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Forget the Bitcoin halving: Bitcoin’s original vision has been surpassed

Forget the Bitcoin halving: Bitcoin’s original vision has been surpassed

BlockworksBlockworks2024/05/30 23:49
By:Blockworks

Why has crypto and Web3 so far failed to live up to Satoshi’s vision — and what will it take to deliver on the industries’ promises?

2024 was projected to be one of the biggest years yet for the crypto industry. 

But barely a few weeks following the widely anticipated Bitcoin halving, bitcoin’s price dropped 11%. Aside from the bitcoin ETF approval, this year has actually been underwhelming for the industry, with little progress despite all of the work during the bear market. 

However, it’s clearly not time to call the final score on 2024 yet. We’re not even halfway through the year, and the impact of the halving has typically been seen months after past cycles. 

But perhaps there is a more important question to ask. Despite Satoshi outlining a vision for a peer-to-peer version of electronic cash in the bitcoin white paper over 15 years ago, why has crypto and Web3 so far failed to live up to this vision — and what will it take to deliver on the industries’ promises? 

Is decentralized cash the real goal? 

Proposing decentralized, electronic cash may have been a bold claim in 2008, but in hindsight, I would argue it was the equivalent of selling the internet’s main benefit as the ability to send electronic letters. 

Payments represent a relatively small amount of the global financial system. With the development of smart contracts, there has been an explosion of what is possible with decentralized ledger technology to provide a more efficient, open and competitive global financial system.

With the DeFi summer of 2020, decentralized finance applications found true product market fit. DEXs like Uniswap created 24/7 markets that did not require market makers. And collateralized lending protocols like Aave opened up the ability for holders to generate yield on their tokens while also using them as leverage for other activities, including traditionally impossible products like flash loans. 

While momentum then certainly fell — in no small part due to the scalability issues of Ethereum — the bear market continued to see fast progress here. Perhaps most noticeable was the evolution of DeFi from mainly a user-to-dapp interaction to a dapp-to-dapp interaction — an evolution similar to that 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 gain traction. While they have shiny new names, many will remember these concepts as similar to ideas floated during the ICO era. The difference is that now, combined with the innovation of DeFi, there are clear economic and practical benefits to “tokenizing everything.”

This evolution is, in my opinion, also the evolution of Satoshi’s vision of global decentralized money to global decentralized programmable assets. But if that is true, then why have we still not seen the explosive growth that such a revolution would trigger?

The barriers to mass adoption

The recent bitcoin ETF approval undeniably marks bitcoin’s entry into the mainstream financial system, as more institutional capital pours into the industry. Institutional investors may now engage with cryptocurrency through a regulated entity, allowing those who are more cautious to participate in a thriving asset class. But while this adds legitimacy to the crypto sphere, it also raises concerns about bitcoin’s status as a viable and alternative monetary system. 

Read more from our opinion section: Ethereum and Bitcoin are holding us back

At the same time, the Bitcoin blockchain’s limited capacity to execute transactions swiftly and effectively will become increasingly exposed as the network evolves and usage increases. Proof-of-work is Bitcoin’s most significant inhibitor and demonstrates the need for a new layer-1. The process uses a substantial amount of power and manual energy, reducing the speed at which transactions may be performed. Its energy-intensive nature demands high electricity consumption, sparking concerns about its environmental impact .   

Ethereum first showed promise to overcome Bitcoin’s shortfalls via the use of programmable money executed through smart contracts. But despite its best intentions, Ethereum has failed on two fronts: 1) the network is fundamentally unscalable and 2) it is ill-fitted as a programming language. 

Layer-2s were established as a remedy to Ethereum’s scalability. However, they ultimately serve as a band-aid solution, introducing greater fragmentation and vulnerability. It should be noted that developing DeFi apps requires an incredibly high level of technical knowledge, far above that of the typical developer. Solidity, designed specifically for Ethereum’s smart contracts, is notoriously difficult to master. These barriers to entry impede higher levels of growth and competition between dapps, which is required to facilitate mainstream adoption. 

Even more troubling is that despite the Ethereum community’s highly proficient developers, security remains a persistent issue, with billions of dollars in breaches and vulnerabilities emerging from within the ecosystem. From the DAO’s initial attack in 2016 to the billions of dollars lost each year , Ethereum has repeatedly proven that it is not a platform suitable for developers to develop secure DeFi applications that users can confidently engage with. 

The way forward

The expansion of other networks based on Bitcoin’s concept is proof that its objective of becoming a monetary system is coming to fruition. However, for crypto to truly attain widespread adoption and keep in line with Satoshi’s original vision, chains must be both scalable and easy to program on. 

While Ethereum and its wave of layer-2s attempted to address some of these challenges, they introduced new ones. And while earlier networks like Solana saw comparable advancements in certain areas, they still fell well short of what is required for a global asset layer. 

With the surge of next-generation layer-1 networks coming to challenge Bitcoin and Ethereum, both end-users and developers are becoming better equipped with the necessary tools to build and use intuitive, secure, and powerful Web3 applications. This provides a viable way forward. 

With all of this in mind, one may argue that the future Satoshi envisioned for Bitcoin will only be delivered in Bitcoin’s absence.

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Tags
  • Bitcoin
  • bitcoin halving
  • Layer-1
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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