10 years of bitcoin: a look back and a look forward
It has been 10 years since the Bitcoin blockchain started in January, 2009. Let’s take a look at some of the milestones over the last 10 years and make some predictions for the next 10. Remember, all statements about the future are inherently speculative.
Progress over the last 10 years:
1. Bitcoin blockchain launched
The genesis block (the first block of the Bitcoin blockchain) is created by Satoshi Nakamoto, creating the first decentralized digital money. The block includes data from that day’s headline from the Times of London, anchoring the blockchain to the analog world equivalent. 10 years later, the Times of London would include an advertisement with a hash of the current bitcoin block, anchoring the newspaper to the digital record and closing the conceptual loop.
2. Code quality and features massively improved
Many bugs were fixed by a global decentralized team of developers. Blockchain synchronization was sped up. Key features were added. Timelocks allow bitcoins to be rendered unspendable for a period of time. Besides forced savings, it opens up many other possibilities (with escrow and multisignature transactions, as well as with the nascent lightning network). Segregated witness (aka Segwit) increased the transactions per second of the network and fixed transaction malleability.
3. Hardware wallets are created (Ledger Nano S, Trezor, and others) and bitcoin debit cards
Dedicated physical devices were built for the sole purpose of securely storing bitcoin private keys. Bitcoin debit cards were launched by several different companies, allowing easy spending of bitcoin (via the banking system as an intermediary)
4. Regulated products launched
Grayscale launched the Bitcoin Investment Trust (trading under the symbol GBTC). The CME and the CBOT both launches cash-settled futures on bitcoin. Coinbase and other companies launched professional custody solutions for bitcoin.
5. Users grew from a handful to tens of millions
Ten years ago, a small number of enthusiasts and cypherpunks were experimenting with this new digital money. Now we know that tens of millions of people have interacted with bitcoin in some form, whether it is registering for a regulated exchange, downloading a wallet, participating in bitcoin forums, or taking courses about bitcoin. While the exact number isn’t known, the number of users and reasons for why they are using bitcoin has grown massively.
6. Hashrate grew from a handful of ordinary computers to 40+ exahashes
Mining was initially a few people, with regular computers, with very little money at stake. It evolved through several phases, leading to SHA256 ASICs, machines dedicated to mining bitcoin orders of magnitude faster than a general-purpose computer. If the top 500 supercomputers in the world were told to mine bitcoin, they would be insignificant on the bitcoin network. Many miners are now professional operations at a large scale, filling warehouses with rows of ASICs, located near cheap sources of electricity (such as remotely-located hydroelectric dams) The bitcoin hashrate has even grown during “cryptowinters”, periods of time where the price declined and speculators became pessimistic.
7. Hedge funds and Venture Capital invest billions of dollars
Hedge funds started investing in bitcoin, given its phenomenal returns without any correlation to existing asset classes (stocks, bonds, forex, commodities, interest rates, real estate….) Venture capital firms invested in bitcoin startups, supporting companies providing services related to bitcoin.
8. An ecosystem formed around bitcoin
Altcoins, tokens, nonfungible tokens, books, podcasts, exchanges, meetups, startups, conferences, node satellites, mining pools, collectibles, and paraphernalia were created thanks to bitcoin.
9. Price rose from less than a penny to thousands of dollars
The price increased by millions of percent, with multiple 80%+ crashes along the way. The price is the easiest part of bitcoin to understand for the general public, and the mainstream media picked up on the price bubbles and wrote many articles (as well as over 300 bitcoin obituaries https://99bitcoins.com/bitcoin-obituaries/ ). Few assets in history have performed like this, and the story isn’t yet complete.
10. World class universities start teaching courses on bitcoin
Princeton, MIT, Harvard, Stanford, NYU and many others now offer courses teaching Bitcoin.
Predictions for the next 10 years
1. Bitcoin exceeds $100,000.
Bitcoin’s price will at some point break six figures, bring its “marketcap” to approximately 2 trillion dollars. This could be caused by increased adoption, speculative interest, financial crises, and/or the three halvings that will occur in the next 10 years. In 2020, the production of new bitcoins drops from 12.5 per block to 6.25 per block. In 2024, it drops in half again, and again in 2028. Bitcoin has the unique position of exponentially increasing demand and exponentially decaying production.
