Summary
Bitcoin has come a long way since its inception, but there is a growing sense of complacency in the community. The belief that early protocol ossification is acceptable is false and dangerous. The biggest threat to Bitcoin is if it were to effectively “ossify” today, leading to regulatory capture, an uncapped fractional reserve supply, and monitored transactions. The current limitations of Bitcoin, including scalability issues, will force users to rely on centralized and custodial providers, undermining the vision of Bitcoin as a censorship-resistant and sovereign money. It is crucial for the Bitcoin community to continue pushing for research and proposals to improve the base protocol and increase scalability. There are already advancements and proposals for scalability that don’t require larger block sizes. It is important to critically examine the limitations of Bitcoin and actively work to address them in order to scale the vision of peer-to-peer and sovereign money to every person on the planet.
Key Points
1. Bitcoin’s evolution: Bitcoin has evolved from a single transaction between Satoshi and Hal Finney to a complex system with industrial scale miners, evolving meta-protocols like the Lightning Network and Fedimint, and the embrace of institutional investors with record-breaking inflows into newly approved spot ETFs.
2. Complacency and the dangers of ossification: The optimism and sense of inevitability surrounding Bitcoin have led to a culture of complacency. This culture assumes that early Bitcoin protocol ossification is acceptable, ignoring the potential risks of regulatory capture, uncapped fractional reserve supply, and censored and monitored transactions.
3. The future challenges of scalability and self custody: Even with solutions like the Lightning Network, Bitcoin’s current state has limitations on scalability and usability. This poses a challenge for the widespread adoption and use of Bitcoin as a self sovereign currency. Without addressing these challenges, centralized custodial providers may become the norm, undermining the vision of Bitcoin as a censorship-resistant and decentralized currency.