.44B / 8 (3 halvenings) = 1.05B (attack threshold for 1 year) / 365 = 2.88M (attack threshold for 1 day)
An Impossible Choice
So what does this all mean? This means that BTC's long-term security is in deep trouble. Without extremely high TX fees or unrealistic price appreciation, the security of BTC will inevitably continue to decrease. Until it drops so low that the network becomes profitable to attack, rendering BTC insecure within 7 to 11 years
At which point, there will only be two choices left:
1. Increase BTC's supply inflation beyond 21M!
2. Allow the network to come under attack with double-spend attacks & censorship attacks!
BTC is between a pet rock & a hard place. The writing is on the wall: Bitcoiners will have to make this hard choice or watch BTC's security fall right before their own eyes
That is why several prominent figures, including Core developers such as Peter Todd, acknowledge this problem & are advocating for an inflation increase
I am a BTC critic because I do not think BTC will be able to solve this dilemma in time. The "solution" is an inflation increase, as a block size increase is off the table politically, something we will dig further into later
Despite this, an inflation increase "solution" overturns BTC's primary touted benefits, thereby betraying the promise or "social contract" of Bitcoin. The bitcoiners who support a supply increase obviously do not believe this. At least their position is consistent
The bitcoiners who deny this only exacerbate the situation by promising people that BTC will always have a 21M supply limit. Damaging trust, & setting them up for disappointment & a feeling of betrayal, rightfully so! As they are misleading people into supporting BTC based on false pretenses!
The most likely outcome is that in 7-11 years from now, both of the options I described & more occur simultaneously
Splitting the network in half again & causing even more chaos in the process. One version of BTC with inflation, the other without & possibly even more bifurcations. While making them all even more vulnerable to attack, as the hashrate is now shared between them
Bank Run
If only a fraction of current BTC holders attempted to move their coins today, the system would cease to function. That is what opens up the possibility of a "bank run" type situation, as people are piling into a system that can in no way accommodate a timely exit
Even according to the most conservative estimates, if every current BTC user only did one transaction, the queue would be 1.82 months long!
BTC cannot actually support such long queues, making it extremely unreliable during congestion. In effect, most people's TXs would get stuck & eventually drop after a few days...
That is how, for most people, the BTC network would effectively cease to function! As the capacity is finite, no matter how much people pay
That is why self-custody over BTC is completely unsafe & we should be advising people against it!
This will also only get worse if BTC continues to surge in popularity, as most have no idea how deeply flawed BTC really is
We can debate semantics, but from a user perspective who cannot move their funds while price crashes, the experience is the same, even if there is no bank involved in this "bank run"
Panic can quickly exacerbate the situation as people rush for an exit that cannot accommodate the demand, thereby inflating the strain on the network as people desperately start "spamming" TXs in an attempt to be included, clogging the system up even more...
This crisis could even be triggered early, before the exact 7-11 year timeline predicted here. As the "bank run" threat is compounded by BTC's failing security model
A course of events so dramatic that it is not hard to imagine that this could cause a fraction of BTC holders to attempt to move their coins, triggering the "bank run"
Death Spiral
Such a panic could certainly also impact the price of BTC, too. The problem is that this has a very real potential to create a vicious cycle (a death spiral)
That is because a significant drop in price leads to a corresponding drop in the hash rate, as some miners would no longer be profitable, forcing them to shut down. However, due to how the difficulty adjustment algorithm works; a 2-week readjustment period (measured in block time)
A sudden drop in hash rate proportionally affect the speed & capacity of the network. So, if half the miners left, for instance, block time would also drop in half & the readjustment period could take up to a month! (because it is measured in block time)
A unique quirk of BTC's design, which on its own might not have been so harmful, however, when combined with BTC's current limited capacity, it is a recipe for disaster, because of the compounding, spiraling effects
So, we could see a situation where a 3-month backlog turns into a 6-month backlog, & then a 1-year backlog, very quickly
As the panic would cause the price to crash, which in turn causes more miners to shut down, which in turn slows the chain down even more, causing even more panic & the price to crash again & even more miners shutting down, etc, etc; ad infinitum...
