The Future of Bitcoin

There are many versions of Bitcoin’s future predictions that can be found online. However, since many authors are also ignorant of the concept of bitcoin, the predictions they make are naturally very different.

Following on from my previous blogs, here I will express my views on what the future of Bitcoin and Bitcoin itself will look like like over the next 10 years. However, before talking about the future of Bitcoin, I would like to summarize what Bitcoin looks like today.

Today’s Bitcoin

Today’s Bitcoin is a centralized non-mainstream transaction system with extremely limited trading volume (compared to other assets like stocks and FX).

Satoshi Nakamoto made it very clear in his whitepaper that Bitcoin is a distributed electronic cash system. However, we are all adults, and we should know one fact — you can’t always believe what people say.

Satoshi Nakamoto — whether he’s Craig Wright, or another person or a group of people — firstly, is a person, a human being, which means he is not perfect. Those who believe Satoshi Nakamoto is God must have some other intentions. Just like I mentioned in the first post, Bitcoin is “the culmination of all attempts by humans to replicate the most primitive currency transactions in the digital world. So far, it is the first one that is close to success, and is the only one that is close to success”. But even then, it is just an attempt. This attempt by Satoshi Nakamoto is indeed a breakthrough. However…

1. It did not appear out of thin air, it is based on the countless failures of predecessors, and many technologies, such as asymmetric encryption and the maturity of the P2P network.

2. It is not technically perfect, even if it was at the time; it is still impossible for it to be impeccable today after nearly 10 years. Those people such as Cøbrawho see the white paper as the Bible and the PoW as the only truth must have some spiteful purpose (or ulterior motive).

3. It does not get rid of the limitations of history. To put it simply, as a pioneer, it is difficult, if not impossible, to predict the problems that this system will face in the future.

The above comments can be applied to any groundbreaking new technology. Deifying the pioneer and deifying this technology has no benefit in understanding it and developing it.

Bitcoin is also the same, and Satoshi proposed to use PoW to reach a consensus, so as to achieve the distribution of the system through the distribution of computing power. This idea was groundbreaking, and under the environment at the time, it was also correct. However, Satoshi was not able to predict Bitcoin’s environment (not just the price) ten years later, and no one in the world can. Some people still remember what the network looked like ten years ago. But had anyone predicted how the network appears now 10 years ago? If anyone said Satoshi has guessed that Bitcoin now has many centralization limitations such as hashrate domination, the separation of digital signatures (segregated witness) and scaling challenges, etc. This is also deifying Satoshi Nakamoto.

Therefore, since Satoshi did not predict the way Bitcoin is now. In his original implementation, he only succeeded in establishing a distributed monetary system. However, he did not say “to build a forever not changing decentralized monetary system”, everything is changing, and technological innovation is moving even faster. I think deifying Satoshi Nakamoto is not the correct way. The best way to acknowledge the wisdom of Satoshi Nakamoto is to not think that “Satoshi Nakamoto has long anticipated this and has arranged for it”. The best way to acknowledge his efforts should be to acknowledge that a smart person like him would never think “Bitcoin should always be what I designed.” In the past 10 years, we see Microsoft has changed, Apple has changed, Nokia has even been completely annihilated in the tide of technological innovation as its environment changed. Therefore, Bitcoin will also change. As for whether or not it violates the original intention of Satoshi, I suspect even Satoshi himself did not think that the experiment he had done would still exist after ten years.

Therefore, why is “miners’ behavior against the original intention of Satoshi?” The miners said that BTC is “Bitcoin Core centralization”, Bitcoin maximalists said that miners are “hashrate centralization”, but if everything is to follow the vision of Satoshi, is it considered “Satoshi centralization”? No one had defined what Bitcoin should look like, only rules can dictate what it looks like. Therefore, the past of Bitcoin should be what it used to be. The current Bitcoin is what it is now.

Is Bitcoin Centralized?

Yes, Bitcoin is centralized. SegWit and (the defeat of) SegWit2x were centralized victories. The August 2017 Bitcoin hard fork was a centralized victory too. However, were these processes a violation of Bitcoin’s rules?

