Bitcoin Is 10: How Its Next 10 Years Could Transform Digital Society
The cryptocurrency could be about to change the world.
Ten years ago on October 31, a post appeared on the newsgroup “gmane.comp.encryption.general.” The poster, who used the name “Satoshi Nakamoto,” opened with the line: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” Attached was a PDF for a project called “Bitcoin,” detailing what would become the world’s first cryptocurrency. Perhaps as a sign of the obscurity of the term at that stage, the word never appears in the paper itself.
Bitcoin grew over time into a household name, first hitting the mainstream in 2013 when it began getting mentions in shows like The Simpsons. It truly captured the public imagination last year, where search data shows skyrocketing interest in the term as news reports spread of the coin’s soaring value: During the second half of 2017 alone, the price for bitcoin pushed its way from roughly $2,875 in June to close to $20,000 per coin by the end of December. Investor interest blossomed, and digital and crypto-currency related projects began sprouting up left and right.
But while popular discussion fixated on how the soaring value of that cash could make people rich, experts believe its “fully peer-to-peer” nature s what will chart the course for bitcoin’s coming 10 years. As ever larger tech corporations exert ever greater control over our personal lives, technology promises to enable truly decentralized forms of commerce grows more and more attractive by the day. But can a community rocked by scandals and rampant speculation deliver on the underlying technology’s promise?
What a Decentralized Future Could Look Like
As it stands today, even relatively new forms of commerce are bound by the constraints of centralized systems. Take the case of ride-sharing, we use Uber to connect with drivers to get a ride home. That means signing up with the company, entrusting our data and locking ourselves into that system, while the driver does the same. Uber’s app is the only way one can find the other.
But in a truly decentralized system, paying for things would work a lot more like a phone number, where you can use any number of different apps and providers as you please. A decentralized version would mean cutting out the singular middleman that is Uber, perhaps paying for goods and services using uniquely identifiable keys in endlessly interchangeable combinations. Hedge fund manager Mike Novogtraz notes that such a system could spread out ownership so it lies with the participants instead of some big firm.
“The core innovation that Bitcoin has highlighted is the broader shift to forms of ‘distributed trust’ in society,” Marc-David L. Seidel, professor of entrepreneurship at the University of British Columbia and the author of a paper on distributed trust, tells Inverse. “Bitcoin is a very visible example of such distributed trust technologies, with many of the other blockchain enabled options being similar such examples.”
How a Decentralized Future Would Work
Blockchain is a distributed ledger system that underpins bitcoin, logging every transaction by asking nodes to all agree on a change before adding it to the chain. This means its users don’t need to place their trust in a single server or organization. In the wake of the global financial crisis, it seemed the perfect antithesis to big bank control. Lehman Brothers’ collapse painted a picture of an industry that was able to act with other people’s money with little consequences, while British bank Northern Rock saw huge lines outside as people rushed to withdraw money from a central institution they no longer trusted. Blockchain researcher Emin Gun Sirer told CoinDesk that “it’s very clear that Satoshi was affected by the events that led up to the financial crisis of 2008.” Bitcoin, by design, means you don’t need to entrust a bank just to exchange value digitally.
Seidel argues that the so-called big success stories of Silicon Valley like Google, Facebook, AirBnB and Uber can all be replaced by such distributed systems.
“The organizations that have traditionally in recent years been thought of as disrupting established industries all can now be displaced by distributed trust technologies not owned by a central VC-backed for-profit,” Seidel says. “It is an exciting time ahead as the technology holds the promise to reduce inequality and share power if implemented with such goals in mind.”
Bitcoin: Using Peer to Peer Networks to Fight Inequality
The prospect of decentralization as an antidote for rising inequality has become a focal point for the community, as the conversation moves away from price fluctuations and toward how developers could use bitcoin or its underlying principles for good. Paul McNeal, co-founder of CryptoMarket360, envisions the next decade as an era where bitcoin moves from a simple store of value to a broader medium of exchange, where value moves seamlessly across borders.
“In the early days when Satoshi Nakamoto (collective minds) created this complete protocol, it was a challenge to see just how pervasive it would become globally,” McNeal tells Inverse, speaking from the imagined perspective of the year 2027. “However, when Satoshi disappeared from the scene, it provided space for the other brilliant minds our world had to offer to continue improving and innovating on this futuristic technology. Blockchain technology is responsible for the entire global infrastructure and is primarily controlled and constantly being improved via Artificial Intelligence.”
