Michael Saylor thinks sales of bitcoin weaken the network
According to Strategy (formerly MicroStrategy) founder Michael Saylor, buying bitcoin (BTC) strengthens the Bitcoin network while selling weakens it. Bitcoiners immediately pounced on this controversial claim.
Their first critique is obvious: selling and buying always occur simultaneously. Each BTC purchase is also a sale, meaning there are always an equal number of purchases and sales at any time in the currency’s history.
Giving Saylor the benefit of the doubt on this technicality, most critics were fine to assume that he intended to say buying at successively higher prices strengthens the network, and vice versa. However, even this charitable interpretation of the actual mechanics of a financial market didn’t clear much skepticism.
A prominent Bitcoiner told Saylor to re-read its whitepaper in order to fully understand its security model. Indeed, a higher or lower price for any particular transaction doesn’t affect the strength of the network. Rather, the network simply transmits, validates, and protects transactions.
Bitcoin’s whitepaper only describes a system for peer-to-peer online payments without a trusted intermediary. That network still processes each peer-to-peer transaction in exactly the same way regardless of at what US dollar price the payments occur.
Critics also blamed Saylor for downplaying the role of BTC’s velocity. In actual fact, transacting frequently — even at the exact same price — often strengthens its network effects. Increasing the liquidity of a commodity, regardless of its price, eases its day-to-day utility and encourages user adoption.
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In defense of Michael Saylor
A final cohort of critics attacked Saylor over issues that stand apart from his core proposition. For example, some blamed him for promoting MSTR, a paper contract backed with some BTC plus various business assets.
Others blamed him for using Ponzi scheme promotional language to talk about BTC.
Of course, Saylor fans rallied to his defense, pointing out that obviously, the price of BTC transactions affects its market capitalization. Miners, in turn, decide to expend resources when their USD-projected BTC rewards exceed their USD-projected operating costs of electricity, equipment, and overhead.
In this sense, buying BTC at successively higher prices incentivizes miners to use more hardware, expend more power, hash faster, and raise more capital. This does, in fact, strengthen the Bitcoin network.
Whether this most charitable interpretation of Saylor’s tweet absolves him of the many other errors is certainly not a settled matter on social media. The tweet earned millions of impressions and garnered thousands of mostly contentious replies.
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