Theory: If Monero were to gain adoption on a global scale, it would eventually centralize as running a node would become increasingly difficult (ignoring the issues with hard forks and ASIC resistance).
Bitcoin is not just "Number go Up" (NgU) technology due to being a fixed supply. Bitcoin is the most popular, most decentralized, and most secure blockchain for a reason. Bitcoin being the first cryptocurrency means it has gone through a creation process that cannot be replicated. This path dependence is ultimately what sets Bitcoin apart from any other cryptocurrency competing as a money from being able to replace it. Any cryptocurrency created after Bitcoin, regardless on whether or not it is intentional to compete as a money, will ultimately be forced to compete as a money as its adoption grows and use of its network requires its coin. Since Bitcoin is already the oldest and most widely tested and distributed network, it will always win this competition, as money tends to one.
When it comes to decentralization, Bitcoin again shows its strength by having a low fixed block size and long block time. This is typically modified by other cryptocurrencies trying to copy and attempt to improve on Bitcoin by making larger blocks (or dynamic blocks, in Monero's case) and faster block times (2 minutes for Monero). This is an error because when a network tries to increase throughput or functionality at the base layer, decentralization is sacrificed in that it becomes more difficult over time to run a full node for that network. This is obvious in Ethereum since it is significantly more difficult to run a full node as its adoption grows, and not even an archival node, than Bitcoin. It should be noted that Ethereum also has a dynamic block size, though with different rules around the block size than Monero's.
In order to determine how a cryptocurrency is able to handle being used on a global level, we should approach it from the perspective that it's the only currency that people are willing to transact in, again since money tends to one. There are, of course, optimizations that can be implemented at the base layer to improve scalability, like Schnorr signatures, but ultimately that won't enable global usage at the base layer. The base layer must be as simple as possible so that users are able to validate the blockchain on minimal hardware forever. Bitcoin's main approach to scaling is by utilizing layers, where additional transactions can be accomplished in an upper layer, like Lightning Network. Monero has no upper layers, every user must rely on the base layer for every transaction.
Proponents of Monero will say the most important use case of cryptocurrency is digital cash. While I can completely agree with this, I disagree that privacy must be implemented at the base layer. Scaling in layers is an architecture design that is similar to the internet. Take TCP/IP for example, we use TCP/IP all the time even for encrypted (private) communication, yet TCP/IP itself isn't encrypted. Encryption is handled at a different (application) layer of the networking stack, leaving lower layers as simple as possible to fulfill their function. TCP/IP doesn't need to know anything about instant messaging, browsing websites, checking your email, etc., it only needs to do its simple job.
Adding complexity to the base layer of a blockchain means every node of that network must be able to handle the extra load that the complexity has added at a full global scale. There's an assumption that Bitcoin needs privacy or fungibility at the base layer. Bitcoin implements the bare minimum functionality necessary for settlement and ability for different use-cases to be pushed to different layers. The base layer represents a settlement layer. Multisigs on the base layer have enabled the Lightning Network to provide instant transactions between users with nearly zero fees on a secondary layer that can fallback to the base layer at any time. Regardless of what you think of LN, its devs or the drama, this alone proves the layered approach works.
Bitcoin's base layer processes around 10 times the number of transactions than Monero per day. Bitcoin's blocks also tend to be around 10 times the size as Monero's, while Monero processes 5 blocks on average for every block on Bitcoin. Even with some napkin math, we can see that if Monero's usage were to only double in transactions, its storage would then grow at the same rate as Bitcoin's, while Bitcoin would still process 5 times as many transactions. Again since Monero lacks the ability to scale in layers, its base layer must process every transaction every user wishes to perform.
Now finally let's imagine that somehow Monero were to suddenly overtake Bitcoin and become the only form of money anyone wants to transact in. Every transaction of every user, machine, and program would have to use Monero's base layer, which would have to be validated by every node on the network. When it comes to bandwidth, Monero's 2 minute block times mean every node has to be able to download larger and larger blocks as well. Its dynamic block size will eventually work against the users and favor the miners, as their revenue from fees would be incredibly high. Since the miners would receive more payment in the form of transaction fees, they would have the natural incentive to increase storage and network capacity to run a node to continue mining. However, users would have a harder and harder time validating the chain, and without any incentive, would drop off the network, reducing decentralization. Over time, with this amount of usage at the base layer, only data centers could afford to run a node.
This has been a fun little theory that I thought I would capture in written form for a while. In summary, I think there are four key points I'm trying to get across:
- The strongest money overtakes weaker money
- The most basic and constricted the base layer allows for maximum decentralization
- Scaling is best accomplished in layers
- Monero fails as a money, has too much complexity at its base layer, and cannot scale to global usage
I've been thinking for a while now that Monero fans are ideologically 90% Bitcoiners. They may just lack the final push to understand what Bitcoin is really trying to accomplish. Hopefully this can help both my understanding of Monero, as I hope to receive some criticism, and Monero's fans understand that they can like the Monero project, but they should probably store their value in Bitcoin if they don't want to have fun staying poor, privately.