"if you recognize bitcoin as the end of the exploration for an internet-native neutral money, you can see the beginning of what can be built now that we have this internet primitive"

I had a private email exchange with a friend who is self-described as bullish on bitcoin, but who is also always seeking out the “next big thing”. I believe there are lots of “next big things” that can and should be built now that we have bitcoin. But we’ll accelerate development of those “next big things” if we can accelerate consensus on a consistent monetary foundation and invest development work into new applications and infrastructure that’s only possible now. I’m sharing our private conversation below with personal details redacted.

DK: I believe that bitcoin is the neutral, internet-native monetary protocol. This creates a profound shift in how everything in media, communications, and information will work. I’m going to continue investing in and experimenting with how digital scarcity and global payments can be used to build a better internet.

Friend: Are you still of the mindset that Bitcoin wins as the base layer for all of these use cases? Or are you open to the idea that Ethereum or other platforms may be better suited for the programmable layer beyond store of value, e.g. Lightning doesn't really have traction while USDC+USDT has trillions in flow?

DK: I still believe that bitcoin and cryptography more generally is most useful when it allows us to create trust-minimized systems that empower the individual. I think a trust-minimized programmable layer is an exciting idea, but uncertain all the different ways it might be accomplished. The new BitVM idea builds on the strong security foundation that bitcoin provides (and includes ideas like "optimistic rollups" with appropriate credit given to initial work done on Ethereum).

I also think there is a lot of opportunity for cryptographic programmability outside of smart contracts. We can use well understood cryptography for individuals to sign messages and use open source software to coordinate peoples' ability to verify/read these messages. In many cases the presumed requirement to track global state as a blockchain leads to strictly worse implementations for programmable systems with cryptographic verifications. The best example I've seen so far here is the kind of stuff being built on Nostr, but I would guess there's going to be a tremendous diversity of programmable solutions.

But the hypothesis around Ethereum winning the smart contract programmability use-case doesn't seem likely to me. I think Ethereum represents a lot of new technology experimentation, but it's substantially worse across the most important characteristics of neutrality, security, and its properties as money. If it purports to be a foundational L1 it is de facto competing as money. But it's a worse money than bitcoin when compared against just about every property of money. Having non-monetary innovation while compromising on monetary characteristics is a bad tradeoff for convincing anyone to accept it as money long term. And the security guarantees flow out of being that money. Additionally, Ethereum is going to be under constant competition from new projects like Solana/Tron/etc. A new entrant can always promise faster transactions and cheaper fees, which are relatively easy features to achieve compared to improvements in the security model at the foundation of bitcoin. I'm not sure how any of these projects can recreate the "immaculate conception" that gives bitcoin the neutrality required to be a global money.

I agree that Lightning has not proven to be the answer for neutral global payments yet. I'm still hopeful it may be part of the solution since it's the leading attempt built on the solid foundation of bitcoin’s security guarantees. I've also been playing with Cashu/Fedi and various ecash projects which may also be part of the answer for scaling payments, but these are far from certain, have their own tradeoffs, and are definitely not operating at any interesting scale yet.

USDC+USDT may be trillions in flow, but they each require a tremendous amount of trust to work. So I'd argue they provide great utility to people who don't value trust minimization. Maybe these people don’t otherwise have access to or want to participate in the USD system directly, but are fine trusting 3rd party issuers and exchanges. I think these tools have primarily demonstrated utility as a way to exit trades in cryptocurrencies on exchanges before entering new positions. This may be a very large markets, but it doesn’t seem to have much impact on how the internet is built so far and it’s already operating at pretty significant scale as you mention.

The new internet that excites me creates new dynamics of competition between application clients, datastores, identities and wallets. When everything is open source and in direct competition with each other you get services more aligned with the user’s needs. If you are okay accepting the trust of issuers and exchanges you head down the path of building traditional web applications like we already have operating at scale today. They have an application, datastore, identities, and integrated payment solutions all in the same product and platform. While I’m a fan of building such technologies and companies, those techniques are reasonably well explored now that the web has been popularizing over the past 30 years. They may represent a lot less opportunity to build new things in the coming years.

In my mind, the magic comes when you decouple all of these layers and make the solutions for any given component interchangeable. When someone comes up with a new idea for an interface they can just launch the new application on the existing datastore, identities, and payment solutions. When someone has a new wallet solution it’s easy for end users to swap in the new wallet instead of accepting the default as the only choice or needing to restart the rest of the network to experiment with a new wallet tool.

Interchangeability reduces the trust required in any given developer or provider. It also aligns all developers to contribute in ways where they must compete to serve users better – they don’t own a monopoly on user accounts, data, or the underlying monetary asset. There’s very little proprietary technology. It’s weird to think about technology businesses when such a different economic model emerges, but it’s possible that a pure application layer doesn’t accrue much value in the future. In the past that’s where all the value accrued because of the rest of the coupling it implied.

Ultimately, I'm excited about how to build a better internet and I suspect the solution is primarily dependent upon this relatively new primitive of having digital scarcity allowing us to explore an entirely new architecture for internet applications.