As Bitcoin reaches a new all-time high, the Bitcoin maximalist community is abuzz with excitement. However, their evangelism has led to a fundamental misunderstanding of what Bitcoin is and does. In this article, we’ll explore why not everything needs to be decentralized, and how the blockchain can complement existing technologies rather than replace them outright.
The Problem with Bitcoin Maximalism
Bitcoin maximalists argue that all Web3 technologies should be built exclusively on Bitcoin. However, this approach ignores the technical reality that Bitcoin wasn’t designed to be built upon. Ethereum, on the other hand, was specifically created as a foundation for decentralized applications and smart contracts.
Take Bitcoin Puppets, for example. People are paying over $17,000 for images supposedly drawn by a child. These images are intentionally sloppy and basic but shouldn’t exist. Similarly, Bitcoin Ordinals, while creative and novel, are inefficient and clog the Bitcoin network. Binance’s decision to shut down support for Ordinals indicates that, while attractive to purists or maximalists, they are merely novelties.
The Blockchain Isn’t Right for Everything
Not everything needs to be decentralized or onchain. The blockchain isn’t right for every industry or organizational system. Some things work perfectly fine with the technologies we have today, and the blockchain should complement those systems rather than replace them outright.
As Web3 builders, we need to accept that not everything can be solved by decentralization. We need to strike a balance between decentralization and efficiency. The trend of "bridging" Web2 and Web3 is misguided; instead, we should focus on blending the two worlds to create the best user experience possible.
Technologies Exist on a Spectrum
All technologies exist on a spectrum, and work together in one way or another. The internet still serves as the basis for everything we do, Web2 technologies will continue to be the dominant online infrastructure for the foreseeable future, and the need to transact fiat currency is unlikely to ever go away.
Even Web1 technologies like static pages and fillable forms are still alive. Any blockchain system, particularly those in finance, will have to find a way to coexist with other, more traditional systems that represent the current standard.
Humans Will Always Be Involved
Blockchain technology will always require human administrators and institutions to run the systems, at least to some degree. While we should strive for trustless systems that require minimal human input, they will only be as good as the underlying code itself.
Humans still need to be able to intervene when things go wrong, as seen in the recent Pump.fun disaster. The concept of "trust" is often confused with "verification," which is what the blockchain does. Records on an immutable ledger enable you to see the history of whatever was put onchain, but that doesn’t mean that thing onchain is trustworthy.
More Distributed Than Decentralized
Blockchains today are far more distributed than decentralized, and Bitcoin is a perfect example. As of July 2024, just 1.86% of Bitcoin addresses held 90% of the total supply in circulation, which is not only far from any notion of "decentralization" but mirrors the distribution of wealth worldwide.
At a more practical level, many people don’t even know their wallet holds the cryptographic key to access their tokens rather than the tokens themselves. Finally, blockchain technology often relies on the systems it’s designed to replace, which is more akin to shifting the work elsewhere, not actually decentralizing the processes, rules, and access underlying the system.
Conclusion
Web3 builders should focus on establishing a durable, flexible, wide-ranging ecosystem rather than overly relying on one blockchain or another at the expense of the wider industry. The views expressed in this article are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
About the Author
Jordan Yallen is the CEO of MetaTope, a 3D-focused Web3 tech company. Jordan attended Loyola Law School and became a licensed California attorney.
This article is for general information purposes only and should not be taken as legal or investment advice.
