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Photo-Illustration: Intelligencer; Photo: Nickelodeon
It has been a while since the world of digital currencies has seen a real explosion. After the collapse of FTX and the arrest of its founder, Sam Bankman-Fried, which rocked the financial and political systems of the United States, today’s scandal is a nice return to familiar territory: stupid memes.
The immediate crisis is that if you want to buy or sell bitcoin right now, it is very difficult to do so. The network that processes bitcoin transactions is stuck at its peak, there have been over 400,000 orders that are basically stuck in a queue. These are all trades that have accumulated over the days, driving the price up to complete one at around $20. (Last month it was as low as 87 cents.) It’s not a perfect analogy (there are workarounds for bitcoin), but imagine paying for your groceries with a Visa card, but then tells you that you have to wait hours or days until all the transitions before yours pass and, oh yes, there will also be a $20 fee.
Imagine you arrive at your bank drive and there are 400,000 cars in front of you.
It’s #bitcoin right now.
— Jason A. Williams (@GoingParabolic) May 8, 2023
But the funny thing here is that all those other people in the bitcoin queue aren’t buying groceries. They send each other memes. These memes aren’t high or high were literally about Pepe the Frog and SpongeBob. While the basic bitcoin blockchain has long been dominated by transaction data (account A sending account B a given amount of bitcoin), recent innovations have made it cheaper and faster for people to write all kinds of data in the transaction, including pictures and kidding a process called registration. So now bitcoin is a platform not only for bitcoin transactions but for NFTs, remember those blockchain-based images like the Bored Apes that everyone was (very) briefly excited about and the coins of joke currency which are all basically budding dogecoins. Two meme-coin projects, one based on the amphibian Pepe and the other on SpongeBob, are currently experiencing a major speculative boom, both acting like its 2021 again. The demand is so crazy that coins like these made $2.3 billion in volume last week. The resulting network congestion was so severe that Binance, the world’s largest crypto exchange, was forced to temporarily suspend bitcoin withdrawals.
So the big questions today at least, among the types of people who spend a lot of their time thinking about bitcoin, are whether this kind of innovation is a good thing or a bad thing. Was the underlying system really designed to handle these types of transactions? Was the bitcoin blockchain supposed to be inscribed with millions of stupid, short-lived jokes and memes? Or is it all good and queues just a momentary growing pain as bitcoin expands into new (as ridiculous as they are) use cases? The Bitcoin network has gradually supported more different types of tokens like NFTs. That adoption should be a longer-term positive sign, but it appears to have slowed the network down, an Oppenheimer analyst wrote, according to CNBC, tentatively taking a stance on the optimistic side.
This whole mess is the result of an upgrade to the bitcoin system last year, which was supposed to have made transactions faster and cheaper. When bitcoins are traded, transactions are recorded on the blockchain, the immutable ledger of who owns what, it is the founding innovation of all crypto-economy. It has always been possible to write data to a bitcoin transaction. This is nothing new, Cory Klippsten, CEO of financial services firm Swan Bitcoin, told me. After last year’s upgrade made data transmission easier, it didn’t take long before anyone could invent a lighter way to do it, he said. The new ways of doing this are bitcoin-adjacent systems called ordinals and stamps.
Bitcoin is, of course, the original cryptocurrency and, until now anyway, its proponents have viewed it as purer, less junky and corrupt than the rest of the crypto world. It doesn’t work like a backdoor stock offering to fund another company, a pattern that has led to all manner of fraudulent tokens, as well as a Securities and Exchange Commission crackdown on companies violating securities laws. securities. Because profits from bitcoin trading cannot be traced back to a corporate source (the network was created by Satoshi Nakamoto, who later mysteriously disappeared, and now no one owns or controls it), it is regulated as a commodity like a barrel of oil, or a bushel of wheat.
The biggest bitcoin cheerleaders are called bitcoin maxis (or maximalists). For years they have mocked other crypto projects (aka altcoins) for being unserious and fraudulent. Now, after the spectacular rise of Pepe coins, they are faced with the uncomfortable reality that shitcoiners (as they call their enemies) have, at least temporarily, taken control of their precious network.
Klippsten, himself a bit of a bitcoin purist, sees the rest of the crypto universe trying to borrow bitcoin’s credibility. That’s exciting for altcoiners whose goal is to squeeze some bitcoin shine, do the bitcoin affinity stuff, and then pump and dump with their shitcoin projects, he said. that the line between bitcoin and the rest of crypto has never been so difficult to begin with. Bitcoin Maxis like Klippsten doesn’t see it that way though. For bitcoin, it doesn’t change anything, he said.
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