Copyright © 2024 by Roger Ver. All rights reserved.

Published by Roger Ver

Rogerver.com

Co-written with Steve Patterson

Steve-patterson.com

ISBN 9798989492442 (Hardcover)

ISBN 9798989492435 (Paperback)

ISBN 9798989492428 (ePub)

ISBN 9798989492459 (Audiobook)

The views, thoughts, and opinions expressed in this book belong solely to the author and not necessarily to any other group or individual. The scenarios, discussions, and views are expressions of opinion and are not intended to be a definitive analysis of the complex workings of Bitcoin or the cryptocurrency market. While the historical accounts and narratives within this book are based on the author's research and personal experiences, they are provided for informational purposes only and do not constitute financial, legal, or professional advice.

The author has made every effort to ensure the accuracy of the information within this book was correct at the time of publication. The author does not assume and hereby disclaims any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from negligence, accident, or any other cause.

Cover design by Felix Diaz De Escauriaza

Contents

Foreword

Introduction

Part I: An Ingenious Design

1 Altered Vision

2 Bitcoin Basics

3 Digital Cash for Payments

4 Store of Value vs. Medium of Exchange

5 The Blocksize Limit

6 Notorious Nodes

7 The Real Cost of Big Blocks

8 The Right Incentives

9 The Lightning Network

Part II: Hijacking Bitcoin

10 Keys to the Code

11 The Four Eras

12 Warning Signs

13 Blocking the Stream

14 Centralizing Control

15 Fighting Back

16 Blocking the Exit

17 Hotwired for Settlement

18 From Hong Kong to New York

19 The Mad Hatters

Part III: Taking Back Bitcoin

20 Challenger for the Title

21 Bad Objections

22 Free to Innovate

23 Still Forking Around

24 Conclusion

Notes

About the Author

Foreword

By Jeffrey Tucker

The story you will read here is of tragedy, the chronicle of an emancipationist monetary technology subverted to other ends. It’s a painful read, to be sure, and the first time this story has been told with this much detail and sophistication. We had the chance to free the world. That chance was missed, likely hijacked and s ubverted.

Those of us who watched Bitcoin from the earliest days saw with fascination how it gained traction and seemed to offer a viable alternative path for the future of money. At long last, after thousands of years of government corruption of money, we finally had a technology that was untouchable, sound, stable, democratic, incorruptible, and a fulfillment of the vision of the great champions of freedom from all history. At last, money could be liberated from state control and thus achieve economic rather than political goals—prosperity for everyone versus war, inflation, and state expansion.

That was the vision in any case. Alas, it did not happen. Bitcoin adoption is lower today than it was five years ago. It is not on a trajectory of final victory but on a different path to gradually increase in price for its earlier adopters. In short, the technology was betrayed by small changes that hardly anyone understood at the time.

I certainly did not. I had been playing with Bitcoin for a few years and was mainly astounded at the speed of settlement, the low cost of transactions, and the ability for anyone without a bank to send or receive it without financial mediation. That’s a miracle about which I wrote rhapsodically at the time. I held a CryptoCurrency Conference in Atlanta, Georgia, in October 2013 that focused on the intellectual and technical side of things. It was among the first national conferences on the topic, but even at this event, I noticed two sides coalescing: those who believed in monetary competition and those whose sole commitment was to one protocol.

My first clue that something had gone wrong came two years later, when for the first time I saw that the network had been seriously clogged. Transaction fees soared, settlement slowed to a crawl, and vast numbers of on-ramps and off-ramps were closing due to high compliance costs. I did not understand. I reached out to a number of experts who explained to me about a quiet civil war that had developed within the crypto world. The so-called maximalists had turned against widespread adoption. They liked the high fees. They did not mind the slow settlements. And many were involving themselves in the dwindling number of crypto exchanges that were still in operation thanks to a government crackdown.

At the same time, new technologies were becoming available that vastly improved the efficiency and availability of exchange in fiat dollars. They included Venmo, Zelle, CashApp, FB payments, and many others besides, in addition to smartphone attachments and iPads that enabled any merchant of any size to process credit cards. These technologies were completely different from Bitcoin because they were permission-based and mediated by financial companies. But to users, they seemed great and their presence in the marketplace crowded out the use case of Bitcoin at the very time that my beloved technology had become an unrecognizable version of itself.

