Thoughts on the Past and Future of Bitcoin

It’s been nearly three years since I first got involved in Bitcoin and became an active advocate for it’s adoption and growth. As we close out 2015, I find myself thinking both back on the disappointments Bitcoin has offered up and forward to the as-yet-possible successes we might see.Monkey thinking about Bitcoin

Early in 2013 we saw the crisis in Cyprus and huge spike in the price of BTC as, ostensibly, Cypriots tried to get their money out of their currency before it could be confiscated by the government to bail out the banks. It’s still not clear that that was the whole, or even a part, of the reason, but it makes for a good story.

At that time, I was looking for a new hobby and business and latched onto BTC as something that looked interesting and with a lot of possibilities. I was really disappointed that nothing real had been done to fix the systemic problems in our financial system that led to the 2008 crash and further depressed by systemic corruption of the government creating a corporate-led plutocracy that would impoverish the vast number of people and create a permanent class system of the wealthy and everyone else.

At the time, there was a lot of movement into merchant adoption and there were huge numbers of boot-strapped startups. Anything seemed possible at the time.

By the end of 2013, we saw the huge spike in price prompted, again ostensibly, by Chinese demand, but seemingly aided by huge market manipulation. The moon seemed possible for a couple of months, but in that time I learned a hard, real-world lesson in finance. I put my money in CoinLenders which promised high (read unrealistic) interest payments. I lost the majority of Bitcoin holdings just as the price was skyrocketing when CoinLenders was hacked, or when the owner, TradeFortress ran away with the money. I’m sure I’ll never know the truth of the matter, but for the lesson learned, it really doesn’t matter: I am now much more careful with where I put my bitcoins, and for the most part they are safe in wallets that I own the private keys to.

2014 was a year of disappointment. The price fell consistently aided by the complete and spectacular collapse of MT Gox, the heavyweight exchange of Bitcoin’s early days. Merchant adoption began to sputter and many of the bootstrapped businesses I reported on in the early days can now only be found on the pages of the Internet Wayback Machine. The only good thing for me personally was that I completely rebuilt my Bitcoin holdings and I’m again ready for a moonshot if it comes.

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2015 in many ways has just been a repeat of 2014. The price has disappointed all the way up to the last couple of months, and may disappoint yet again. Much of the focus on Bitcoin has been drawn off by Etherium, private blockchain enterprises, and a plethora of vaporware like sidechains and the Lightning Network, but may yet explode into reality, but are still something we are only talking about.

In the meantime, the block size debate couple with the continued centralization of hashing power have been making me question whether Bitcoin really can be the safety net for the world economy that I have been hoping for.

The block size debate comes down to how we are going to scale Bitcoin to be big enough to be anything more than a niche curiosity. I can follow some of the arguments of the different proposals, but there is so much personality and ideology mixed into the debate, it’s fairly difficult to parse. What’s clear to me is that Bitcoin must scale if it is to be anything and everyone of the people engaging in the block size debate need to realize that.

Scaling Bitcoin, whether it be with a huge increase in block size, incremental, stopgap, or whatever, is essential. Period.

Really, though, the problem of block size is about the second problem that Bitcoin is facing right now. Satoshi originally envisioned Bitcoin as being a one CPU one vote system with most users being miners. Even he knew that eventually not every user would have the bandwidth or computing power to be a miner, but I don’t think he envisioned how fast hashing would centralize or high the difficulty would become.

Satoshi solved the Byzantine Generals’ problem but Bitcoin now has a second generals’ problem, the fact that because of the few number of people who have a vote about what goes into the core protocol of Bitcoin, there can be a logjam in consensus to the point where despite several good proposed solutions, we can’t solve what almost everyone acknowledges is a problem.

We are still very early in the development of Bitcoin, and at this point it should still be possible for a majority of users voting with their own machines that this type of problem should be solvable. But regardless of how we solve it, what we do now is likely to impact the development and usefulness of Bitcoin for the foreseeable future.

There are a lot of things to be positive about for 2016, including the small resurgence of price, the halving, better exchanges and other businesses building out the infrastructure, and the continued (though currently lulling) interest in Bitcoin of VC investors. As long as we as a community are able to get our proverbial shit together, Bitcoin is still well positioned to fulfill its initial promise of being the fallback currency–a replacement for gold–in the world economic system.

I have been battered and bruised in the last few years of Bitcoin involvement. I really don’t expect the hits to stop, but I also expect the development to keep going. And what gives me the most hope in the future of Bitcoin is that the world economic system is unbalanced, unfair, manipulated, and repressive. This is not a situation that is likely to hold, and when things break the next time, people are going to be looking for an alternative. I expect that Bitcoin is going to play a huge role in our future.