No. In fact, there is no such thing as “centralization of hashrate” because Bitcoin has only one kind of centralization, which is the centralization of hashrate. Bitcoin maximalists arguing against the “centralization of hashrate”, in my opinion, are no different to any protesters — certain human rights that cannot be obtained by legal means can only be achieved through public pressure or through street politics.

As for “Bitcoin Core centralization”, it is even more nonsense. This is just a way of stigmatizing opponents. There are a lot of examples in all you-must-be-politically-correct western countries.

In the Bitcoin world, the most useful stigma is “centralization.” In the ICO world, the most useful stigma is “scammer”. These are all strategies, I don’t think it means anything.

So, is the centralization of Bitcoin against the original vision of Satoshi Nakamoto?

No. As I said before, Satoshi had no original vision (at least none he stated explicitly). His original intention was only to “establish” something. He never imagined the development of Bitcoin as to which route it should follow. Whether Bitcoin scaling or the Lightning Network, it is just a marketing banner that “follows the vision of Satoshi”.

Therefore, all predictions and arguments in the following texts are based on my previous statements — today’s Bitcoin is a centralized non-mainstream transaction system with extremely limited trading volume. Based on this, let me predict 10 years later — the future of Bitcoin.

The Future of Bitcoin

How much does 1 Bitcoin cost after 10 years? Before answering the question, please recall the formula for the value of Bitcoin: T ≤ min (C, L , kN) . In which, C is to guarantee the value of this monetary system, L is the limit of the safe transaction volume designed by this system, and kN is the daily transaction volume of N users in this monetary system.

For Bitcoin, C and L will grow with the number N of users. In other words, the value of Bitcoin is not subject to C and L compared to the general transaction system. That is, it seems that if the number of users can grow indefinitely, the value of Bitcoin will increase indefinitely.

However, the transaction volume of Bitcoin, which is T, is actually capped. This is the famous 7 transactions per second. Many people who know little about Bitcoin say that this cap is only subject to the rules of Bitcoin, and there is no technical difficulty in scaling, a block of 100MB is not a problem or miners are not willing to do this due to ulterior motives, etc

This limit is because the 1MB block size and 10 minute frequency which are correct. However in the end, it is subject to the weak synchronization of the whole network and the security of work proof. Therefore, the block size cannot be too big. This limit is ultimately subject to the speed of the network and the response speed of the computer, as well as the number of nodes. Even if scaling increases the block size, it is impossible to increase the block size to 100MB. Currently, SegWit increases “block weight” to around 4MB and Bitcoin Cash increased its blocks to a size of 32MB, which is basically the limit that Bitcoin can achieve now. The transaction volume will probably double, but the speed of the internet will increase too. The current speed increase of about 100–1000 times compares to the speed of the internet 10 years ago. However, the past decade has been precisely the decade of rapid advances in telecommunication, and it has now reached a bottleneck. The most optimistic estimate is that the network speed can be increased by 100 times in the next ten years. Therefore, if scaling is carried out at that time, a block can be turned into 800MB (10 minutes).

Therefore, from this point of view, according to the current price of a bitcoin at $6–7,000 USD, after ten years, Bitcoin theoretically rose to a maximum of $5.6 million.

Limitations in Bitcoin’s Future

However, the limit of the Bitcoin price does not only the depends on T (the safe transaction volume), but also the actual transaction volume (kN). At the same time, kN is actually hard to predict. Due to actual transaction volumes not being able to reach 1,000 currently, it has nothing to do with the safe transaction volume limit, but only depends on whether there is such a large transaction demand. The transaction demand depends on whether Bitcoin can be a mainstream payment method or not.

At this point, we can only predict it by comparing it with other mainstream payment systems. Let’s look at a few key indicators:

1. Transaction volume: 5,600/second, more than PayPal, Visa, AMEX and others’ magnitudes, although still below AliPay or WeChat payment, but would reach the mainstream level.

2. Traffic: the most optimistic estimate can be that confirmation is reduced to 1 minute, because the method of increasing the volume of transaction can also increase the block frequency in addition to increasing the block size. If the network speed is increased by 100 times, the block frequency can also be increased by 100 times. However, it is difficult for the traffic being reduced to seconds, because the machine’s reaction delay can not be ignored at that time. However, minute-level transaction delays are already an acceptable magnitude in online payments or large cash transactions.