The forking of Bitcoin into Bitcoin Cash occurred two years later, in 2017, and it was accompanied by great cries and screams as if something horrible was happening. In fact, all that was happening was a mere restoration of the original vision of the founder Satoshi Nakamoto. He believed with the monetary historians of the past that the key to turning any commodity into widespread money was adoption and use. It’s impossible to even imagine conditions under which any commodity could take on the form of money without a viable and marketable use case. Bitcoin Cash was an attempt to restore that.

The time to ramp up adoption of this new technology was 2013-2016, but that moment was squeezed in two directions: the deliberate throttling of the ability of the technology to scale and the push of new payment systems to crowd out the use case. As this book demonstrates, by late 2013, Bitcoin had already been targeted for capture. By the time Bitcoin Cash came to the rescue, the network had changed its entire focus from using to holding what we have and building second-layer technologies to deal with the scaling issues. Here we are in 2024 with an industry struggling to find its way within a niche while the dreams of a to-the-moon price are fading into memory.

This is the book that had to be written. It is a story of a missed opportunity to change the world, a tragic tale of subversion and betrayal. But it is also a hopeful story of efforts we can make to ensure that the hijacking of Bitcoin is not the final chapter. There is still the chance for this great innovation to liberate the world but the path from here to there turns out to be more circuitous than any of us ever imagined.

Roger Ver does not blow his own trumpet in this book, but he truly is a hero of this saga, not only deeply knowledgeable of the technologies but also a man who has clung to an emancipatory vision of Bitcoin from the earliest days through the present. I share his commitment to the idea of peer-to-peer currency for the masses, alongside a competitive marketplace for free-enterprise monies. This is a hugely important documentary history, and the polemic alone will challenge anyone who believes himself to be on the other side. Regardless, this book had to exist, however painful. It’s a gift to the world.

Jeffrey Tucker

President, Brownstone Institute

Introduction

The past thirteen years of my life have been spent trying to make Bitcoin and other cryptocurrencies the money of the future. The technology has the potential to make the world a radically freer and more prosperous place, and it will end up being one of the most important inventions of all time. I have spent more than a decade evangelizing about the benefits of Bitcoin, funded numerous startups within the industry, built my own businesses around it, and have seen the price increase by more than 6,500,000%. Yet, this book is not a love story, and I wish it did not have to be written. The project I got involved with in 2011 has been hijacked and changed for the worse.

Bitcoin was designed to be digital cash, usable in everyday commerce, with minimal fees and fast transactions, and it worked that way for years. But today, Bitcoin is thought to be digital gold, not meant for everyday commerce, with high fees and slow transactions—a complete reversal of the original design. It’s discussed as a store of value, with little care for its utility as a payment system. Some people even claim that Bitcoin cannot work as a payment system, because it does not scale. These common ideas are simply untrue. The reason that Bitcoin is no longer used as digital cash has nothing to do with the underlying technology. It’s because a group of software developers took over the project, decided to change its design, and intentionally limited its functionality—whether due to incompetence, sabotage, or a mixture of both. The takeover happened from roughly 2014-2017, and it ultimately resulted in the network splitting in two and the cryptocurrency industry fracturing into a thousand pieces. The original design still exists and remains extremely promising, but it no longer trades under the ticker symbol BTC.

As I travel and continue to speak around the world about the benefits of cryptocurrency, it has become apparent that hardly anybody knows the story of Bitcoin’s takeover. The main discussion platforms online have been heavily censored for years and carefully control the information that people receive. Bitcoin Maximalists—the loud voices that insist all projects other than BTC are scams—also help to discourage critical investigation, mostly by bullying people on social media. Anybody that questions their narrative is instantly mocked, and this has proven to be an effective tactic for silencing dissent. Since nobody speaks up, newcomers have almost no chance of hearing about Bitcoin’s real history and design. This book provides that information.

Hijacking Bitcoin has three parts. Part I is a detailed look at the original design of Bitcoin and the radical changes made to it. Part II is the history of the takeover, including the many dirty tactics employed like censorship, propaganda, and attacks on businesses that dissented from the narrative. The final section, Part III, is about rescuing Bitcoin from its captors and providing a realistic vision for the future.

Getting involved early with a breakthrough technology is a dream of many entrepreneurs, and my journey has been filled with exciting moments and interesting stories. But this book is not a memoir. Its purpose is to educate. For the last few years, I have been sharing this information in private conversations, public speeches, and online videos, but now it’s time to put it all in writing. The goal is to help people understand Bitcoin’s current situation and how it got there. To the entrepreneurs and investors who are interested in bringing fast, cheap, reliable, and inflation-proof digital cash to the world: we can still do this. We just have to work together on the right project.