Causing a repeating downward negative pattern/cycle. That is known as a vicious cycle in game theory, also referred to as a negative feedback loop or a death spiral
Pure Greed
There are exactly ZERO use cases that 7-TPS can support, making BTC, by definition, purely speculative. Unable to effect any real change in the world by virtue of it literally being useless
For reference, FedWire & Chips on average do around 12 TPS (inter-bank settlement), PayPal does 200 (online payment), while VISA & Mastercard average at around 5k TPS (retail)
All while BTC's crypto competitors can exceed 10k TPS, or even 1M TPS in some cases, all without sacrificing decentralization! There is no excuse anymore for keeping the limit this low
That is how BTC fits the definition of a meme coin perfectly, as a meme coin is an asset without utility; in other words, pure speculation!
A consequence of restrict a chain to being a "Store of Value" only; it destroys the very qualities that might have made it a good SoV in the first place: Utility
Contrary to the wishes of its founder, Satoshi Nakamoto. BTC was captured by a relatively small group who managed to radically change the design, purpose & economics of BTC
One of the biggest tragedies is that the original design might have worked! Instead, the Core developers restricted on-chain capacity, instead of massively increasing capacity as the original plan promised
It is this failure of the utility/usefulness of BTC that bears such dire consequences for its long-term security model. As security, scarcity & utility are all intrinsically linked in blockchain design
Raison D'être
The root cause behind all of this can be traced back to the block size wars, where BTC was effectively captured by a small group, who pivoting BTC away from its original design, despite the wishes of it founder, Satoshi Nakamoto, to quote the man himself:
"The existing Visa credit card network processes about 15 million Internet purchases per day worldwide. Bitcoin can already scale much larger than that with existing hardware for a fraction of the cost. It never really hits a scale ceiling" - Satoshi Nakamoto
"The current system where every user is a network node is not the intended configuration for large scale. That would be like every Usenet user runs their own NNTP server. The design supports letting users just be users" -Satoshi Nakamoto
The evidence for this is indisputable; you can disagree with Satoshi, but please do not attempt to rewrite history. Read "Hijacking Bitcoin" for a more in-depth exploration of this history, as it does a great job of exposing how BTC was captured & perverted along the way
As BTC is capable of achieving massive scale while preserving decentralization. With some relatively minor code optimizations that are present in some of BTC's forks, such as BCH
Even supporting VISA lvl scale on a decade-old laptop right now! As Satoshi thought was already the case in 2013... The threat of supporting bigger blocks is totally exaggerated, especially in 2026!
This is one of the reasons why Bitcoin's original & intended design was so brilliant & not at all so incredibly flawed & broken as the BTC that we all know today
The truth is that BTC has completely pivoted its purpose, economics, & vision since that time, breaking what was once a great blockchain, all because of the block-size wars. As not increasing the blocksize limit was the biggest change ever, a clear departure from the original vision & purpose of Bitcoin
The original design might conceivably have worked, as attempting to service a large number of TXs, each paying a small fee, is a far more realistic path to long-term sustainability. As opposed to a few TXs paying an extremely high fee, which is unrealistic in a free market & serves no utilitarian purpose
In the former case, if BTC followed its original roadmap, it would be providing invaluable utility to billions of people today...
This is also clearly what BTC was always intended to do, based on all of Satoshi's writings & as he even clearly stated on the first page of the Bitcoin whitepaper. Allowing BTC to actually be money was taken away from us by the powers that be:
Usage has literally been capped! This is why BTC cannot & will not ever be for payments, as the Bitcoin Whitepaper so clearly described was one of Bitcoin's purposes. This is what makes widespread & significant usage of BTC technically impossible. All contrary to the project's original roadmap & the founders' clearly stated wishes...
Even mass self-custody is impossible on BTC now: Since even if everyone in the world wanted to only do one transaction, the queue would be more than 32 years long!
Requiring people to hold BTC through custodians en masse, the very thing BTC was created to bypass
Economic Theory
This makes today's BTC a poor & uncompetitive Store of Value, as this limitation means there is zero real utility; even mass self-custody is off the table, this is what makes it such a terrible SoV...
