Vitalik Buterin Asserts Bitcoin Dev That BTC Wasn’t Always “Digital Gold”

Ethereum co-founder Vitalik Buterin was involved in a debate with a Bitcoin developer on Twitter, when he stated that initially BTC was created to be P2P cash, not digital gold.

Answering to Blockstream employee Zack Voell who argued that Bitcoin was, is, and always shall be digital gold, Vitalik Buterin noted that the narrative had seen an overhaul 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.”

Buterin’s stance on Bitcoin as peer-to-peer electronic cash in its original design is shared by many and supported 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.”

What is so important about the digital gold debate?

The clash between the two standpoints starts when one considers the difference between P2P cash, and digital gold.

Gold, though scarce and valuable, is not very convenient as an everyday transactional currency. It is not easy to carry or divide, and is almost useless for micropayments, unless managed and overseen by a gigantic centralized network of processors and sorting offices (banks). In such a scenario, high transactions arise as a matter of course.

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

In practice, these philosophical differences are embodied 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 led to high transaction fees, and made a large part of the community to hard fork the code into a new chain — Bitcoin Cash (BCH).

Bitcoin transaction fees

Today, Bitcoin fees are one of the highest in the crypto space. As of March 1, the average transaction fee was $0.40. By March 20, it had risen to $1.76, according to data provided by Bitinfocharts.

In the past 24 hours, average transaction fees were somewhere between 617% and 645,900% higher than other major cryptocurrencies (ETH and XRP respectively).

However, supporters of the digital gold narrative accept Bitcoin’s high fees and interpret it as a proof of the network’s high security which comes from Bitcoin’s dominant hash rate. High fees are more acceptable to users of “digital gold,” as they normally conduct large transactions.

Similarly, Buterin accepts the reality of Bitcoin’s high fees, and suggests that now, as the digital gold use case has been established, people should turn to other cryptocurrencies for other use cases:

“It was a controversial pivot executed without many participants’ consent. It’s certainly reasonable to be upset about it, though yes, now the pivot has happened, and if you don’t like it you should just use one of the other blockchains whose community expresses different values.”

More than 11 years after the mining of Bitcoin’s genesis block, Satoshi Nakamoto’s original blueprint has seen thousands of interpretations by various individuals, entrepreneurs and would-be pioneers.

The beauty of blockchain mechanics is such that philosophical differences can be resolved practically, in the form of hard forks. The insistence of Bitcoin Core developers to preserve low block size, and maintain the digital gold narrative, has possibly inspired more hard forks and more altcoin launches than any other phenomena in crypto — barring greed.