It’s one thing to hear ignorant criticisms of Bitcoin from people that don’t own any or aren’t deeply involved with crypto. It’s another, however, for billionaire crypto bros to carelessly spread the same false and outdated criticisms across the media like nobody’s business.
Sam Bankman-Fried (SBF) – the CEO of cryptocurrency exchange FTX – is the latest of such figures. In an interview with the Financial Times last month, he suggested that Bitcoin has “no future as a payments network.”
SBF’s Comments on Bitcoin
His critiques, of course, boiled down to the standard criticisms: inefficiency, and high energy output.
“The bitcoin network is not a payments network and it is not a scaling network,” he said.
The CEO claimed that tools designed to process “millions of transactions per second” must be lightweight, and cheap on energy. While Bitcoin isn’t that, he said that proof of stake (POS) networks fit the bill.
“It has to be the case that we don’t scale this up to the point where we’re spending 100 times as much eventually as we are today on energy costs for mining,” he added while dismissing tools like carbon offsets as adequate solutions.
Instead, SBF pigeonholed Bitcoin’s potential to that of a store of value – at least during his FT conversation. Only over Twitter did he later briefly mention the existence of layer 2 scaling solutions, after receiving backlash from Bitcoiners.
What About Lightning?
Indeed, the lightning network – Bitcoin’s premier L2 – allows for instant and virtually free transaction processing, alongside increased privacy. It’s been in development for years and is already used at major retailers in El Salvador for processing trades. Even major exchanges like Kraken have gotten on board, while CashApp has integrated lightning compatibility into its Bitcoin wallet.
Jack Dorsey – the founder of Cash App’s parent company Block – immediately confronted SBF for failing to mention it to FT. “And you didn’t bring up Lightning because…?” asked the former Twitter board member.
SBF responded as if Dorsey’s question was ridiculous, and Dorsey’s issue overblown. “It’s a big mouthful to repeat the whole set of ways that BTC can be transferred each time I’m asked the question,” he said.
But as Dorsey demonstrated afterward, it isn’t a mouthful. Only a one-sentence qualifier about the lightning network changes the entire conversation around Bitcoin’s capabilities.
No other solutions need to be mentioned – lightning is the frontier, decentralized solution for Bitcoin’s growth in payments. While there are still weaknesses to work out, the network has already proven that it works outstandingly well. In fact, merchants across America are already planning to integrate lightning into their internal payment processing systems.
Sam knows this. Lightning is no secret – nor some ineffective afterthought that doesn’t have massive implications for Bitcoin’s future. So why frame it that way to the public?
Marketing the Crypto Casino
The answer is evident within the other half of SBF’s comments: his appraisal of POS cryptocurrencies as alternatives.
Again, there’s nothing new about this criticism. Organizations left and right are falling for the well-funded ESG campaign dogging Bitcoin’s proof of work (POW). Regulators, too, are even naive enough to think that Bitcoin could be encouraged to “upgrade” to POS.
SBF, however, should know that Bitcoin’s energy mix is primarily clean. Furthermore, the catastrophic estimates about its future consumption have been radically off base in the past. Texas even believes that Bitcoin mining will help to stabilize its energy grid and create an energy revolution.
SBF’s motive for knocking proof of work is the same as his motive for disregarding Bitcoin’s scalability: both narratives are the biggest lifelines keeping the top altcoins relevant in the marketplace.
Why would SBF care about that? Because his business is built on the existence of those coins. Exchanges make money by charging fees on every trade executed by their users. In other words, the stronger and more diverse the crypto economy, the more money SBF gets to make.
SBF will also make more money by ensuring that his own investments stay relevant in the public eye. Investments, for instance, like Solana, which distinguishes itself through both proof of stake and high transaction throughput. SBF has a history of praising the cryptocurrency and has publicly offered to buy out people’s Solana holdings at various times.
A Common Game
The same pattern can be spotted in the behavior of other crypto billionaires.
Brian Armstrong – CEO of Coinbase – said in a 2015 tweet that the community should focus more on Bitcoin, rather than altcoins.
He’s since deleted that tweet. Today, his exchange is among the most criticized for listing the most suspect cryptocurrencies without a second thought.
Then there’s Elon Musk. Though it’s hard to spot any profit motive in the matter, the Tesla CEO has a particular fondness for Dogecoin. He holds massive sway over its community and its price, and has suggested that it could become the world’s global currency.
Whatever his reasons, Musk has willfully promoted Dogecoin as a superior alternative to Bitcoin for transactions. He’s even suggested that it would “beat” Bitcoin as the “people’s crypto” by increasing block size, further raising its transaction speed.
This was shortly after Musk stopped accepting Bitcoin as payment for Tesla vehicles, citing – you guessed it – environmental concerns.
Interestingly, Jack Dorsey happened to host a discussion with Musk two months later on the subject of Bitcoin. Like SBF, Musk admitted that a properly implemented layer 2 could let Bitcoin “scale to do a vast number of transactions.”
Not just that, but he confessed that Bitcoin’s energy consumption was already looking more green following the China ban. He even reconsidered accepting Bitcoin payments at Tesla again.
Did he? No. Do we know why he was so interested in accepting Doge instead? Not really. Elon is a strange character.
What about Marc Andreesen, co-founder of Andreesen Horowitz (a16z) – the king of crypto venture capital firms? Astoundingly, the firm made zero mention of Bitcoin in its 70-page report on the state of crypto in 2022 last month. Somehow, the very first decentralized money had no role to play within so-called web 3, unlike the oft-mentioned Ethereum and Solana.
Back in December, Jack Dorsey (surprise surprise) railed against web 3.0 and altcoins as being centralized under VC control. During his attack, he hinted that a16z was at the center of such involvement.
Andreesen’s response? Blocking Dorsey on his own platform.
Conclusion: This is Why Bitcoiners are Toxic
FUD can come from everywhere – even within the industry. It’s naive to think everyone in crypto would be on the same team, even if they act like it.
There are thousands of coins competing within the same market, and Bitcoin is the long-standing king of the bunch. It has a target on its back. That’s why people with an entrenched interest in other cryptos are so focused on disparaging Bitcoin when possible.
It’s amusing, then, to watch Ripple CEO Brad Garlinghouse wonder why Bitcoiners happen to be so “tribal” when discussing crypto. Could it be that the co-founder of his company is simultaneously funding an environmental FUD campaign against Bitcoin? That regulators are already responding to the climate doom mongering put forth by such altcoin leaders?
Bitcoiners didn’t start this fight. Bitcoin simply pushes along as opportunists try to hijack its success by shilling altcoins to make a quick buck. Calling out such people, as Jack Dorsey does, is the correct response to these attacks.