The notion that bitcoin will retain its number one position is not without controversy. Steve Ehrlich, CEO of crypto asset broker Voyager, tells Inverse that “bitcoin will likely continue to have the largest market share but another coin could take off dramatically if it proves to be more efficient — both from a mining perspective and as a utility.”
Stablecoins: A Way of Reducing Bitcoin Volatility?
Bitcoin has had a profound effect on decentralization, but critics have also constantly argued over the design of the system and its shortcomings. At a private members’ club in London, a group called Stable.Report recently held a conference in late October where some of the biggest minds in cryptocurrency came to discuss bitcoin alternatives. The main subject of discussion was stablecoins, which as the name implies are designed to avoid price volatility. These sort of heated debates chart a future path for crypto that leaves bitcoin by the wayside.
“I think over time that bitcoin gets replaced by new generations of cryptocurrency that have the benefits of bitcoin, but not the downsides.” Joel Telpner, an attorney and partner with both ZAG-S&W and Sullivan & Worcester, tells Inverse at the conference. Telpner cites its lack of transparency and the ability to concentrate power through mining as unforeseen issues with the design. He predicts that bitcoin will lose its position as the world’s largest cryptocurrency “unless you solve some of the fundamental bitcoin problems, and without any centralized body to force it, I don’t see how that happens.”
Stablecoins could boost cryptocurrency use, but their decentralization credentials are up for debate. Blockchain venture capitalist lawyer Tamara Rogers noted in April that these coins need to maintain their fixed price unlike freely-priced bitcoin, and so stablecoins “may not fulfill the wish of decentralization,” particularly if they depend on a central governing body to back each token with fiat currency.
A Replacement for Bitcoin
But perhaps the question is less whether these coins are the answer, and more whether something else could (or should) replace bitcoin. Remember that “decentralized Uber” concept above? Vitalik Buterin, co-founder of the second-largest cryptocurrency Ethereum, said in April that building such a concept on top of the cryptocurrency today would leave the developer “screwed” as Uber sees 12 rides per second but Ethereum can only process 15 transactions per second. Nikola Stojanow, CEO of Aeternity Ventures and chief business development officer of Aeternity, said that bitcoin’s dominance could be challenged by innovative ideas that improve on the original concept.
“I think there’s going to be a shift of the proportions, because there’s going to be more and more things we haven’t even thought of yet which are going to change the market,” Stojanow tells Inverse at the conference. However, he notes the wide variety of third-party developers using bitcoin to develop decentralized projects, stating that “bitcoin will always have its place” in a multi-coin market.
Indeed, some solutions can use bitcoin in surprising ways that work around its limitations. The “Lightning Network” processes cryptocurrency transactions outside of the blockchain by only adding to the chain when necessary. Unlike bitcoin itself, which only processes around seven transactions globally per second, its developers claim the network can support billions per second. Microsoft has also been exploring such “off-chain” solutions as a way of scaling to meet global demand.
The question about bitcoin’s role in the coming 10 years could also be irrelevant. Bjørn Alsos, operations manager for BitBay, tells Inverse at the conference that the ideal scenario over the coming 10 years is where user interfaces make the actual currency an obscure piece of information. It doesn’t matter if you’re paying with fiat, crypto, your time, other valuables or something else entirely, as it all feeds through a system that hides the complexities.
“There is no way we’re going to see a scenario where one coin rules at all because the coins are optimized to do specific things,” Alsos says, noting that the blockchain can’t store that much data before it reaches an unmanageably large size. “So you have to limit the data that you store the blockchain, which means you need several projects, doing different things.”
Alsos likens bitcoin’s first decade to the early days of the internet in the nineties. Users could set up an email address and try their hand at online banking, but it wasn’t until further developments like social networking and mobile computing emerged that those same technologies embedded themselves in people’s everyday lives.
“The next 10 years are all about infrastructure and user experience,” Alsos says. “And then the 10 years after that is really exploiting the potential in the technology.”
The author of this story has a stake in bitcoin and Ethereum.