If BTC had been allowed to become money by scaling the L1, as was originally intended. It might have been a great SoV, as a foundation in utility provides the best possible security for long-term value creation & preservation. Today, BTC is reduced to being a mere meme coin with a failing security model instead
Being forced to choose between security & scarcity is not a good choice at all. Especially, when BTC's competitors can offer security, scarcity, capacity, & speed combined! All while still preserving decentralization, as was always intended originally!
Governance Mythos
The myth of BTC is that it is a decentralized meritocracy where the best ideas rise to the top...
The truth is that the dominant client, “Bitcoin Core” Has effectively achieved centralized control over BTC development. Turning it into a one-party system, with Core as a gatekeeper of all change!
My original 2013 thesis for investing in BTC was destroyed by the very people we trusted to maintain it. There also lay the problem; what we witnessed was a failure of governance:
BTC's history of power struggles & civil wars is a symptom of this failure; that is why Bitcoin Core, in practice, has disproportionate power to make any changes, even controversial ones, such as RBF & not raising the blocksize limit today!
While kicking out anyone who disagrees with them, such as Gavin Andresen, Mike Hearn, Jeff Garzik & more during the block size wars, & calling that consensus...
Political Analysis
The probability of positive change is a key part of this puzzle; however, this requires a political & governance analysis:
In practice, there is an extreme degree of centralization of decision-making power, where a small group of Core developers can act as gatekeepers to all changes
The truth is that the dominant client, “Bitcoin Core” has effectively achieved centralized control over BTC development. BTC is governed in the same way most software projects are governed on GitHub; essentially a type of dictatorship...
Effectively turning it into a one-party system, a type of "Github Dictatorship" if you will. With Core as the gatekeeper of all change! Currently, there are only six people who hold the keys to the empire, literally! (commit access to Bitcoin Core)
Like all dictatorships, there are limits to their power. Yet, this is still a total perversion of the very idea of decentralization that BTC was supposed to represent
The Wizard Of Oz
The block size wars are not only the cause for the current status quo but also the perfect example of the effective centralization of power within BTC, as the majority of miners wanted an increase & so did the majority of companies, stakeholders, and users...
The fact that Core still got their way instead, passing SegWit & blocking a blocksize increase to this day, is one of the strongest pieces of historical evidence for massive governance centralization in BTC
Their "anti-governance" stance serves only as a convenient shield, allowing them to deflect responsibility through the use of "decentralization language". When in reality they remain effectively in charge
A lot like the Wizard of Oz, who controls his empire behind the curtains, pretending to be something he is not
Cause & Effect
Another far-reaching consequence of the block-size wars was that they suppressed competing clients in favor of a "monolithic network". That is why Bitcoin Core still makes up the majority of nodes on the network. Preventing all efforts to solve the security dilemma without resorting to increasing the inflation rate!
Creating a competing client that meaningfully opposes Core is still seen as an "attack on Bitcoin" to this day. That is part of the ever-so-harmful cultural legacy of the block size wars. That is how the same people remain in charge, literally. In part because the failed revolution actually reinforced their position
That is also why the probability of change is so low, egos & businesses (L2s) depend on BTC never scaling
Due to demographic shifts over the last decade, within the BTC community. There is nowhere near the level of support for change compared to during the blocksize wars. All of those rebels have since left for greener pastures, while the people who support the new status quo have remained!
Like other cryptocurrencies, BTC's demographics are self-reinforcing!
This all means that BTC has effectively been captured, a clear failure of decentralized governance design. A subject I explored in far more depth in my "theory on Bitcoin governance" & other articles here
Leaving "voting with our feet" as the only option left
The big takeaway here is that bad centralized governance is the reason why there is very little hope for change left, at least not until the crisis forces change, but by then, it will be too late, by my reckoning
Conclusion
The story of Bitcoin is one of a beautiful early hope
A wonderful, positive vision for the world that most people are buying into now. Which is fantastic
There also lies a silver lining in that there clearly is demand for Bitcoin's original vision. What a shame that BTC cannot actually deliver on what it is promising people today
Most do not realize the bait & switch that has occurred, as BTC cannot deliver on the vision they are being sold
The Bitcoin dream on BTC was crushed by the very people we entrusted to uphold the vision. There lay the problem as trust led to betrayal & deceit. False promises followed by broken promises. Forever moving the goalposts to the point of infallibility...
