Why hasn't Satoshi Nakamoto's vision for Bitcoin been realized?

Translation: Vernacular Blockchain

2024 is expected to be one of the most important years yet for the crypto industry.

However, in the weeks following the highly anticipated Bitcoin halving event, the price of Bitcoin fell by 11%. Aside from the Bitcoin ETF approval, this year has actually been disappointing for the industry, with little progress despite a lot of work being done during the bear market.

However, it is not yet time to make a final assessment of 2024. We haven’t even passed the halving year yet, and in past cycles the effects of halvings often took months to be felt.

But perhaps there is a more important question that needs to be asked. Although in Bitcoin’s white paper, Satoshi Nakamoto outlined a vision for a peer-to-peer version of electronic cash 15 years ago, why have crypto and Web3 failed to realize this vision so far? What will it take to deliver on the industry’s promise?

1. Is decentralized cash the real goal?

Proposing decentralized electronic cash might have been a bold statement in 2008, but in retrospect I think it amounted to describing the main benefit of the internet as the ability to send electronic correspondence.

Payments account for a relatively small proportion of the global financial system. With the development of smart contracts, the possibilities of decentralized ledger technology have been greatly expanded, providing a more efficient, open, and competitive global financial system.

In the 2020 DeFiSummer, decentralized financial applications found real product market adaptability. Decentralized trading platforms like Uniswap create all markets and eliminate the need for market makers. Collateralized lending protocols like Aave enable holders to generate revenue when leveraging their tokens for other activities, including products that were not traditionally possible, such as flash loans.

Although the subsequent development momentum obviously weakened, one of the important reasons was Ethereum’s scalability issues, rapid progress was still made in this area during the bear market. One of the most striking changes is the gradual shift in DeFi from primarily interaction between users and decentralized applications to interaction between decentralized applications, similar to the development of Web2, where most interactions are APIs Driven.

Now, in 2024, terms like Real World Assets (RWAs), Decentralized Physical Infrastructure (DePIN), and Digital Identity are starting to gain traction. Although they have fancy new names, many will remember the concepts as similar to ideas from the ICO era. The difference is that now combined with the innovation of decentralized finance, there are clear economic and practical benefits to "tokenizing everything".

In my opinion, this evolution is also the evolution of Satoshi Nakamoto’s vision of a global decentralized currency evolving into a global decentralized programmable asset. But if this is true, why haven’t we seen the explosive growth this revolution will trigger?

2. Barriers to Mass Adoption

The recent approval of Bitcoin ETFs undeniably marks Bitcoin’s entry into the mainstream financial system, and as more institutional capital pours into the industry, Institutional investors can now participate in cryptocurrencies through regulated entities, allowing those who are more cautious to participate in a booming asset class. While this adds legitimacy to the cryptocurrency space, it also raises concerns about Bitcoin’s status as a viable alternative currency system.

At the same time, the Bitcoin blockchain’s limited capacity for executing transactions will become increasingly apparent as the network grows and usage increases. The proof-of-work (PoW) mechanism is Bitcoin’s most important constraint and demonstrates the need for a new layer-one solution. This process consumes a lot of energy and manpower and reduces the speed of transaction execution. Its high reliance on energy has led to increased electricity consumption, raising concerns about its environmental impact.

Ethereum initially addressed Bitcoin’s shortcomings by using smart contracts to execute programmable money. Despite its good intentions, Ethereum failed on two fronts: 1) the network was largely unscalable, and 2) it was unsuitable as a programming language.

Layer2 solution was built to solve Ethereum’s scalability issues. However, they are ultimately a stopgap measure that introduces greater fragmentation and vulnerability. It’s worth noting that developing DeFi applications requires an extremely high level of technical knowledge, far beyond that of a typical developer. The Solidity language, designed specifically for Ethereum smart contracts, is notoriously difficult to master. These barriers to entry hinder higher levels of growth and competition among dapps, which are necessary to promote mainstream adoption.

Even more worrying is that despite the high level of developers in the Ethereum community, security issues remain a persistent issue, with billions of dollars of bugs and security holes constantly popping up within the ecosystem. From the first DAO attack in 2016 to losing billions of dollars every year, Ethereum has repeatedly proven that it is not suitable for developers to build secure DeFi applications so that users can participate with confidence.

3. The way forward

The expansion of other networks based on the Bitcoin concept proves that its goal of becoming a monetary system is being achieved. However, in order to truly achieve widespread adoption of cryptocurrencies and remain consistent with Satoshi Nakamoto’s original vision, blockchain must be scalable and easy to program.

While Ethereum and its suite of Layer2 solutions attempt to solve some of these challenges, they also create new ones. While early networks such as Solana have made comparable progress in some aspects, they are still far from the level required to build a global asset layer.

As next-generation layer-1 networks proliferate to challenge Bitcoin and Ethereum, end users and developers are increasingly equipped with the necessary tools to build and use intuitive, secure and powerful Web3 applications. This provides a viable way forward.

To sum up, one might think that the future that Satoshi Nakamoto envisioned for Bitcoin could only be realized if Bitcoin did not exist.

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