Bitcoin, and cryptocurrencies in general, are slowly but surely encroaching into mainstream public recognition. There are over 5000 currently in existence, and who knows what number this will get to be in the next few years. With it being over a decade now since its creation, what does the future hold for Bitcoin?
The future of Bitcoin is bright. As by far the world’s biggest cryptocurrency by market cap, it’s going to take a special effort for their crypto throne to be taken away. But how big can Bitcoin get? Can it realize mainstream adoption? It remains to be seen, but there are some encouraging signs.
The History of Bitcoin
2009 was not a year that was looked back on fondly by the financial industry. It was the year that the credit crunch, the global economic downturn of the late 2000s, gripped large parts of the globe. Markets crashed and it was all very much doom and gloom.
The reasons for the credit crunch were numerous, but without delving into what they actually were, it’s safe to say the whole saga resulted in a crisis of confidence in the traditional banking systems. The Times ran a headline on 3rd January, referring to the UK Chancellor of the Exchequer, Alistair Darling, as being on the “brink of (a) the second bailout for banks.”
Looking back at this headline now, over a decade later, it will look inconspicuous to the casual observer, just another headline highlighting the ungodly mess that the financial industry was in at the time. The 3rd January 2009 was a Saturday, and as was the norm, the Times was on sale in the UK that day for £1.50, or around $2.
However, in recent years, copies of this newspaper have been sold, and are still on sale, for astronomical amounts. This website, lists all known copies of the newspaper still in existence from that date, with one copy on sale for a crazy $1.3 million. This to any rational person probably seems like insanity, and it’s all because of that headline. So, what makes the headline so significant in history, exactly?
The Genesis Block
Despite 2009 not being looked back on fondly by the financial industry, for the crypto industry quite the opposite is true. It was year zero for crypto. It was on 3rd January 2009 that illusive Bitcoin creator Satoshi Nakamoto, who it is assumed goes under a pseudonym, mined the first 50 Bitcoins and the world’s first cryptocurrency was founded.
On the very first coin that was mined, embedded on the ‘genesis block,’ was this very headline, “chancellor on brink of second bailout for banks.” This was a direct reference to why Bitcoin was created in the first place. At a time of great uncertainty, amidst growing distrust in the major banks in control of the centralized financial systems which had caused so much turmoil, here was the perfect antidote.
Here was something built on decentralization. It was a complete diversion from the institutional ways of banking and completely independent from it. The banks no longer held the power and authority with this new form of currency. An open, distributed ledger, using blockchain technology where every transaction is verified by the consensus of every member on the blockchain. And these were not physical assets, but digital assets.
A great idea in theory, but would it catch on? As Hal Finney, the first recipient of Bitcoin from Nakamoto noted soon after this transaction:
“One immediate problem of any new currency is how to value it. Even ignoring the practical problem that virtually no one will accept it at first, there is still a difficulty in coming up with a reasonable argument in favor of a particular non-zero value for the coins”.
Of course, there was also the problem of how it could be used in real-life.
Adoption and Rise in Value
A significant moment for Bitcoin was the first transaction using the currency for a real-world item, 10,000 for $41 worth of pizza by Laszlo Hanyecz in 2010. This day has been marked every year since with Bitcoin Pizza Day. This signaled to the world that Bitcoin could actually be used in real life, and subsequently its popularity, and value, rocketed.
From being worth virtually nothing until early 2010, it had hit parity with the US dollar by early 2011. And we all know how the price has skyrocketed since then. Indeed, much is often made of its price. But what about its usage throughout its history and to the present day, for actual real-world transactions?
This article from the BBC, essentially a ‘Bitcoin for dummies’ piece, contains this very simple but true sentence: “Bitcoins are valuable because people are willing to exchange them for real goods and services, and even cash.”
Of course, its price has been extremely volatile at times, such as the spike to nearly $20,000 in late 2017 and its subsequent crash, and more recently with the market crash brought on by the onset of the COVID-19 pandemic, but it has generally become more valuable as confidence has grown in the currency, and its usage has grown.
The Use of Bitcoin
In its early days, its usage was still quite limited, as skeptics expressed doubt over its long-term viability as a currency. But gradually, as it grew in legitimacy, more and more merchants started to accept it as payment. Bitpay, a payment service provider enabling merchants to accept Bitcoin, was established in 2011.
There is no escaping the fact however that in these early years, Bitcoin was largely known for illicit activities, such as for money laundering and transactions on the dark-web marketplace, The Silk Road.
This in turn skewed its reputation and public perception. Fortunately in more recent years, as Bitcoin has continued its meteoric rise, it has managed to shake off this association in favor of more widespread acceptance by legitimate merchants.