The rejection of "on-chain" governance only gave us the worst of "off-chain" governance; Plain old school realpolitik, something BTC's leadership was not ready or equipped for, making BTC incredibly vulnerable to capture, corruption, & perversion. The social scientist in me should not be surprised by this outcome; it really was inevitable
It is shocking & unbelievable, yet it is the truth. From censorship, cybercrime & extensive conflicts of interest. Core gained effective control over BTC's decision-making process. That is what is leading BTC toward its inevitable downfall now & is what annihilates almost all hope for change
There are no viable paths for change within this urgent timeline. Unless the wider leadership & public seriously acknowledge this. That, unfortunately, seems unlikely. That is what makes the looming security crisis of BTC's security so certain today
So, please take this as a warning, from someone who loves Bitcoin's original vision & wants it to thrive. BTC now only holds back that original cypherpunk dream, & it is setting up a scenario where countless innocent people are going to get seriously hurt
Exiting the BTC chain will become almost impossible once the collapse begins
Trapping countless innocent people in a potential death spiral. A disaster at a scale we have not even seen in crypto yet, we can avoid becoming victims by rejecting the lies & accepting the truth now
Spreading this message can also help mitigate the damage that will be done. Both directly to innocent people & to the progression of the cryptocurrency revolution, movement & industry as a whole
Crypto can provide people with scarcity & security at scale, while preserving decentralization right now! BTC represents a horrible compromise we do not even need to make. Another reason why BTC is a band-aid that is better pulled off sooner rather than later
As our beautiful experiment is now teaching us its most important lessons through its failure ♥️
There is, however, much hope left on the horizon for cryptocurrency as a whole. As the industry has evolved by leaps & bounds beyond the original tech & BTC. Solving all of these key problems & far more
That is why Bitcoin's original vision now thrives in its children instead! 🕊
BTC's security is lower now than it was 5 years ago!
The security budget will keep falling until the network is attacked
Most bitcoiners do not understand PoW; hashrate does not measure security...
Block reward does, which is cut in half every 4 years, & BTC is not keeping up:
The Ethereum Foundation's new insane mandate includes a literal "seppuku licence"!
Members are forced to sign or must leave
Paired with Milady symbolism, whose founder stepped down for involvement in a suicide cult!
Shocking & disturbing, ETH is now a weird & toxic religion 🧵
The founder of Milady, "Charlotte Fang," was caught participating in a suicide cult called "Systemspace" under another pseudonym called "Miya"
Urging their followers to kill themselves with promises of reaching "paradise". Allegedly even succeeding with a 17-year-old boy in Canada...
Miya’s posts also included extreme racist, homophobic, antisemitic, & misogynistic content, plus pro-anorexia (“pro-ana”) material that allegedly involved grooming or encouraging self-harm among young followers
This is what caused Fang to consequently apologize & step down from the Milady maker project team!
That is why having the EF explicitly support this Milady symbolism in their mandate/constitution is, to say the least, frightening. What makes it far worse is that the suicide cult overtones are there, too. It honestly makes me feel deeply shocked & disturbed
So strange that it is hard to believe, but there it is, in the mandate for all to see. They will pass it off as a joke or satire, but this is not okay, especially not for the EF!
That an organization like the EF could even release a document like this shows how unbelievably out of touch they are. Creating a culture only suited to super niche & toxic internet communities instead of something suitable for global adoption
The EF & Vitalik are also pumping up the Milady NFT project by doing this, which is somehow the least worst thing about all of this...
