Skip to content
Swan logo
Log InGet Started

Why Bitcoin is Different (Part 1)

Bitcoin is a brand new technology that differs from anything else that has come before or after it. But where beginners run into confusion is in how Bitcoin differs from other cryptocurrency.

Sam Callahan
Sam Callahan
Mar 4, 2022March 4, 202211 min read11 minutes read

Bitcoin is a brand-new technology that differs from anything else that has come before or after it. It’s a decen­tral­ized monetary system controlled by rules instead of rulers. This innova­tion is radically different from our tradi­tional finan­cial system, and people can typically under­stand this differ­ence easily. But where begin­ners run into confu­sion is how Bitcoin differs from other cryptocurrencies.

New investors often get lured by the false promises and decep­tive narra­tives of altcoins. They get duped into selling their Bitcoin for scams and inferior systems that claim to be better than Bitcoin in some way. The running joke in the Bitcoin commu­nity is a newcomer first buys bitcoin, then finds altcoins, then loses money on altcoins, only to eventu­ally return back to only investing in Bitcoin. This is collo­qui­ally known as the “Sh*tcoin Cycle.” 

New investors go through this Sh*tcoin Cycle because avoiding it requires a deep under­standing of the under­lying technology, the game theory, monetary economics, and network economics that reveal why there is only one Bitcoin. Failing to know all this makes one vulner­able to being unable to choose the best option.

The goal of this series is to break the Sh*tcoin Cycle. The only way to do that is through educating begin­ners about what makes Bitcoin unique compared to all the other cryptocur­ren­cies. There is Bitcoin, and there are sh*tcoins — and here’s why. 

Bitcoin Is Decentralized, Altcoins Have Management Teams

Bitcoin solved a problem that plagued humanity throughout history: the need to create a system of money that could not be captured and corrupted by anybody. This problem has led to the fall of nations and empires throughout history.

How Satoshi solved, it was ingenious. The solution involved not just the system’s design and code but how it was intro­duced to the world. Whoever Satoshi was or was, he was not after personal fame, power, or wealth.

In contrast, the names of all of the founders of all major altcoin projects are publicly known. Those founders hold tremen­dous power over the partic­i­pants in their projects. Only Bitcoin has a founder, now disap­peared, who wields no influence over the protocol nor the people who use it, which is, when you think about it, a prereq­ui­site to incor­rupt­ible and uncap­turable money.

Since Bitcoin has no active founder, founda­tion, or consor­tium that created or controls the coin, it has no single point of failure. There is no one to target, manip­u­late, or coerce. There is no one who is tempted by greed or self-interest that can affect the opera­tion of the system. 

This lack of central authority makes it exceed­ingly diffi­cult to make changes to the rules of the protocol. It thus makes Bitcoin an extremely reliable store of value. Since Bitcoin is truly decen­tral­ized and censor­ship-resis­tant, no one can change it unless everyone in the system volun­tarily agrees to the change. You never have to trust a group of individ­uals to keep their word in Bitcoin. Code is law. 

By contrast, the network design of Ethereum, the altcoin with the highest market cap, is central­izing over time, both in its current proof-of-work form (where now almost no one can run a node, and that gets harder all the time) and in its future proof-of-stake form being planned by Ethereum manage­ment. It’s safe to say that Ethereum is centrally controlled today despite claiming other­wise. It is decen­tral­ized in name only. 

Ethereum’s central­iza­tion makes it easy for the manage­ment team to make changes to the rules of the protocol. We saw it take place with yet another Ethereum hard fork recently, and these events take place regularly, often benefiting the manage­ment at the expense of the commu­nity.

Consider the charts below — Bitcoin’s monetary policy is hard to change because it’s decen­tral­ized and leader­less. So hard, in fact, that it has never changed. Its monetary policy is predictable and machine-like because Bitcoin is truly run by math, not people. 

Total Money Supply and Money Supply Growth Rate

Now compare the chart above with the one below and notice the stark difference.

Ethereum’s Histor­ical and Projected Issuance Rate

Ethereum’s monetary policy is controlled by humans, not computers, and thus its issuance reflects the unpre­dictability of human nature. 

