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Sunday, June 2, 2024
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Bitcoin is no longer limited to its original vision

2024 is predicted to be one of the biggest years for the cryptocurrency industry.

But just weeks after the much-anticipated Bitcoin halving, Bitcoin prices dropped 11%. Aside from the decision to approve a Bitcoin ETF, this year has actually been a mixed bag for the industry, with little progress despite all that was done during the bear market.

However, it is clearly not yet time to announce the final results in 2024. We are not even halfway through the year and the impact of the halving is often seen months after previous cycles.

BTC price chart | Source: Tradingview

But perhaps there is a more important question. Although Satoshi outlined his vision of a peer-to-peer cryptocurrency in the Bitcoin Whitepaper more than 15 years ago, why have cryptocurrencies and Web3 so far failed to meet this vision? What will it take to achieve the industry’s promise?

Is decentralized cash the real goal?

Proposing a decentralized cryptocurrency might have been a bold statement in 2008, but in retrospect, it amounts to finding that the main benefit of the Internet was the ability to send electronic mail.

Payments make up a relatively small amount of the global financial system. With the rise of smart contracts, there has been an explosion in what can be done with decentralized ledger technology to provide a more efficient, open and competitive global financial system.

In the DeFi summer of 2020, decentralized finance applications found real product-market fit. Decentralized exchanges (DEXs) like Uniswap have created 24/7 markets without the need for market makers. Collateralized lending protocols like Aave open up the possibility for holders to generate profits from their tokens, while also using them as leverage for other activities, including traditionally impossible products. It’s like flash loan*.

While the subsequent decline in momentum was largely due to Ethereum’s scalability issues, there was still rapid progress during the bear market. Perhaps most notable is the evolution of DeFi from primarily user-to-dapp interaction to dapp-to-dapp interaction – a development similar to that of Web2, in which most Interactions are controlled by API.

Now, in 2024, terms like real-world assets (RWA), decentralized physical infrastructure (DePIN), and digital identity are starting to gain traction. Although they have catchy new names, they remind many people of ideas that emerged during the ICO era. The difference is that there are clear economic and practical benefits to “tokenizing everything” when combined with DeFi innovation.

This development is perhaps also an evolution of Satoshi’s vision of global decentralized money for globally decentralized programmable assets. But if that’s true, why haven’t we seen the explosive growth that such a revolution would create?

Barriers to work accept popular

The recent approval of a Bitcoin ETF undeniably marks Bitcoin’s entry into the mainstream financial system, as more and more institutional capital flows into the industry. Institutional investors can now participate in cryptocurrencies through a regulated entity, allowing the more cautious to participate in a burgeoning asset class. But while this adds legitimacy to the digital currency sector, it also raises concerns about Bitcoin’s status as a viable, alternative monetary system.

At the same time, the Bitcoin blockchain’s limited ability to conduct transactions quickly and efficiently will increasingly be exposed as the network grows and usage increases. Proof-of-work (PoW) is Bitcoin’s biggest barrier and proves the need for a new layer 1. This process uses significant amounts of electricity and manual energy, reducing the speed of transaction execution. Its energy-intensive nature requires high electricity consumption, raising concerns about environmental impact.

Ethereum first showed promise to overcome Bitcoin’s shortfall through the use of programmable money implemented through smart contracts. But despite the best of intentions, Ethereum failed on two fronts: 1) the network was fundamentally unscalable and 2) it was not suitable as a programming language.

Layer 2 was established as a remedy for Ethereum’s scalability. However, they ultimately act as a bandwidth bandaid, creating greater fragmentation and vulnerability. It should be noted that DeFi application development requires extremely high technical knowledge, far beyond the technical knowledge of a typical developer. Solidity is specifically designed for Ethereum smart contracts, which are notoriously difficult to master. These barriers to entry hinder the higher levels of growth and competition among dapps that are needed to facilitate mainstream adoption.

What’s even more worrying is that despite the Ethereum community having very proficient developers, security remains a persistent problem, with billions of dollars in losses due to breaches and vulnerabilities emerging from the inside. Ecosystem. From the first attack on the DAO in 2016 to the billions of dollars lost every year, Ethereum has repeatedly proven that it is not the right platform for developers to build secure DeFi applications that users can use. Users can confidently participate.

The way forward

The expansion of other networks based on Bitcoin’s concept is evidence that the project’s goal of becoming a monetary system is about to be realized. However, for cryptocurrencies to truly achieve widespread adoption and stay true to Satoshi’s original vision, chains must be both scalable and easy to program.

While Ethereum and the layer 2 wave attempt to solve some of these challenges, they have introduced new ones. And while previous networks like Solana have seen comparable advances in certain areas, they still fall short of what is needed for a global asset layer.

With the rise of next-generation layer 1 networks challenging Bitcoin and Ethereum, both end users and developers are being better equipped with the tools needed to build and use Web3 applications. Intuitive, secure and powerful. This provides a viable way forward.

With all of this in mind, it can be argued that the future that Satoshi envisioned for Bitcoin would only be realized in Bitcoin’s absence.

*Flash loan is a special type of loan in the DeFi field, allowing users to borrow large amounts of cryptocurrency without collateral, on the condition that the loan must be returned within the same period. transaction.

Minh Anh

According to Blockworks

Mark Tyson
Mark Tyson
Freelance News Writer. Always interested in the way in which technology can change people's lives, and that is why I also advise individuals and companies when it comes to adopting all the advances in Apple devices and services.
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