This crosses the line so far that it is worse than what the BTC maxis have ever done in terms of religious-type behavior. As such extremes usually only occurred on the fringes
What is unprecedented is the degree of insanity we are witnessing at such a massive scale. The EF is forcing its employees to sign a literal "source seppuku licence" (a literal suicide pact) pledging their "Ethereum alignment" or get fired! Unbelievable, weird & scary stuff
That is what happens without on-chain governance. Centralized control is maintained by turning it into a cult to enforce cohesion & "resiliance" from external forces
We can understand the appeal, but ultimately it is a losing strategy. True resilience comes from good governance. Extremist cults cloud rational thinking & ultimately good decision making
There is much more to unpack from this latest mandate, as it is anti-growth, anti-adoption, anti-competition & anti-value
Completely going back on ETH's recent pivot, which promised a more pragmatic approach. We instead just took an extreme left turn into weird, religious & cult-like thinking
Like a proper cult, it is perfect & can never be changed as the supreme leader states:
"Our Mandate is written for a thousand-year horizon ... we do not expect any material compromise within our lifetimes"
I was going to write a longer article about what this pivot represents for ETH in more material terms & still will. The suicide pact within the document was just too weird for me not to cover first, as maybe I need you all to tell me I am hallucinating or something...
Yet there it is, in the EF's own foundational document for the next millennium, I even attached the screenshot of the "seppuku licence", making it undeniable:
BTC is a mass collective delusion
Not that different from the tulip bubble, dot-com bubble, or the more recent subprime mortgage crisis
The truth is that mass self-custody is impossible, inflation will increase beyond 21M & security is falling
BTC is an emperor with no clothes
Bitcoin is not our ticket to freedom!
In reality, it is a trap, as BTC is technically unable to support mass usage or self-custody
Unable to even guarantee the 21M limit in the face of its failing security model
These are the facts, whether we like it or not; BTC is dying! 💀
The value era of crypto has begun!
Instead of memes & speculation, we have revenue & PMF, instead of narrative, we get to live in reality
Only scalable chains can rise in this new revolution
That is why the future of finance & money belongs to chains like SOL, HYPE & NEAR! 🔥
NEWS
CARDANO CLASHES OVER PROPOSED DISCORD HUB 😱😱😱
@Justin_Bons criticized @IOHK_Charles over plans for a governance-focused Discord, arguing it could centralize discussion and influence.
Some community members pushed back, saying a dedicated forum could improve coordination and reduce governance noise on social media.
The debate has reignited questions around decentralization, moderation, and the future of Cardano governance.
Should Cardano governance discussions be centralized in a dedicated forum, or remain spread across open platforms?
Hi @IOHK_Charles would you be interested in debating/discussing Cardano governance during Common S3nse by @CryptoCanal this 4-5 Sept. in Amsterdam)
@Justin_Bons is already a confirmed speaker.
Cardano has to kick @IOHK_Charles out!
The final straw is attempting to centralize governance discussion within a moderated Discord server
IOHK failed to deliver; ADA's max capacity is 23 TPS in 2026: Actions speak louder than words
Stakeholder governance was made for this! ✊
Elon Musk deserves to be the world's first trillionaire!
All of his capital is productively focused on bettering humanity
From space travel, electric cars, robotics, free speech, AI & energy
Socialism cannot replicate it; only capitalism creates as much prosperity for all! 🔥
Last Seen Users on Sotwe
Most Popular Users
Elon Musk 
@elonmusk
241M followers
Barack Obama
@barackobama
119.2M followers
Cristiano Ronaldo
@cristiano
111.9M followers
Donald J. Trump
@realdonaldtrump
111.8M followers
Narendra Modi
@narendramodi
107M followers
Rihanna
@rihanna
98M followers
NASA
@nasa
92.2M followers
Justin Bieber
@justinbieber
91.2M followers
KATY PERRY
@katyperry
88.4M followers
Taylor Swift
@taylorswift13
82.3M followers
Lady Gaga
@ladygaga
73.8M followers
Virat Kohli
@imvkohli
71M followers
Kim Kardashian
@kimkardashian
70.1M followers
YouTube
@youtube
68.7M followers
Bill Gates
@billgates
64.3M followers
Neymar Jr
@neymarjr
63.9M followers
The Ellen Show
@theellenshow
62.4M followers
CNN
@cnn
61.8M followers
Selena Gomez
@selenagomez
61.5M followers
X
@x
60.8M followers