3. Transaction fees: currently (in Bitcoin) are less than 1%, compared to the mainstream transaction systems, which is an advantage. The advantage of transaction fees, ultimately from the mining company’s operating costs and structure, is much simpler than the average payment company.

4. Security: First of all, as I argued my last post, a decentralized system has no natural security advantages compared to a centralized system. However, as an already centralized system, only mining companies guarantee Bitcoin network security. This feature has no more advantages than mainstream payment networks except for company operating expenses. Their advantage is that, compared to mainstream payment companies, such as AMEX, which handles complex systems such as credit, customer service, global payments, etc., mining companies only need to consider providing higher hashrate — because higher hashrate represents a safer, more unbreakable transaction.

5, Ease of use: the ease of use of Bitcoin can be said to be negative. Losing your private key means money is gone and can not be recovered. In fact, the issue of ease of use is the biggest problem with Bitcoin.

Human beings invent things meant to simplify problems, not the opposite. Google, Facebook, Baidu, Tencent and other big companies collect a lot of users’ information, and if they want, they can always know where you are and what you are doing. Although Cambridge Analytica was exposed by the media but there are still a lot of other data driven research companies out there doing similar things. Why? Very simple, because it is really convenient.

A technology, or a thing, if it doesn’t work conveniently, then no matter how many other advantages it has, it will probably not go mainstream. There are too many examples out there, such as Linux and Windows, WeChat/AliPay and ApplePay, such as Coinbase and Blockchain.com, etc.

Some people may ask: “Can’t Bitcoin be upgraded?” Yes — but is the upgraded Bitcoin still Bitcoin? Bitcoin is called cryptocurrency because its security is completely guaranteed by cryptography. The security of cryptography is based entirely on the premise of “private key owner is the real owner”. If you upgrade Bitcoin, the owner of the private key is transferred to others, such as a mining company. Or, if the private key is generated by others then what is the difference between this system and other centralized systems?

This is to say:

The future currency could be any currency, even any digital currency, but it will never be Bitcoin.

Bitcoin can’t be a unified currency system in the future, and it can’t even get into the mainstream, because the purpose of money is to simplify transactions, not to make transactions more complicated. The feature Bitcoin has in which “money must be locked in a safe before it is spent. If the money is lost or transferred, we are not responsible for that” — this kind of feature would never be accepted by the mainstream in the past, present or future.

Conclusion:

If Bitcoin is still alive after 10 years, this doesn’t mean that the entire blockchain technology ecosystem has collapsed, it has existed for 10 years. That is to say, Bitcoin is bound to have countless competitors. Moreover, technically, any cryptocurrency is superior to Bitcoin without exception.

1. Bitcoin as the pionnier of cryptocurrency, has the most backward technology.

2. Bitcoin will not be upgraded because Bitcoin’s upgrade involves many parties, and it is almost certain that Bitcoin will always be the most conservative cryptocurrency regardless of future blockchain technology — the one that moved the slowest.

As a result, those countless competitor coins will also be decentralized; they will also maintain low costs, they are safer and faster. At this time, what are the advantages of Bitcoin?The only advantage is — it is the first crypto on blockchain which has the highest number of users and hashrate. The former may not always be the case, and the latter is likely to always be the case, as more and more cryptos have already turned to proof-of-stake (PoS), which means that future mining machines may not be used as much as today’s types.

Therefore, it can be said that even in non-mainstream systems, Bitcoin will face fierce competition from other alternative cryptocurrencies, and its only advantage is the hashrate. So, in other words, if you want to use differentiation to compete with other blockchain transaction systems, it is a natural choice to increase transaction costs and improve the security of transactions.

So, if I make a prediction about Bitcoin after 10 years, I think it would be:

A centralized, hard-to-use, non-mainstream transaction system with fair trading volumes.

One where transaction fees will exceed general mainstream payment systems and are used to improve security, estimated at 5–10%. Its transaction volume, I think it is difficult to surpass another transaction system that is not very mainstream — PayPal.

Therefore, personal prediction: the price of Bitcoin will not exceed $50,000 after 10 years.