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Op-ed: On Bitcoin and why there is no second best

Op-ed: On Bitcoin and why there is no second best – Part 2

Note: This is part two of a two part series on what differentiates bitcoin from the rest of the crypto market. See part one here.

It could be said that bitcoin will have been nothing more than a Ponzi game if it fails and eventually fades into obscurity. However, this characterization applies to successful, widely-used forms of money as well, as they’re effectively bubbles that haven’t popped. Some forms of money are seen as more credible than others. Still, these similarities between money, bubbles, and Ponzi games can cause a heavy amount of confusion for crypto market participants.

What is clear is that none of the speculative activity happening in the rest of the crypto market can compete with bitcoin as a money or savings mechanism, at least in the traditional sense. Long-term savings necessitates predictability, security, longevity, and a monetary policy that is “set in stone”, and there’s nothing else in the crypto market that comes close to bitcoin in that regard.

The Credibility of Bitcoin’s Monetary Policy

A key differentiator with bitcoin in terms of its ability to act as money is the credibility of its monetary policy. The fact that the rate of issuance of new bitcoin over time will not change is even more important than the often-touted 21 million cap because it is the unwavering nature of the issuance rate that provides the market with a clear understanding of what will happen in the future. 

Holders of bitcoin know what they’re getting into when they first buy the crypto asset, and they do not need to worry about outside factors such as the potential inflation in traditional fiat currencies caused by central bankers or supply shocks that lead to unforeseen changes in the prices of commodities in the physical world.

Recently, JPMorgan Chase CEO Jamie Dimon claimed Bitcoin creator Satoshi Nakamoto could reappear one day and inflate the bitcoin supply on a whim; however, this is not possible due to the system’s design. While Satoshi could offer a code change to the market, operators of full nodes on the Bitcoin network would have to accept the change en masse. The difficulties associated with making any controversial change were illustrated by the conclusion of the block size wars in 2017 (read more details on that here).

As a side note, one of the main criticisms of the idea that bitcoin’s monetary policy is already set in stone is that there is the potential need for a change to the monetary policy in a situation where…

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