Twelve months ago, Miguel Cuneta revisited a piece he had written three years ago...and it's still aging well!

decentralize.today

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I published this  post on Medium originally in early 2018. It has so far aged quite well but I will be adding a few updates on some of the sections.

I  was a speaker at a Blockchain conference in Manila recently (Q1 2018),  and a bold statement was made by one of my co-panelists during a talk about the future of cryptocurrencies and Blockchain tech. He said,

"We won't be talking about Bitcoin in three years".

Ironically, almost four years ago in 2014–15, when the price of  Bitcoin was tumbling down, and all the rage in Wall Street was the  magical "Blockchain technology", this statement was made over and over  again too. We are seeing it again today, this time not from the wall  street types, but from the silicon valley/startup/tech people.

Well, I have a bold statement to make too.

"By the year 2028, the Bitcoin protocol will be the standard for secure and  censorship-resistant value transactions on a global scale. As its  network effect grows, multiple layers of applications will be built on  top of the Bitcoin Blockchain, and the world will see value and commerce  flow like never before. Money will flow like pure information —  instant, secure, unfairly cheap, open, borderless, and programmable."

We will no longer be sending money, we will be streaming money.

It is actually obvious once you truly grasp what the technology behind Bitcoin enables. And no, I am not talking about everyone's favorite buzzword, "Blockchain". I am talking about the Bitcoin protocol, of which the blockchain is merely a part of the system.

Money Over Internet Protocol

Bitcoin is simply a network of computers that constantly reach agreement over the state of a shared database.

  • The network is made up of Nodes, which are actual computers running the  Bitcoin software. As of today, there are about 10,000+ Nodes all over  the world.
  • They all reach agreement through a set of predetermined rules that cannot be changed without unanimous consensus among nodes. The rules keep every participant in sync and keep the  integrity of the network intact.
  • The shared database is the  Bitcoin blockchain, which is a tamper-proof and public record of every  transaction ever made in the history of Bitcoin, in chronological order, secure by proof-of-work. Because everybody is watching everybody else, no one can cheat.

The simple elegance of the Bitcoin protocol is what makes it work.  With these three simple components, plus of course, bitcoins, the only  currency accepted in the network, we now have the base protocol for  peer-to-peer internet value transfers. The possibilities for new  applications and protocols to be built on top of this base layer are  endless. Things like Lightning Network,  enabling near-instant and almost free transactions, are already a  reality. Similar to how Uber or AirBnB were unimaginable just fifteen  years ago, financial applications that are unimaginable now will emerge  out of the permissionless innovation enabled by the open-source nature  of Bitcoin software.

Death, Taxes, and Bitcoin

"Which  is why Bitcoin is an excellent idea. It fulfills the needs of the  complex system, not because it is a cryptocurrency, but precisely  because it has no owner, no authority that can decide on its fate. It is  owned by the crowd, its users. And it has now a track record of several  years, enough for it to be an animal in its own right." — Nassim  Nicolas Taleb

Running non-stop for nine years, with almost zero  financial loss on the chain itself, Bitcoin has become the most reliable  and secure financial network in the world. When you send a valid  Bitcoin transaction, you can bet the farm on it that it will be sent and  that it will be received by your intended recipient. It's right up there with death and taxes.

It has been subject to every kind  of attack ranging from network attacks, spamming, social attacks,  government crackdown, FUD attacks, hash power and mining attacks,  contentious hard fork attacks, and more recently, brand hijacking from  unscrupulous groups that spend exorbitant amounts of money to try and destroy Bitcoin. All the attacks have failed, and the network became  more resilient as a result.

Diminishing Risks

The Lindy Effect states that every additional period of survival implies a longer remaining life expectancy for things like technology. Nine years after  its inception, Bitcoin has overcome most major risks that would pose a  threat to the integrity of the protocol and the network. With each  passing day, with each block added to the chain, the confidence in the  network increases, and its network effect grows stronger.

Protocol Flaw

One  of the earliest risks was that there was a fatal flaw on the protocol  level of Bitcoin. In 2009–2010, when Bitcoin was in its infancy, people  were not really sure about how robust the software would be, simply  because it has not faced any major challenges yet. By 2011, the best  engineers and cryptographers in the world knew that this risk had been  reduced to almost zero.

Government Risks

Going into 2013, during the second Bitcoin hype-cycle, the greatest risk was  from the governments of the world — what if the US banned Bitcoin? What  if governments made it illegal to own Bitcoin? The New York Bitlicense set an ominous precedent, but by the end of 2013, at least in free and  democratic countries around the world, this risk had gone down to zero  as well.

Update:  After the recent Facebook Libra congressional hearings in the United States, it has become evident that Bitcoin has surpassed this stage of government risk when sitting US Congressman Patrick McHenry said this in  his opening statement:

"The world that Satoshi Nakamoto, author of the Bitcoin whitepaper,  envisioned, and others are building, is an unstoppable force. We should  not attempt to deter this innovation. And governments cannot stop this  innovation. And those that have tried have already failed."

Secondary Market Challenges

And then there was the Mt. Gox hack  in 2014. What was then the largest and most popular Bitcoin exchange in  the world had been hacked, losing over half a billion dollars, and compromising the integrity of the fledgling cryptocurrency markets. The risk of losing the valuable secondary markets for trading Bitcoin was  looming over everyone's heads, but common sense prevailed, and by 2017  we already had numerous regulated and liquid cryptocurrency exchange  platforms everywhere in the world, with Bitcoin as the crypto-reserve currency, following industry best practices and better security  protocols.

Update: By the end of 2018 and going into 2019, secondary market for Bitcoin has matured considerably. The Chicage Mercantile Exchange started  offering Bitcoin futures, and companies like Bakkt are set to launch  very soon. Fidelity Investments, with 2.6 TRILLION dollars assets under  management, announced the launch of Fidelity Digital Assets, which  offers Bitcoin as a full-service, enterprise-grade platform for  securing, trading, and servicing investments in digital assets. ETFs are  also seen to be an inevitable addition to the growth of Bitcoin's market.

Social and Technical Scalability Risks

The last challenge Bitcoin faced last year, in 2017, was the risk of a major hard forksplitting  the network and ultimately compromising its integrity. A contentious hard fork eventually did happen, but it did not have the expected results. After the fork, Bitcoin rallied to new all-time highs, rising  over 1000% in just three short months. The social scalability of Bitcoin  had been tested, and it passed with flying colors. The users, nodes,  and miners that make up the Bitcoin network had chosen the version of  Bitcoin that they wanted to support, and the market responded positively.

Although the root cause of the split in the network  was transactional scalability, Bitcoin still works well today, with  transaction fees at all-time lows because base layer improvements like Segwit have reached 30% adoption.

Second  layer applications like the Lightning network will be more than enough  to facilitate transactions on the scale of VISA and other payment  networks. The engineers that maintain and upgrade the software are hard  at work with improvements on every aspect of the Bitcoin protocol.


Future Challenges

Just  like any new technology, there will be more challenges in these early development and adoption phases. The fact that Bitcoin challenges the  status quo and breaks the lucrative positions of middlemen in the  financial world is enough reason to assume that these attacks will continue and increase in intensity and in scope. The beauty of decentralized protocols is that they are not just resilient to attacks, they are Anti-fragile.

Could  Bitcoin fail? Yes, nothing is impossible. The odds are pretty low at  this point, given the examples I have given above, but nothing is  certain. The thing is, it may fail in its current form, but technology  is fluid and software adapts. Bitcoin cannot be uninvented. It is here  to stay.

In the words of Nassim Nicolas Taleb, "It may fail; but then it will be easily reinvented as we now know how it works."

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