Part I:

An Ingenious Design

1

Altered Vision

The cryptocurrency revolution began when Bitcoin was released to the world in 2009. Over the past decade, Bitcoin has gone from being completely obscure to being an international sensation that spawned a new industry. Entrepreneurs are trying to use the technology to solve a wide range of problems, from simply improving online payments to rebuilding the global financial system. Between all the news coverage, Wall Street speculation, and online enthusiasm, cryptocurrencies are probably the most hyped technology of the twenty-first century. Yet, despite the hype and astronomical price increases, their real-world impact has been minor. In the future, they might serve as the foundation of a new financial system or become an alternative to government-issued money, but to date, the primary use of cryptocurrency has been financial sp eculation.

The situation reminds me of when I was living in Silicon Valley during the internet boom of the 1990s. Internet technology was predicted to revolutionize commerce around the world, which meant that any internet company with no infrastructure or plausible business plan could raise millions just by owning a premium domain name. The speculation was mind-boggling. Many of the biggest startups went bankrupt only a few years after going public. Yet, despite the infamous burst of the dotcom bubble, the world has indeed been revolutionized by the internet. The technology has become essential infrastructure for the global economy and an indispensable part of modern life, though its maturation process took longer than people had hoped. Cryptocurrencies are following a similar path. Despite the wild speculation and relative lack of usage, they look like an inevitable part of our future.

Any story of modern cryptocurrency must begin with Bitcoin, the grandfather of them all. My own life has been wrapped up with Bitcoin since discovering it in 2010. My first coins were purchased in early 2011 for less than $1 each. A few months later, the price spiked to $30, only to crash back to $2 by November that same year—the first of many extreme price fluctuations that have since become common for the industry. Rapid price appreciation, followed by a crash of 80% or more, is a regular cycle that has been repeated several times in Bitcoin’s short history. The volatility makes for good news headlines, since the general public is almost exclusively focused on price. But for me, Bitcoin has always been more than just a financial investment. It’s a magnificent tool for increasing the amount of economic freedom in the world.

The early Bitcoin community was filled with eccentric people and unusual ideas. Like many others, I was particularly drawn to Bitcoin because of my political and philosophical ideals. I greatly value human freedom and believe individuals should have maximum control over their own lives. The more power any government has, the less power individuals have, and I knew from my study of economics and history that central banks’ control over the money supply gives an enormous amount of power to governments. So, Bitcoin was naturally appealing to me, as it was designed to operate without a central, governing authority. People do not have to ask permission to use it. There’s no Bitcoin Central Bank that controls the supply of coins, and the technology does not recognize international borders. Few things have more potential for increasing global freedom than fast, cheap, permissionless, inflation-proof digital money.

Futurism is the other primary philosophical motivation behind my enthusiasm for cryptocurrencies. Thinkers like Ray Kurzweil paint a compelling picture of the future in which humans radically improve their well-being through advanced technology. We might be able to greatly reduce the amount of suffering in the world, and even extend our own lifespans to enjoy more time on Earth, when we reach sufficient economic and technological development. In order to get there, it will require enough wealth and prosperity to continue financing research, as well as ongoing freedom to innovate. In my mind, Bitcoin gets us one step closer to a more technologically sophisticated future in which everybody’s life is improved.

These beliefs were not unique in the early Bitcoin community. Online forums and message boards were the central hubs for discussion, and if you visited them, you would see endless discussions about Bitcoin being much more than a simple payment system or speculative investment. We all knew that the technology could be used to dramatically improve the world. Brian Armstrong, the co-founder and CEO of Coinbase, captured this sentiment perfectly in an article entitled How Digital Currency Will Change the World by stating:

Digital currency may be the most effective way the world has ever seen to increase economic freedom. If this happens, the implications are profound. It could lift many countries out of poverty, improve the lives of billions of people, and accelerate the pace of innovation in the world… reduce wars, make the poorest 10% better off, overthrow corrupt governments, and raise happiness.¹

My enthusiasm quickly turned into evangelism, and I was nicknamed Bitcoin Jesus for preaching the Gospel of Bitcoin to anybody who would listen—and to plenty of people who wouldn’t. My friends and family, the media, and businesses that I patronized would hear the same message: Bitcoin is fast, cheap, reliable money that was designed for the internet. With it, you can send any amount of money anywhere in the world instantly for around a single US cent or less. In fact, in the earliest days, most Bitcoin transactions were completely free and only included a small fee if your coins had recently been moved. People could immediately see the value in such a technology, regardless of their personal ideology. One of the best marketing pitches was to simply have people use Bitcoin, since the user experience was fantastic compared to other payment systems. I would get people to download a wallet onto their phones to send them a few dollars. After experiencing their first Bitcoin transaction, it would only take a few seconds to hear the inevitable Wow! after being dazzled by their first impression.

