2024 is a crucial year for the cryptocurrency industry, facing challenges such as scalability, user-friendliness, and security. However, the emergence of the new generation of the internet offers hope in achieving the vision of a decentralized financial system. This article is based on Adam Simmons’ article “Forget the Bitcoin halving: Bitcoin’s original vision has been surpassed” and has been compiled and translated by Blockchain Zone.
Summary:
Rune Race outbreak! DOG reaches a new high of 0.008, what other potential benefits does Bitcoin Runes have?
Background:
The fastest ever! Baillie Gifford Bitcoin ETF “IBIT” reaches a scale of £20 billion in just 137 days, with investments from over 400 institutions.
Table of Contents:
Is decentralized cash the real goal?
Obstacles to mass adoption
The direction forward
2024 is expected to be one of the most important years for the cryptocurrency industry so far. However, in the weeks following the highly anticipated Bitcoin halving event, the price of Bitcoin dropped by 11%. Apart from the approval of a Bitcoin ETF, this year has been disappointing for the industry, despite the efforts made during the bear market.
However, it is not yet time to make a final evaluation for 2024. We haven’t even reached the halfway mark, and in previous cycles, the impact of halving usually takes a few months to show.
But perhaps a more important question needs to be raised. While Satoshi Nakamoto outlined the vision of a peer-to-peer electronic cash system in the Bitcoin whitepaper 15 years ago, why have cryptocurrencies and Web3 not been able to achieve this vision? What does it take to fulfill the industry’s promises?
In 2008, proposing a decentralized electronic cash may have been a bold statement, but in hindsight, I believe it’s akin to describing the main benefits of the internet as the ability to send electronic mail.
Payments account for a relatively small portion of the global financial system. With the development of smart contracts, the possibilities of decentralized ledger technology have been greatly expanded, providing a more efficient, open, and competitive global financial system.
During DeFiSummer in 2020, decentralized finance applications found real product-market fit. Decentralized trading platforms like Uniswap created markets where market makers were no longer needed. Collateral lending protocols like Aave allowed holders to generate income by utilizing tokens for other activities, including previously impossible products like flash loans.
Although the momentum has since waned, with one significant reason being Ethereum’s scalability issues, progress has still been made in this area during the bear market. One of the most notable changes is the shift from interactions mainly between users and decentralized applications to interactions between decentralized applications themselves, similar to the development of Web2, where most interactions are API-driven.
Now, in 2024, terms like Real World Assets (RWAs), decentralized physical infrastructure (DePIN), and digital identities are starting to capture attention. While they have fancy new names, many will remember these concepts as reminiscent of the ideas from the ICO era. The difference is that now, the innovations of decentralized finance are combined with clear economic and practical benefits of “tokenizing everything.”
In my view, this evolution is also the evolution of Satoshi Nakamoto’s vision of a global decentralized currency becoming global decentralized programmable assets. But if this is true, why haven’t we seen the explosive growth that this revolution will bring about?
The recent approval of a Bitcoin ETF undoubtedly marks Bitcoin’s entry into the mainstream financial system. With more institutional capital flowing into the industry, institutional investors can now participate in cryptocurrencies through regulated entities, allowing those who are more cautious to engage with a thriving asset class. While this adds legitimacy to the cryptocurrency field, it also raises concerns about Bitcoin’s position as a viable alternative monetary system.
At the same time, the limited capacity of the Bitcoin blockchain when executing transactions becomes increasingly apparent as the network grows and usage increases. The Proof-of-Work (PoW) mechanism is the most significant constraint of Bitcoin, indicating the need for a new first-layer solution. This process consumes a significant amount of energy and human resources, slowing down transaction execution. Its high energy dependence raises concerns about its environmental impact.
Ethereum initially addressed Bitcoin’s shortcomings by using smart contracts to execute programmable currency. Despite its good intentions, Ethereum has failed in two aspects:
The network is fundamentally not scalable.
It is not suitable as a programming language.
Layer2 solutions have been developed to address Ethereum’s scalability issues. However, they ultimately serve as temporary measures, introducing greater fragmentation and vulnerability. It’s worth noting that developing DeFi applications requires a high level of technical knowledge, far beyond that of typical developers. The Solidity language, specifically designed for Ethereum smart contracts, is notorious for being difficult to master. These entry barriers hinder higher-level growth and competition between dapps, which is necessary for mainstream adoption.
More concerning is that despite having a high level of developers in the Ethereum community, security issues remain a persistent problem, with billions of dollars in vulnerabilities and security flaws emerging within the ecosystem. From the initial attack on The DAO in 2016 to billions of dollars lost annually, Ethereum has repeatedly proven itself unsuitable for developers to build secure DeFi applications that users can confidently participate in.
The expansion of other networks based on the concept of Bitcoin demonstrates that it is moving closer to its goal of becoming a monetary system. However, to truly achieve widespread adoption of cryptocurrencies and stay true to Satoshi Nakamoto’s original vision, blockchains must possess scalability and programmability.
While Ethereum and its range of Layer2 solutions attempt to address some of these challenges, they also bring new problems. Early networks like Solana have made comparable progress in certain aspects but still fall short of the level required to build a global asset layer.
With the rise of the next generation of first-layer networks challenging Bitcoin and Ethereum, end-users and developers are gradually equipped with the necessary tools to build and use intuitive, secure, and powerful Web3 applications, offering a viable path forward.
In conclusion, one might argue that Satoshi Nakamoto’s envisioned future for Bitcoin can only be realized in the absence of Bitcoin itself.