Although it entered the world with more of a whimper than a bang, bitcoin has clawed its way into the spotlight over the last few years as an alternative to the centralized institutions that have dominated finance for centuries. Even so, many concerns have arisen over the last year mirroring the tantalizing percentage gains recorded across the cryptocurrency ecosystem in terms of capitalization. Despite its multiple booms and busts, the likes of which characterize many financial assets, bitcoin has emerged stronger and more defiant with each passing hurdle.
Bitcoin has found itself in the crosshairs of detractors who decry its sluggishness, high fees, and enormous amounts of power needed to run the seminal blockchain infrastructure that backs the cryptocurrency. Nevertheless, while the challenges are numerous and notable, bitcoin’s engrained attributes ensure that it will be a viable alternative for fiat currencies not just a year from now but also a decade into the future, even if it deviates from its original form.
Bitcoin the Unkillable
Satoshi Nakamoto’s loyalists have seen it all since bitcoin’s unveiling nearly a decade ago. Putting its dazzling returns aside for a second, the famed cryptocurrency has experienced numerous crashes and corrections in its lifetime. Between the high-profile Mt Gox hack which soured investor sentiment to the more stringent regulations imposed by certain governments that sent investors scurrying, Bitcoin has managed to overcome every obstacle put in its path. Even though these events, both regulatory and sentiment related, temporarily hurt bitcoin as evidenced by the noteworthy plunges witnessed since widespread trading was first initiated, the cryptocurrency has subsequently strengthened.
Almost like a cockroach that is impossible to kill, Bitcoin has managed to survive several events that would have meant instant extinction for other products and services. One of the primary reasons is that the seminal cryptocurrency appeals to individuals’ democratic impulses thanks to blockchain’s implementation. Its distance from mainstream finance is also tempting considering its decentralized nature that eschews gatekeepers and other rentiers from the model. Most importantly, it is now viewed as a financing tool for the next generation of blockchain-based enterprises, helping bitcoin solidify its position in this new financial paradigm.
Exploring New Avenues for Financing
Although bitcoin has not entirely achieved its goal of helping unbanked and under-banked communities, it has proven to be a strong source of financing. The ICO-craze took the world by storm in 2017, with few currencies actually accepted in exchange for newly minted tokens, bitcoin being the most prominent among them. It is this very fungibility that will contribute to bitcoin’s longevity. More than just fungibility, bitcoin introduced blockchain, advancing the capability of developing closed ecosystems. Essentially, bitcoin showed self-contained ecosystems could expand and grow in tandem with adoption, a model being mirrored by other great ideas popping up across the blockchain landscape.
The original cryptocurrency effectively helps users access a vast number of cutting-edge tools and services in which all ecosystem participants gain collectively. Take for example retail network HotNow, which has built a gamified platform whereby shoppers can earn tokens, called HoToKeN, for social posts or other activities designed to promote their favourite merchants. These tokens can be redeemed for discounts at participating retailers. On the other side, merchants gain helpful insights on customers to forge better longer-term relationships that help bring online business offline. No marketing agency or discount website sits in the middle collected a fee for this service.
Another strong example of symbiosis is Storj, a new take on cloud storage platforms. Currently, cloud storage platforms are largely run by multinationals like Amazon, Microsoft, Google, and Apple, ensuring these companies are compensated for hosting users’ data in the cloud. Storj breaks down the presence of middlemen by focusing on its community’s collective computer memory. Users can rent out their computer’s unused memory for which they are remunerated in Storj tokens. Other users can pay in tokens to use this decentralized cloud storage space. All participants in the equation reap the rewards without leakage from the ecosystem, helping close the circle without requiring a centralized party that collects a fee.
Decentralizing the Familiar
Aside from contributing to a new financing model that is already gaining substantial global traction, bitcoin is now commonly referred to as digital gold thanks to its unique properties that make it a useful risk-aversion instrument. Just like traditional investors view gold as the haven against inflation and market downturns, bitcoin is viewed as a hedge against fiat systems and obtrusive governance. Much like the US dollar is backed by the “full faith and credit” of the US Government, bitcoin is backed by the faith of the community and its waning faith in more traditional systems.
One of the reasons it is so appealing is due to its decentralized nature and embrace of true democracy. Even though the US is the most oft-cited example of democracy, bitcoin and blockchain easily put that notion to shame. For instance, any move to change bitcoin’s structure or infrastructure or add features requires the 51% consensus of all outstanding coin holders. Decentralization and lack of a centralized authority are also attractive considering no one can “print” more bitcoin. Furthermore, despite its perceived weaknesses, it is this very power of community that has driven new innovations designed to practically improve the network without detracting from its decentralization.
The Lightning Network, for example, is a second layer solution that was enabled thanks to the bitcoin network’s approval of SegWit. By design, the Lightning Network is built to speed up transactability and fungibility with other cryptocurrencies, helping bitcoin reach its goal of being a faster, cheaper, and safer alternative to other forms of currency. It is for this very innovative reason that bitcoin represents such a troublesome development for many entrenched institutions, established governments, and industry gatekeepers: it ultimately threatens their collective existence.
More Momentum To Follow
While the risk of an outright global government ban has been something at the back of every crypto participant’s mind, bitcoin’s decentralized nature and strong following ensure that no amount of regulation will kill the idea. Even if bitcoin itself is prohibited, the thought process behind bitcoin’s introduction will be enough to bring a revolutionary wave of change to the world. Just like the world wide web made the globe a smaller place and helped weave a sense of interconnectedness, blockchain is the next architecture that will help embolden and empower more people than any other technological wave that came before it.