BTC Wasn’t Always ‘Digital Gold’

Ethereum co-founder Vitalik Buterin was involved in a spat with a Bitcoin developer on Twitter yesterday, when he suggested BTC was originally designed to be P2P cash, not digital gold.

Replying to Blockstream employee Zack Voell who claimed that Bitcoin was, is, and always shall be digital gold, Buterin pointed out the narrative had changed since 2011:

“I joined Bitcoin land in 2011 and back then I remember a clear vibe that Bitcoin was P2P cash first and gold second.”

Source: Twitter: Vitalik Buterin, Zack Voell

Buterin’s view that Bitcoin was originally intended to be peer-to-peer electronic cash is one shared by many and is backed up by the very title of the Bitcoin whitepaper, published by Satoshi Nakamoto in 2008.

Indeed, the first line of the Bitcoin whitepaper reads: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

Why the digital gold debate matters

The conflict between the two views arises when one considers the difference between P2P cash, and digital gold.

Gold, while scarce and valuable and is unwieldy as an everyday transactional currency. It can’t be carried or divided easily, and is practically useless for micropayments, unless managed and overseen by a giant centralized network of processors and sorting offices (banks). In such a scenario, high transaction fees arise as a matter of course.

P2P cash on the other hand is exactly what it sounds like: a currency that can be transacted between two people without the need of an intermediary.

In practice, these philosophical differences manifest in the form of the Bitcoin block-size debate. The refusal of Bitcoin developers to increase the block size in order to scale on-chain resulted in high transaction fees, and prompted a sizable chunk of the community to hard fork the code into a new chain — Bitcoin Cash (BCH).

Bitcoin transaction fees

Today, Bitcoin fees are now among…

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