Due to its changing nature, Ethereum’s long-term issuance schedule can’t really be predicted. In contrast, Bitcoin’s issuance is knowable with certainty for the rest of the time. With Ethereum, you are trusting people to respon­sibly control the money, which histor­i­cally has been a losing venture. Recall that this was the whole problem Bitcoin set out to fix. 

If you have to trust that some oligarchy won’t change the rules of the protocol, then you can’t trust the monetary policy will stay the same. If you can’t trust the monetary policy, then you can’t trust the scarcity of the asset. Which begs the point, why do you have to trust anyone or anything at all? 

And here, then, is the big differ­ence between Bitcoin and every imitator: besides Bitcoin, none of them have created anything new if their token is not decen­tral­ized and immutable. If you buy those tokens, you are simply trading your centrally controlled dollars for another centrally controlled token— trading one group of rulers for another group of rulers with the power to manip­u­late the money at their will. 

Only Bitcoin has proven to be suffi­ciently decen­tral­ized and censor­ship-resis­tant over its history. Bitcoin’s monetary policy and scarcity are programmed and predictable. Its monetary policy relies on predictable code, not unpre­dictable humans. Rely on Bitcoin, do not trust altcoins. 

Bitcoin Is Scarce, Altcoins Are Abundant 

There will only ever be 21 million bitcoin. The fixed supply and issuance schedule of Bitcoin was programmed in from the very begin­ning. It can never be altered without all the network nodes agreeing to the change. This programmed scarcity is verifi­able by every user of the network and knowable into the future because of the predictable nature of the monetary policy. As touched on previ­ously, this predictability is made possible due to the decen­tral­iza­tion and immutable nature of the Bitcoin protocol. It is these proper­ties that ensure Bitcoin’s fixed 21 million scarcity remains intact. 

Bitcoin is the first time in history that we have a provably fixed, scarce asset that we can rely upon to continue to be scarce. In other words, Bitcoin is the inven­tion of absolute scarcity because its supply will remain fixed regard­less of increased demand.

Digital scarcity can only be invented once. This inven­tion occurred with Bitcoin. The cost of creating imita­tors with slightly different varia­tions in the code is zero, given Bitcoin’s open-source nature. With no cost to produce a copy, this led to an explo­sion of altcoins, all trying to recreate their own version of Bitcoin. But what no single one of them can recreate is being first. Bitcoin’s organic adoption and the grass­roots growth of its mining ecosystem cannot be (and there­fore has not been) repli­cated in this world where digital scarcity already exists. 

When some group creates an altcoin, one must ask:

  • What does your new cryptocur­rency offer to a world where Bitcoin exists, and what does it sacri­fice that Bitcoin actually has?

  • Can you guarantee that the monetary policy is credible?

  • Can you ensure the distri­b­u­tion of money is an equal oppor­tu­nity and fair? 

  • Is this new cryptocur­rency decen­tral­ized? How? 

Typically there are no answers to the hard parts of these questions because the true answers are that this is simply a group trying to get person­ally rich by issuing some new money, giving themselves a lot of it early on, and staying in control of its issuance and rules.

Since the cat is out of the bag with digital scarcity, nobody can credibly create a new cryptocur­rency without it being more central­ized, unfairly distrib­uted, less credible, and less secure than Bitcoin. With decen­tral­iza­tion and censor­ship resis­tance being the key to maintaining the credi­bility of a cryptocurrency’s monetary policy and, subse­quently, its scarcity, we can conclude that an altcoin is less scarce and less credible than Bitcoin because of they fail to be the first cryptocur­rency, which only Bitcoin can ever be, and also because they all fail to address these questions with satis­fac­tory answers.

Only Bitcoin is the inven­tion of digital scarcity. It is optimized for credible scarcity due to its decen­tral­iza­tion and censor­ship resis­tance. Every­thing else that came after it is hopelessly trying to re-invent the wheel when the wheel we already have is working flawlessly. 

Bitcoin Is Backed by Energy, Altcoins Are Backed by Promises

Energy is the currency of the universe. To get anything done, you need to transfer energy and put in the work. Energy is something that can’t be faked, that can’t be created, but that can only be trans­ferred. This is the first law of thermo­dy­namics, and it sits at the core of the Bitcoin Proof of Work consensus algorithm. 

