What is Bitcoin good for, if not an occasional dose of drama?
Readers of the recent New York Times piece, “The Bitcoin Believer Who Gave Up“, have been rightfully concerned about the future of bitcoin. But there remains much more promise for bitcoin and blockchain than readers might glean from this single snapshot.
Yes, there are significant technical and governance challenges for scaling bitcoin. The number of transactions the network can process today is far too low and the security and software development concentrated in too few hands.
None of the concerns raised by developer Mike Hearn in his farewell message (to bitcoin specifically; he is now working full-time for the blockchain consortium R3CEV) are news to those who have been following bitcoin closely.
However, these challenges should be seen as symptoms of bitcoin’s amazing success to date rather than its imminent demise. In barely seven years of existence, bitcoin has moved from a fringe technology for libertarians and drug dealers to a commodity valued at over $5bn (with a ‘B’), the basis of over $1bn in venture capital investment.
Bitcoin and its underlying blockchain technology are the focus of R&D efforts by nearly every major financial services company, the MIT Media Lab, and the UK government.
Just last week, Digital Asset Holdings announced a $52m fundraise from some of the biggest players on Wall Street, as well as revealing the selection of their blockchain-based software as the new infrastructure for the Australian Securities Exchange.
All the problems Hearn cites have arisen because more and more people and institutions want to use bitcoin; they are more like growing pains than a death knell.
Growing ecosystem
Despite the current challenges, we still believe bitcoin and blockchain hold as much promise as they did a year ago when we decided to start the Bits + Blocks coLAB.
Once you’ve seen the power of a peer-to-peer digital currency and permissionless payment network, it’s hard to unsee them. Bitcoin has opened our eyes and created new expectations for the ways we store and transfer value of all kinds.
While we believe in bitcoin specifically, we also see it as just one piece of a growing ecosystem of distributed systems, shared ledgers, and cryptographic technology which will have a profound impact on how we interact, transact, and communicate with each other.
Bitcoin may eventually fail to live up to the potential we see for it, but it is certainly ripe with learning and worthy of our attention. We are still inspired by the vast potential of blockchain technology to foster new forms of trust and exchange.
Our most recent research into how these technologies might enable new digital identity systems left us feeling more confident than ever that blockchains are powerful tools that will lead to the creation of great new experiences.
Bitcoin has been declared dead many times before, something that should come as no surprise, given it is a very early-stage technology that has already taken a couple steep rides up and down the hype cycle.
Much like the evolution of the internet starting with TCP/IP protocols that have resulted in the web we use today, the revolutionary changes made possible by bitcoin and blockchain will likely take at least five to 10 years to begin to reach their potential.
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