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#196: Crypto Decentralisation Complex

#196: Crypto Decentralisation Complex

micksonmatch
December 09, 2024

Today is not my usual chart fest; this just came out of me, and I decided to go with it. All I ask is to be open-minded.

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I realise that my thoughts might upset some of the crypto maximalists. However, my job is to apply some critical thinking to the markets. First we need to make a pit stop at the fountain of Carl Jung’s wisdom, i.e., his Collected Works. I have been a Jungian scholar for a decade plus and believe his writings are a manual to understand the minds of society at large and individuals in particular.

I accept that not everybody is into analysing every word of a master. It is hard work and requires lots and lots of contemplation to fully grasp. I have highlighted the words I think make the point I wish to convey.

“A complex is the image of a certain psychic situation which is strongly accentuated emotionally and is, moreover, incompatible with the habitual attitude of consciousness. This image has a powerful inner coherence, possesses its own wholeness, and in addition, a relatively high degree of autonomy, so that it is subject to the control of the conscious mind only to a limited extent and therefore behaves like an animated foreign body in the sphere of consciousness.”(Collected Works of C.G. Jung, Vol. 8, “Structure and Dynamics of the Psyche”)

When bad news is viewed as good news, you know there is something else driving collective human consciousness. Yes, AI has lots of amazing prospects and many current real-life examples of productivity enhancement. However, there are many issues in the world, way too many to go into, and frankly, I am suffering from geopolitical overload. It is as if the current market simply does not want to consider anything negative.

So the best I can come up with is that we are under the influence of a “market complex” that cannot be explained, as a complex is its own unpredictable autonomous energy. How else do you explain a “Fartcoin” with a market cap of $284 million? How do you explain the Hawk Tuah girl, infamous for a rude viral comment that led to a meme coin, $Hawk, that had a market cap of $500 million in a day before collapsing 95%?

Decentralisation

If you have ever built software, you will know that anticipating every possible outcome is near impossible. If you are building an ecosystem, then you can be sure it is impossible to think of everything. The Bitcoin protocol is a work of genius; there is no question about it.

I read the Bitcoin whitepaper in April 2013, just when it crossed $100 for the first time. I fell in love with it. The elegance of the logic captivated me. I sold my Bitcoin in November 2013 at $1000, calling it one of my best ever trades, a 10 bagger. What a shmuck in hindsight!

In case you think everything about Bitcoin is perfect, there have already been hard and soft forks and changes to the protocol. Check out Segwit in 2017, the Taproot upgrade in 2021, and the Ordinals protocol in 2023.

With the help of ChatGPT, I came up with this design to share a thought that I have been thinking about for a few weeks. As you can see, my mind can be quite dark.

One of the centrepieces of the Bitcoin maximalist argument is that it is decentralised and not at risk of a few powerful people calling the shots. The protocol operates on a decentralised consensus mechanism where the majority (hashing power and nodes) must align for changes to take effect. Changes are only successful if they maintain backward compatibility (soft forks) or are widely accepted by all participants (hard forks).

I am not suggesting that Bitcoin is going to become centralised. I am just asking you to think about the possibility of it happening. Gold has been around for 5000 years and is still governed by the same chemical properties that governed it when it was first discovered.

It is possible that miners with enough influence can collude and change the protocol. It is possible that the bulk of Bitcoin is held in the hands of a few that make changes in their best interests at the expense of the little guy. The notion that there can only be 21 million Bitcoin ever is not set in stone. It is set in protocol.

The advice I give to people who are in a rush to go on Ozempic to lose weight instead of using discipline is, slow down; it is early days. I say the same thing about Bitcoin: it is still early days; take it slow.