Some companies that currently accept Bitcoin as payment include Microsoft, who accept it on their Xbox store. The list of merchants accepting Bitcoin as payments is ever expanding. Check our guide on Where Can You Spend Bitcoin for a full lowdown.
The Future of Bitcoin
Bitcoin’s future looks promising but its ultimate fate as a currency could depend on several factors. Bitcoin’s volatility is well-known, but for mainstream adoption to be ultimately realized, it needs to shake off this reputation.
Merchants will always be reluctant to accept as a form of payment if there’s a good chance its value will decrease soon after. Alternatively, Bitcoin price optimists will not want to part with it if for mundane everyday items, they’ll want to hold onto it instead. That realistically is the state of affairs today, but what needs to happen for this to change?
Keys to Mass Adoption
(1) Regulatory Certainty
With its decentralized nature, the idea of regulations may seem at odds with Bitcoin is all about. But in reality, regulatory certainty is vital for Bitcoin’s mass adoption. While some countries such as South Korea and Japan have led the way in providing clear guidelines for the regulation of Bitcoin, a lot of the world is still lagging behind in this respect.
In many countries the legal status of Bitcoin is still murky. As more governments around the world introduce regulatory frameworks in the coming years, it will give Bitcoin more legitimacy as a mainstream asset.
(2) User Friendliness
Paying for goods with fiat is a simple experience. Although cash use is getting less and less, it’s just as easy or even easier to pay with cards, or with apps such as ApplePay or WeChatPay in China. But paying for goods with Bitcoin is still not a simple experience for most.
As it is, although necessary components, things such as hot and cold wallets and public and private keys may be too complex for the average person to understand. The crypto industry needs to find a way to make the process of buying things with Bitcoin more easily digestible.
One way this could be achieved is through increased third-party involvement, exposing Bitcoin to a wider mainstream audience through their platforms. As explored in this Bybit Insights article, Paypal is planning to introduce cryptocurrency sales to its 325 million users.
Such a payment gateway could well be a game changer in the mass adoption of Bitcoin and crypto. Visa and Mastercard have also announced ventures into Bitcoin and cryptocurrency payments, in a sure sign payment providers are softening their stance.
(3) Blockchain Scalability Trilemma
Scalability is an ongoing issue for the Bitcoin blockchain. While a new block on the blockchain can accommodate on average around 2700 transactions (with one block added every 10 minutes), Visa for example can accommodate 2000 transactions per second.
Therefore it is obvious that to be able to compete, changes need to be made to improve the Bitcoin network’s scalability. This problem is known as the blockchain scalability trilemma. Several solutions have been put forward. One such solution is SegWit.
The soft fork Segwit increases the ability to process transactions on the network by segregating the digital signature from transaction data. It is hoped that eventually, along with other solutions such as the Lightning Network, Segwit will allow millions of transactions per second to be processed on the Bitcoin network. Its usage has steadily increased since its implementation in August 2017.
Segwit usage on the Bitcoin network. Source: Blockchair
Check out our article on Bitcoin Blockchain Performance and Scalability for a full lowdown of scalability issues with Bitcoin and possible solutions to combat them.
Bitcoin Price Predictions
Industry analysts have varied opinions about where the price of Bitcoin may be in 2025, 2030, or even further into the future.
- In June 2020, the 10th edition of Crypto Research Report unveiled optimistic predictions for the price of Bitcoin and other cryptocurrencies such as Ethereum, Litecoin and Bitcoin Cash. Based on the equation of exchange model, which gives a price prediction based on assumptions of future supply and demand, the report predicts Bitcoin’s price will be $341,000 by 2025, and $397,000 by 2030.
- Morgan Creek CEO Mark Yusco goes even further, predicting Bitcoin could exceed $400,000 per coin by 2030, saying:
“If we come to gold equivalence, meaning the market cap of Bitcoin equals the market cap of gold, which I think is perfectly logical, you could easily see that $400,000 to $500,000 price sometime”
- Others haven’t been quite so optimistic. Although refraining from giving a price prediction, Bank of England governor Andrew Bailey made his thoughts clear on Bitcoin in a virtual conference hosted by the Brookings Institute. He said crypto assets are “just unsuited to the world of payments”, and that Bitcoin specifically has “no connection at all to money.” So based on that, it’s safe to assume that he doesn’t think Bitcoin’s price will go to the moon like some other analysts do.
However, any prediction of Bitcoin’s price should be taken with a pinch of salt. An untold amount of factors can affect Bitcoin’s price. Some of them foreseen – such as the Bitcoin halving and factors affecting Bitcoin mining such as hash rate and mining difficulty – and some of them unforeseen, such as the COVID-19 pandemic.