2. A bitcoin ETF is launched in the US.
While many parties have been trying to get an ETF approved for years, the next ten is when Bitcoin becomes mature enough that this will finally happen. Note that there are ETFs on gold (which is also traded on both regulated and unregulated markets) and triple inverse leveraged ETFs (and other products that can be problematic for retail investors).
3. Synthetic stablecoins and other assets are launched on bitcoin/collateralized by bitcoin
A bitcoin ETF gives you exposure to bitcoin with the properties of a stock. The conceptual inverse of this is a product that gives you exposure to stocks with the properties of bitcoin. The unique properties of bitcoin (divisibility, noncounterfeitable, portability, permissionless…) combined with price exposure of traditional assets is a powerful combination. Imagine a person who has been paid a small amount in a inflationary local currency immediately converting it into additional holdings in a diversified portfolio based on bitcoin (stocks, bonds, precious metals, real estate, etc). This would be a powerful tool for wealth accumulation available to anyone with a smartphone.
4. Central banks add bitcoins to their reserves (in addition to the gold and the foreign currency holdings).
Central banks do not hold gold or foreign currencies because they like them; they hold them because they can be sold to support the local currency. Bitcoins can be very quickly sold in exchange for many fiat pairs all over the world. Some central banks will realize that a small holding of bitcoin can be beneficial, and that other central banks will follow their lead.
5. Secure hardware for managing private keys for bitcoin becomes integrated into existing devices (phones, smartwatches, etc)
Currently, regular devices do not have a secure way to store private keys (needed for the safe possession of cryptocurrencies). Secure storage requires specialized devices (like the Ledger Nano S or the Trezor hardware wallets). The secure modules from these hardware wallets will be integrated into smartphones and other personal computing devices. This will have the side benefit of providing secure storage of passwords and other authentication measures (boosting the security of non-cryptocurrency applications).
6. Regular ATMs gain bitcoin trading capacity
While there are thousands of bitcoin ATMs (machines dedicated to exchanging cash for bitcoin), this number is dwarfed by the millions of conventional ATMs. Conventional ATMs could be modified to trade bitcoin as an additional feature. Since the fixed and marginal costs are already being covered by the conventional ATM services, the bitcoin features could be offered at a low fee while still adding profit for the operators.
7. Secondary layers of Bitcoin mature (lightning network, Rootstock, etc).
While not well-known among the general public, Bitcoin has secondary layers that can provide features that are not possible on the first layer (the Bitcoin blockchain). The lightning network allows instantaneous payments, streaming payments, and micropayments. Rootstock is a different second layer that adds smart contract functionality (adding the features of Ethereum, which implements smart contracts on its primary layer)
8. Decentralized version of Uber based on bitcoin emerges
Uber is fundamentally an app that connects drivers with riders. The platform is made possible by ubiquitous smartphones and GPS/mapping services, combined with reputation features and cashless payments. Identities can be based on the blockchain, and bitcoin allows decentralized cashless payments. The pieces are in place for an Uber-like service without the company — an app that connects drivers with riders, taking a zero or minimal fee. This has the potential to be much more lucrative for drivers and cheaper for riders (cutting out the middleman taking a substantial fee). The reputations would be portable, allowing drivers and riders to bring their collections of 5-star ratings to other services.
9. AI/robots earn and spend bitcoin
Machines can interact with Bitcoin directly. Humans still need an intermediary (a machine) in order to generate and propagate Bitcoin transactions. Machines will find it more challenging to use cash or bank accounts and thus will pay for data and electricity using bitcoin.
10. Bitcoin becomes boring
Just like how people used to be excited to log on to the Internet, yet these days no one will say “I’m going to use the Internet now!”, Bitcoin’s applications will be developed, and the pace of progress will slow. The rate of adoption will decrease as Bitcoin reaches saturation across the population. Bitcoin will be integrated into the fabric of society. Services will use Bitcoin when convenient and won’t feel the need to advertise it. Remittance services will check whether the banking system, bitcoin, or something else is the cheapest way to send money at that moment. Identity and intellectual property services will anchor to the Bitcoin blockchain. There will be no more need to mention it than Gmail mentioning which email protocols they are using. While people will not be as excited as they once were, Bitcoin becoming boring demonstrates how far it will have come.
