2024 is a crucial year for the cryptocurrency industry, facing challenges such as scalability, user-friendliness, and security. However, the emergence of a new generation of networks offers hope in achieving the vision of a decentralized financial system. This article is based on the work of Adam Simmons in his article “Forget the Bitcoin halving: Bitcoin’s original vision has been surpassed,” compiled, translated, and written by the blockchain team.
Summary:
Dogecoin has surged, breaking the 0.008 mark and reaching new heights. What other potential benefits does Bitcoin Runes hold?
Background:
Fastest in history! The Bally Bitcoin ETF “IBIT” reached a scale of £20 billion in just 137 days, with over 400 institutional investments.
Table of Contents:
Is decentralized cash the real goal?
Obstacles to mass adoption
The direction forward
This year, 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, with little progress made during the bear market.
However, it is not yet time to make a final evaluation of 2024. We haven’t even reached the halfway point, and in past cycles, the effects of halving usually take months to manifest.
But perhaps there is a more important question to be raised. Although Satoshi Nakamoto outlined a vision for a peer-to-peer electronic cash system in the Bitcoin whitepaper 15 years ago, why has the crypto and Web3 industry not been able to achieve this vision? What does it take to fulfill the industry’s promises?
In 2008, proposing a decentralized electronic cash system may have been a bold statement, but in hindsight, I believe it is akin to describing the main benefit of the internet as being able to send electronic mail.
Payments comprise a relatively small portion of the global financial system. With the development of smart contracts, the potential of decentralized ledger technology has expanded significantly, offering a more efficient, open, and competitive global financial system.
During DeFi Summer in 2020, decentralized finance applications found true product-market fit. Decentralized trading platforms like Uniswap created markets without the need for market makers. Collateralized lending protocols like Aave allowed holders to generate income from their tokens while engaging in other activities, including traditionally impossible products like flash loans.
Despite a subsequent slowdown in momentum, one significant change was the shift in interaction from primarily user-to-dApp to dApp-to-dApp, 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 Identity are starting to capture people’s attention. While they may have fancy new names, many will remember these concepts from the ICO era. The difference is that now they are combined with the innovations of decentralized finance, providing clear economic and practical benefits to “tokenize everything.”
In my view, this evolution is also the evolution of Satoshi Nakamoto’s vision of a global decentralized currency becoming a global decentralized programmable asset. But if this is true, why haven’t we seen the explosive growth that this revolution is expected to bring?
The recent approval of Bitcoin ETFs undeniably 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 more cautious individuals to engage with a thriving asset class. While this increases the legitimacy of the cryptocurrency field, it also raises concerns about Bitcoin’s status as a viable alternative currency system.
Meanwhile, the limited capacity of the Bitcoin blockchain when executing transactions becomes increasingly evident as the network grows and usage increases. The proof-of-work (PoW) mechanism is a significant constraint for Bitcoin, indicating the need for a new first-layer solution. This process consumes a substantial amount of energy and manpower, slowing down transaction execution. Its high energy consumption raises concerns about its environmental impact.
Ethereum initially aimed to address Bitcoin’s shortcomings by using smart contracts to execute programmable currencies. Despite its good intentions, Ethereum has failed in two aspects:
– The network is fundamentally not scalable.
– It is not suitable as a programming language.
Layer 2 solutions were developed to address Ethereum’s scalability issues. However, they ultimately serve as stopgap measures, introducing greater fragmentation and vulnerability. It is worth noting that developing DeFi applications requires a high level of technical knowledge, far beyond the reach of typical developers. The Solidity language, specifically designed for Ethereum smart contracts, is notorious for its difficulty to master. These entry barriers hinder higher levels of growth and competition among dApps, which are necessary for mainstream adoption.
What is more concerning is that despite having a high level of development talent within the Ethereum community, security issues remain a persistent problem, with billions of dollars in vulnerabilities and security flaws appearing within the ecosystem. From the initial attack on The DAO in 2016 to billions of dollars lost every year, Ethereum has repeatedly proven 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 its goal of becoming a monetary system is being achieved. However, to truly realize the widespread adoption of cryptocurrencies and remain aligned with Satoshi Nakamoto’s original vision, blockchain must possess features such as scalability and ease of programmability.
While Ethereum and its array of Layer 2 solutions attempt to address some of these challenges, they also bring forth new problems. Early networks like Solana have made comparable progress in certain aspects, but they are still far from the level required to build a global asset layer.
With the rise of next-generation first-layer networks challenging Bitcoin and Ethereum, end-users and developers are gradually equipping themselves 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.