Bitcoin’s “miners” — those who perform the Proof of Work to discover the new coins and secure the history of trans­ac­tions — have no way around using energy. With Proof of Work, they must comply with the laws of the universe by trans­fer­ring energy in order to mine a block and get rewarded. This allows us to view the immutability of the Bitcoin blockchain objec­tively as truth. We can know with certainty that real energy was trans­ferred by miners when they include valid trans­ac­tions in a block and secure the blockchain. There­fore we can know with certainty that the ledger’s history of trans­ac­tions is honest. 

The real innova­tion of Bitcoin is by utilizing the honest nature of energy, a perfectly compet­i­tive and auditable environ­ment is created where market partic­i­pants of a distrib­uted network can come to consensus in a manner that is trust­less and maintains integrity. 

Other consensus algorithms like Proof of Stake rely on someone else (a stalker) to subjec­tively say that the ledger is valid (true).

With Proof of Stake, you are trusting another person’s word to confirm the immutability of the blockchain instead of counting on the unbreak­able laws of nature. Proof of Work is backed by energy and finds truth by bridging the real world with the digital world, whereas Proof of Stake is backed by nothing but what someone else tells you is true. 

What’s the value of a promise when compared with the value of certainty?

Another benefit of Bitcoin’s energy use is it makes Bitcoin hard to produce, thus providing its scarcity. We touched on this topic earlier when we discussed how there is zero cost to produce copycat altcoins.

What sets Bitcoin apart is there is a real external cost to produce new Bitcoin in the form of electricity. If you decide to shift that energy cost to something else that utilizes fewer resources, like Proof of Stake, you just made the money easier to produce. Said differ­ently, you took hard money and made it easy money that is more suscep­tible to being inflated, making it an inferior store of value.

Bitcoin utilizes the honest nature of energy to come to a consensus rather than using people’s promises to do it. This allows it to be a system that is orders of magni­tude more secure, more scarce, and more censor­ship-resis­tant than every other cryptocur­rency in existence today. Bitcoin’s energy usage is a feature, not a bug, and it’s a major reason why Bitcoin stands alone. 

Bitcoin Can Be Imitated, But Never Duplicated

Bitcoin is radically different from every other cryptocur­rency project in existence today. Its killer feature is the long-term credi­bility of its monetary policy. Bitcoin keeps its promises.

Since the Genesis block, Bitcoin has kept its commit­ments:

  • There will only be 21 million Bitcoin.

  • Anyone can verify the ledger.

  • You can’t spend what you don’t have.

It accom­plished this because Bitcoin is suffi­ciently decen­tral­ized in that no one can control it, censor it, or change its rules. This resis­tance to change has allowed more and more people to recog­nize Bitcoin’s scarcity and relia­bility. This cannot be repli­cated by altcoins because it cannot be created by altcoins. 

Altcoin promoters are either ignorant of all of the above or under­stand these concepts and push their wares on newcomers anyways. This is why the altcoin industry is a cesspool of fraud and scams. They are all desper­ately trying to justify their existence because they are building funda­men­tally broken solutions to problems that don’t exist. Only Bitcoin brings incor­rupt­ible money and absolute scarcity to the world. Only Bitcoin is leader­less. Only Bitcoin is energy-backed money. Only Bitcoin is honest. For all these reasons and more, Bitcoin has already won. 

Sam Callahan

Sam Callahan

Sam Callahan is the Lead Analyst at Swan Bitcoin. He graduated from Indiana University with degrees in Biology and Physics before turning his attention towards the markets. He writes the popular “Running the Numbers” section in the monthly Swan Private Insight Report. Sam’s analysis is frequently shared across social media, and he’s been a guest on popular podcasts such as The Investor’s Podcast and the Stephan Livera Podcast.

More from Swan Signal Blog

Thoughts on Bitcoin from the Swan team and friends.

Own your future. Get started with Swan today.

Swan logo


  • Swan IRA
  • Swan Private
  • Swan Vault
  • Swan Business
  • Swan Advisor
  • Bitcoin Benefit Plan
  • Swan API

Swan Bitcoin does not provide any investment, financial, tax, legal or other professional advice. We recommend that you consult with financial and tax advisors to understand the risks and consequences of buying, selling and holding Bitcoin.

© Swan Bitcoin 2024