None of the so-called experts know for sure what will happen, especially a decade or more down the line. Also, as pointed out by the Coin Telegraph, predictions may be too ingrained in fundamental and technical analysis, or off the whim to give publicity to those making them.
Some in the crypto industry and beyond proclaim Bitcoin as digital gold, but can this be backed up? It’s certainly limited in supply like gold, and they can be used for mediums of exchange, but if they’re a store of value is arguable. Historically gold has been such a trustworthy store of value and as a safe haven asset because of its lack of volatility.
Historically this has not been the case of course for Bitcoin. Therefore, it still has a status as a speculative investment. However, correlation to all-time highs with gold has led some industry analysts to speculate that Bitcoin could well earn this status sooner rather than later.
Potential Rival Cryptocurrencies
While there is no doubt that altcoins such as Ethereum, Litecoin, and Ripple are here to stay, none have really come close to disrupting the reign of Bitcoin as the primary cryptocurrency.
But for crypto investors, is it best to stick with Bitcoin or look to emerging new altcoins (or tokens) on the horizon as potentially the next big thing?
Upon its announcement in 2019, Facebook’s planned cryptocurrency Libra was immediately touted as a potential ‘Bitcoin killer.’ With one of the biggest companies in the world behind it, how could it not be a success?
The premise of enabling Facebook’s 2 billion + users to change fiat currency into digital coins, which could then be used to make online purchases or transfer between users certainly sounded promising.
But many in the crypto industry were immediately sceptical about it – as it was the opposite of what lies behind the essence of Bitcoin: decentralization. Indeed, its progression hasn’t been in the vein many were hoping or expecting. It has lost partners such as Paypal and Visa and some EU countries have even said they will ban it.
According to David Gerard, a digital currency historian, the original vision of making Libra free from regulation was “never going to fly’, and it was always going to come up against government barriers. He envisions the “new Libra working as an ordinary, regulated payments processor — PayPal, but it’s Facebook.”
However, Facebook have attempted to appease regulators, with amendments made to its white paper stating it will plans to launch a payment system to support multi-currency stablecoins rather than just the Libra currency on its own.
This may prove an attractive option to banks and central governments looking at launching their own cryptocurrencies. Despite these backtracking moves by Facebook, it remains to be seen if the project will get off the ground.
A proclaimed competitor to Facebook’s possibly doomed Libra project is the stablecoin Celo. It has been in development significantly longer than Libra – since 2017. The project has over 75 backers, including some who were previously backing the Libra project such as Coinbase.
According to the Celo Project’s website, its mission is to ‘build a financial system that creates the conditions for prosperity—for everyone.’ An advantage that Celo may have over Facebook is the bad reputation the social media giant has over data privacy. The fact that Celo has a clean slate may ultimately give it the edge when it comes to getting regulatory backing from governments around the world.
The idea of building a whole new city where only a new cryptocurrency is taken as payment may sound like a far flung fantasy, but rapper Akon is hell bent on making this vision come true.
Construction is under way on the $6 billion “real-life Wakanda” which will be built in Senegal, in Africa, with plans to open in 2023. Akoin City will feature all the amenities of a modern city and run on the Akoin cryptocurrency. If it emerges as a viable alternative to Bitcoin on a global scale may well depend on the success of the new city.
2020 could well be the year of DeFi (which means decentralized finance). DeFi tokens facilitate the use of blockchain technology such as smart contracts to make financial products more effective.
In 2020 tokens such as Chainlink have seen huge gains, far outperforming the major cryptocurrencies. If it’s a case of FOMO (as was the case with ICOs and many altcoins during the bull run of 2017) remains to be seen, although it’s worth noting that the amount of funds involved in DeFi is still relatively small compared to those generated by ICOs in 2017. Even if they don’t rival Bitcoin in the long run, they could still be a shrewd investment choice.
The Bottom Line
As iterated earlier in the article, Bitcoin is the only household name when it comes to cryptocurrency. And as long as this remains the case, it will always be the major player (market dominance is lower than it was in Bitcoin’s first few years but is still considerably higher than during the bull run of 2017).
However, several hurdles must be overcome if it is to realise mainstream adoption. The whole idea of using it to pay for everyday things is still confusing to the average man on the street, so the industry needs to find a way to simplify matters.
Third party involvement, such as the alignment with PayPal, could well prove to be to the answer. Also the issue of scalability is something that needs to be overcome.
So how popular Bitcoin actually becomes is still open for debate. There will be challenges ahead, but the outlook looks good. Exciting times lie ahead, wherever the crypto wind takes us.
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