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"Too Fat to Fly": Bitcoin Magazine CFO Warns of Bitcoin's Extinction

Di Lewis argues that its failure to evolve as a medium of exchange threatens its existence in the face of stablecoins, institutional ownership, and resistance to progress.

Dodo bird bitcoin tether stablecoins

Bitcoin Magazine CFO Di Lewis just compared the first-ever cryptocurrency to a dodo bird. "You know how the dodo bird became extinct? It became too fat to fly."

In his May 6 article, "Snore of Value: Bitcoin's Sleepwalk Towards Stasis," Lewis describes the flightless dodo, which thrived in its isolated, predator-free environment until the arrival of humans, who in turn led to the bird's untimely extinction. Just like the dodo's inability to fly sealed its fate, Lewis argues that Bitcoin risks becoming obsolete if it fails to adapt to the evolving crypto landscape.

Lewis' core argument centers around Bitcoin's current state as primarily a "store of value." While some users value its resilience in this role, he warns against complacency. Bitcoin aspires to be money, and true money fulfills three functions: store of value, medium of exchange, and unit of account. Bitcoin undeniably excels as a store of value due to its limited supply and security features.

However, its adoption as a medium of exchange, where it's used for everyday transactions, remains limited. This lack of integration into daily commerce exposes Bitcoin to several potential threats. Lewis lists four: Stablecoins, Bitcoin ETFs, ossification, and holding.

Stablecoins: "Bitcoin's biggest wolf in sheep's clothing competitor."

Stablecoins offer stability, pegged to traditional currencies like the U.S. dollar. They are simply a more convenient option for everyday use and are rapidly getting more popular, threatening to sideline Bitcoin in this crucial role since they do not face volatile price swings like traditional tokens do. Additionally, stablecoins are usually issued on Ethereum and Tron, not Bitcoin.

A core principle of Bitcoin is to separate money from government control and to be decentralized. Lewis argues that stablecoins are "a gateway to fiat money" and "an adaptation of everything bitcoin was designed to escape from." He warns that using Bitcoin in complement to stablecoins will inevitably lead to tighter restrictions and centralization for the token:

"Do you think the U.S. Treasury is going to just idly sit by without sinking their talons into these stablecoins? The path of least resistance for the government to introduce a CBDC [Central Bank Digital Currency] is to simply regulate stablecoin issuers with an iron fist. Their money, their rules."

Lewis references Gresham's Law, which suggests that people tend to spend inferior currency (stablecoins) while saving superior currency (Bitcoin). Conversely, Thiers' Law argues that superior currency will take over inferior currency without legal tender laws. Lewis warns that if Bitcoin is sidelined in favor of stablecoins, there would be minimal motivation to expand its use in transactions. This scenario could see Gresham's Law dominate, reducing Thiers' Law to an impractical ideal and marginalizing Bitcoin economically.

"If we are not relentless in our pursuit to advance bitcoin’s monetary evolution, then it will not happen."

Bitcoin ETFs, a double-edged sword?

The recent emergence of Bitcoin ETFs (Exchange-Traded Funds) allows easy investment in Bitcoin through traditional financial institutions. Many see this as mainstream adoption, but Lewis views it as a double-edged sword. While convenient, they lead to increased institutional ownership and decreased self-custody, potentially marginalizing core Bitcoin users who value self-sovereignty and ultimately weakening Bitcoin's resistance to future regulations or attacks. As institutions gain control of the supply, self-custody becomes impractical or even risky.

Lewis adds that financial institutions are not interested in supporting Bitcoin's core principle of self-custody, as it removes them from the equation and does not make them money. In fact, he predicts that once enough people access Bitcoin through financial institutions, such as ETFs, these institutions might lobby against self-custody to maintain control over Bitcoin access. Eventually, most BTC holders will not care about defending self-sovereignty, and Bitcoin will lose its independence.

"This isn't conjecture; self-custody is already under attack. The self-sovereign bitcoiner will become low-hanging fruit. And saying you lost your bitcoin in a "boating accident" when you’ve purchased all your bitcoin on a KYC exchange is going to do you as much good as the dodo bird's stubby wings."

Ossification vs. Evolution

"Evolution is a reactive process," Lewis says. Advocating for Bitcoin's "ossification" might stem from a belief that Bitcoin should remain untouched to prevent internal destruction and that it is, therefore, ready as is.

"Ossification" refers to the situation where a blockchain network becomes resistant to change or upgrades as it gets wider adoption. This can be due to a lack of developer interest, a large number of users resistant to change, or technical limitations in the protocol itself.

Lewis stresses that without further development and adoption, when you consider Bitcoin's current minor global penetration and its market cap still trailing behind major corporations like Amazon, declaring victory prematurely is unwise.

He further criticizes the focus of some Bitcoin supporters on defending the status quo rather than pushing for its evolution, particularly in light of new technologies like ordinals, which have sparked debate between purists and those open to diversification within Bitcoin's uses.

"The blind spot for the anti-ordinals crowd is the severe lack of introspection regarding the available block space due to a lack of 'honest' financial transactions. The pro-ordinals crowd doesn't even dispute that all use cases other than bitcoin as money are unquestionably subordinate."

Holding and not spending

A common narrative within the Bitcoin community encourages users to "hold" their Bitcoin and avoid spending it. Lewis says that if Bitcoin is not used for transactions, it reinforces the idea that it is not real money, further hindering its adoption as a medium of exchange. Additionally, a lack of everyday use reduces the incentive for businesses to integrate the token and crypto in general as a payment option.

"Bitcoiners can agree to be disagreeable, but can we at least agree to stop telling people what to do with their bitcoin? It's supposed to be money. Do whatever you want with it. Don't allow your actions to be enslaved by dogmatic rhetoric. Freedom money does not come with instructions."

Bitcoin must be used as actual money, not just as a stock investment. Better investment options will always exist, which would threaten Bitcoin if it does not evolve into an everyday spending currency.

Just like the dodo bird's fate was not predetermined, Bitcoin's future is not set in stone. Its success depends on its ability to adapt and evolve, embracing its role as a medium of exchange alongside its established role as a store of value.

"In the race for monetary supremacy, there is nothing the competition would want more than for bitcoin to stagnate as a store of value. Because it's at that point bitcoin will have become too fat to fly."