By 2015, Bitcoin had built up so much momentum that it looked unstoppable. Prominent companies, from Microsoft to Expedia, were starting to accept it for payment, and the young industry was growing exponentially. The successes started to pile up. Venture capital increased. Media coverage became positive. Bitcoin was on a direct flight to the moon.

Failure to Launch

Fast forward to today. Despite being a household name, Bitcoin has not yet taken over the world. In fact, there’s a grim truth beyond the headlines and price charts: the actual usage of Bitcoin has declined since 2018, and many businesses have dropped it entirely as a payment option. On multiple occasions, the network has buckled and become almost unusable with huge transaction fees and unreliable payments. In times of network congestion, the average fee can reach more than $50 and transactions can take days or even weeks to process. And perhaps worst of all, these failures have pushed the industry to adopt so-called custodial wallets, which are simply customer accounts managed by a company, similar to a regular bank account.

The entire purpose of Bitcoin is undermined by the mass usage of custodial wallets, because total control is given to a third party that can censor, track, and even confiscate coins—no different than an account balance at Venmo. Fraud also becomes easier. For example, when the FTX exchange collapsed in 2022, more than a billion dollars of customer funds instantly vanished. This was only possible because FTX ultimately controlled their customers’ money. The integration of Bitcoin into Paypal is another prominent example of users being onboarded to custodial wallets instead of having full control over their funds. If regular people are all using custodial wallets, Bitcoin will have lost a key property that made it so revolutionary.

High fees, unreliable payments, custodial wallets, and less usage in commerce—by other metrics than price, Bitcoin has not landed on the moon; it hasn’t even left orbit. So what happened?

The Official Story

The conventional explanation for these negative trends is that Bitcoin fell victim to its own success. As it gained in popularity, the network ran out of capacity. Inherent technological limitations caused the fees to skyrocket, payments to become unreliable, merchants to leave, and the industry to move towards custodial wallets. In response to these problems, the narrative surrounding Bitcoin has shifted towards being digital gold and a store of value instead of a digital currency. If Bitcoin is not supposed to be used in everyday commerce, then it does not matter whether it functions as a payment system.

Despite how often these ideas are repeated in the press and among popular commentators, they are completely incorrect. The real story is much more dramatic. Bitcoin was built for massive scale and did not run into inherent technological limitations. Instead, the project was taken over by a small group of software developers who redesigned the whole system. They intentionally limited its capacity and functionality, and they openly advocate for high fees and a backlog of transactions—the antithesis of the original design.

When I tell people about this today, they often think I’m exaggerating, but the developers say it themselves. For example, the influential Bitcoin developer Greg Maxwell has said quite plainly, I don’t think that transaction fees mattering is a failing-- it’s success!² Mark Friedenbach, another Bitcoin developer, stated that Slow confirmation, high fees will be the norm in any safe outcome.³ When the network nearly ground to a halt in December 2017, and the average transaction fee reached more than $50, they celebrated by pulling out the champagne⁴ and were pleased to see the congestion, claiming that a consistent backlog was the required criteria for stability.⁵

If you told me in 2012 that Bitcoin developers would eventually want high fees and slow transactions, I would not have believed you, nor would any of the early entrepreneurs that helped create the industry. The ideas are too bizarre. Expensive transactions and network congestion are not necessary for safety or stability. The opposite is true: high fees and unreliable payments push people into using custodial wallets, which undermines the whole purpose of Bitcoin in the first place.

On its current course, Bitcoin will not empower the average person. The project has stagnated over the past few years not because of technological failures, but because of human failures. Specifically, bad leadership and a flawed governance model. When I learned about Bitcoin back in 2010, it was so exciting that I almost felt a moral obligation to tell people about it and share the good news. Today, given the changes that have been made, I feel a moral obligation to tell people the bad news: Bitcoin was hijacked and no longer resembles the original project that inspired myself and countless others. But