Introduction
Bitcoin is a complex network that consists of three key elements: its software, its economic component, and its social/community aspect. In this article, I will delve into each of these elements and examine their impact on the current state of Bitcoin. But before I begin, I must pay homage to the heroes who built this technology. Men and women who are light-years ahead of me in terms of their skills and achievements.
In the 1990s, when governments tried to ban cryptography, Adam Back donned a T-shirt emblazoned with the PGP algorithm as an act of civil disobedience. This and other similar acts led to the recognition of code as speech in US courts, an incredibly important milestone in the history of cryptography.
While I may have some criticism of the current state of Bitcoin, this does not change the fact that I consider these individuals to be nothing short of absolute heroes.
The Tech
Let's take a closer look at the tech side of crypto networks. At the core of every crypto network are three essential elements: the tech, the economic element, and the social/community element. Today, I want to focus on the software aspect and give you the lowdown on the latest advancements.
Now, I gotta say, I have some mixed feelings about Bitcoin. Don't get me wrong, the heroes who built this stuff are nothing short of absolute legends. But when it comes to the tech, I'm afraid there hasn't been much progress. Since Segwit, the only real update has been the introduction of Schnorr signatures. Sure, they're more efficient and preserve data when opening lighting channels, but that's about it.
The end goal for these networks is to be able to run them on a phone. But let's face it, there's no path to make that happen with Bitcoin. You always need to connect to a centralized server. And don't even get me started on the lighting network. Sure, it's technically interesting, but requires an uninterrupted internet connection and an open channel. Good luck trying to do that on a phone!
One of the biggest problems with Bitcoin's tech is all the ‘stuff’ that naturally accumulates in the software. P2PKH, Segwit, P2SH, TapRoot, it never ends! And there's no path towards removing it. This is a major issue that the Bitcoin community needs to address. But, let's be real, they've got bigger fish to fry these days.
The Community
As a long-time observer of the crypto world, I've seen the growth of the Bitcoin community from its earliest days. It's been an incredible journey, watching a ragtag group of libertarians, cryptographers, and tech enthusiasts build an entire ecosystem around a new way of storing and exchanging value. The Bitcoin community has always been a unique place, full of passion, creativity, and sometimes, a little bit of chaos.
But lately, I've seen a shift in the community that's been concerning. The once-vibrant group of individuals has devolved into something resembling a cult. It's become more about adoration of the technology and its creator, and less about the ideas and ideals that originally inspired so many of us. The rhetoric has become more extreme, the discussions more divisive, and the community has become less welcoming to those who don't fit the mold. It's particularly ironic that this devolution is happening within a community that was originally built around the principles of libertarianism.
The idea was to create a new financial system that was free from the control of governments and central banks. But now, the community is becoming more controlled, more centralized, and more dogmatic. It's a far cry from the open and free-thinking environment that I remember it being just a few years ago. This devolution into a cult-like atmosphere is further perpetuated by the use of purity tests. Members of the community are expected to adhere to a certain set of beliefs and values, or risk being ostracized.
This type of thinking is the exact opposite of what the original Bitcoin community was about. We used to value intellectual honesty and open-mindedness, but now, it seems like those qualities are being left behind. It's a sad state of affairs, but I hope that we can find our way back to the principles that made this community so special in the first place.
The Economics
The Peculiarities of Bitcoin's Economic Model At the heart of Bitcoin's security model lies a network of miners who secure the network by validating transactions and adding them to the blockchain. These miners are incentivized by block rewards, which are granted for successfully adding a block to the chain. However, as the supply of Bitcoin dwindles, the block reward will decrease, making the need for transaction fees more prominent.
As we move towards the eventual halving of block rewards, it's evident that transaction fees will become the primary revenue stream for miners. This shift is a critical juncture for the network, and it remains to be seen how it will impact the security and stability of the network. It's no secret that Bitcoin has struggled to gain widespread adoption as a means of payment. Despite its growing popularity, the number of daily transactions on the network remains relatively low, and the use of Bitcoin for day-to-day transactions is limited. This lack of usage is a significant concern, and it raises questions about the sustainability of the network's economic model.
The Lightning Network has been proposed as a solution to Bitcoin's scalability issues, but it remains to be seen how effective it will be in practice. Additionally, the number of transactions on the mainnet remains insufficient, and this has led some to question the utility of the network. The economics of Bitcoin are a peculiar and ever-evolving beast. It's essential to stay informed and to understand the challenges and opportunities presented by this unique economic model.
Narratives
As the crypto space continues to evolve, it's fascinating to observe the various narratives that have developed around Bitcoin.
From "Bitcoin is money" to "Bitcoin is gold" to "Bitcoin is an inflation hedge",it's clear that the discussion surrounding this digital asset is far from settled. But one narrative, in particular, has faced increasing criticism in recent times: the idea that there will only ever be 21 million bitcoin.
Now, I don't want to throw around hyperbolic claims, but I'm here to tell you that this notion of a 21 million bitcoin limit might not hold up in the long run. And I'm not saying this based on my own personal opinions. No, this is the verdict of one of the most well-respected voices in the crypto community: Peter Todd.
So, what does this mean for the future of Bitcoin and its place in the wider financial ecosystem? Well, that remains to be seen. But one thing's for sure: the narratives surrounding this asset are in a state of constant flux, and as technology and the crypto community continue to evolve, so too will our understanding of what Bitcoin is and what it represents.
Conclusion
The Bitcoin network consists of three key elements: its software, its economic component, and its social/community aspect.
While the software component of Bitcoin has seen some advancements, there hasn't been much progress in making it more user-friendly and accessible.
The Bitcoin community has shifted in recent years, becoming more cult-like and less welcoming to those who don't fit the mould. This is concerning, as the original idea behind Bitcoin was to create a new financial system that was free from government and central bank control.
The economics of Bitcoin are based on a network of miners who are incentivized by block rewards and will eventually rely on transaction fees as the primary revenue stream. However, the network's economic model is facing challenges as Bitcoin struggles to gain widespread adoption as a means of payment, with the number of daily transactions remaining low. The proposed Lightning Network may address the scalability issues, but its effectiveness remains to be seen.
When you have a number of chains busy solving problems bitcoin pretends doesn’t exit, unless something is done about it, I don’t see how bitcoin is going to make it, in my humble opinion, BTC NGMI.
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