Bitcoin has established itself as a secure and impervious digital store of value for nearly ten years. However, the ongoing debate revolves around whether Bitcoin should progress beyond its current state. Can it become the global currency alongside being the “digital gold”? Is it feasible to utilize Bitcoin’s blockchain for registering valuable assets, and should we pursue such a path? Let’s figure it out together with Bitcoin Additional
The discussion has intensified with the introduction of Bitcoin Ordinals and BRC-20 tokens, which have further propelled the demand for the Bitcoin blockchain. Understandably, people are eager to leverage the unparalleled security and stability of Bitcoin’s blockchain to store an expanding array of assets. This development is encouraging for advocates of Bitcoin as a store of value, as increased demand for Bitcoin should lead to price appreciation.
Nevertheless, the surge in transactions also brings about increased competition. To ensure successful transaction processing, users may encounter higher fees and longer confirmation times. This poses challenges for those who envision Bitcoin as a functional currency, and the growing competition for block space is already impacting the registration of assets.
Overall, the evolving landscape surrounding Bitcoin raises questions about its potential to transcend its current role as a store of value and embrace broader functionalities.
THE ECONOMIST’S EVOLUTIONARY THEORY
The challenge of Bitcoin’s scalability and transaction capacity has been a recurring issue. Its deliberate limitation of block size has sparked discussions and led to the development of innovative solutions like the Lightning Network. Debates have also arisen around implementing features such as colored coins, SegWit, and other core changes.
Bitcoin is not the only blockchain facing such limitations. When other blockchains emerged, their ability to handle ERC-20 tokens, NFTs, and other operations constrained their popularity. Ethereum, for instance, faced similar challenges but partially addressed them through technical upgrades. However, this resulted in decentralized applications (DApps) seeking refuge on alternative chains, causing interoperability issues. Yet, as economists would argue, the market gravitates towards maximizing opportunities.
From an economist’s standpoint, it is important to note that Bitcoin’s utility as a store of value has not been widely adopted beyond our industry. During the initial phase of the COVID-19 pandemic, for example, we observed how the crisis, which Bitcoin was designed for, would stimulate demand for the cryptocurrency. Surprisingly, while some individuals purchased and held Bitcoin, others still preferred to save in fiat currency and accepted government support payments in fiat. Although these fiat payments have unfortunately depreciated significantly due to inflation, widespread global investment and adoption of Bitcoin did not materialize.
However, behind closed doors, Bitcoin is finding its way into the treasury reserves of various institutions, banks, and countries. They recognize its value and are utilizing it as a hedge against future financial or global crises.
When contemplating the future, the pandemic serves as an example of why we should remain optimistic about Bitcoin’s current state. Although it has not become the global reserve currency yet, it has achieved significant milestones. Google, for instance, took approximately 17 years from its inception and 11 years from its IPO to reach a market capitalization of $500 billion. Bitcoin accomplished this in less than 12 years without compromising user data for advertisers. Moreover, it has made substantial progress while remaining a proof-of-work blockchain. In contrast, many other chains have undergone costly iterations with diminishing returns. Bitcoin stands apart in this regard.
However, it is important to acknowledge that it is currently impossible for Bitcoin to fulfill everyone’s desires and evolve into an all-encompassing blockchain that combines a store of value, a medium of transaction, and a platform for NFTs, tokens, and other valuable assets. If the market seeks such a one-stop blockchain, either Bitcoin will need to become that solution or another blockchain will emerge to fulfill those needs.
Undoubtedly, the notion of a single blockchain dominating all others has led many individuals to Ethereum, yet its envisioned dominance has not materialized. Bitcoin can draw lessons from Ethereum’s experiences and seize this opportunity to redefine its identity and purpose in the market. It will always remain the pioneering and most successful example of a widely adopted digital currency that effectively addresses the trust problem. Trust is a vital component of a truly decentralized and self-sovereign monetary system, and Bitcoin delivers that trust through its ingenious trustless design. This intrinsic trust forms the core value of the Bitcoin system, regardless of its future evolution.
Bitcoin, as the epitome of a free market, will unquestionably continue to evolve. Its autonomy enables it to adapt to changing market dynamics, which is precisely why it remains the preferred blockchain for many individuals.
However, as participants in this free market, we can only influence Bitcoin through our daily actions. This is not a flaw of Bitcoin; in fact, it is its most exceptional feature and the most reliable indicator of its ongoing successful evolution.