Cryptocurrencies are most often associated with efficiency gains. Most software is created to optimise through maximising certain variables, and cryptocurrencies are no different.
Many cryptos have been created over the last few years with the sole purpose of increasing:
- TPS, as in the number of transactions per second
- Routing, as in the fastest way for information to reach a node
- Network effects, as in the total number of wallets
- Rewards, as in the total value of the network
- Decentralisation, as in the hash rate distribution
Interestingly enough, the Bitcoin protocol was created with the purpose of minimising the number of people outside the financial system. Of course, today we know there are little efficiency gains to be had from minimising the impact of certain variables. Prominent examples are found within the relationship between security, scalability, and decentralisation. By keeping one of the constants fixed, in our case decentralisation, it becomes clear there is no way to improve both the security and the scalability of a protocol.
With the issue of scaling Bitcoin, as one of the key drivers is to keep its blockchain as secure as possible, this means if one does not wish to centralise the network, one cannot decrease decentralisation as well.
Simply put, blockchain technology was created with the purpose of leveraging decentralisation, meaning the proper way to optimise Bitcoin’s protocol is by maximising decentralisation, which simply means minimising centralisation.
When making changes to the protocol, is the most important feature a) to make it easier for everybody to join, or b) to make it resilient against centralisation?
It seems clear the goal is always to make it resilient against centralisation – the optimal path to take is to minimise the attacker’s chances of controlling the network for an indefinite period of time. This is the reason why Bitcoin opted to remain with small blocks (2mb) and to stick with PoW for its long-term security, even though it’s easier to perform a hash rate attack than it is to perform a token-price attack if one considers a shorter attack time frame.
One of the most used arguments against cryptocurrency adoption is the fact this technology is still quite slow and inefficient, while at the same time also being too technical for most people to use. Still, look at the web and the most prominent technologies around today. Are they open-access or proprietary?
Decentralised networks rule the world
In case you didn’t know, the most resilient pieces of software and hardware are generally open source and decentralised.
From the Internet Protocol (IP) and the HTTP protocol to Onion Routing (TOR), Linux, BitTorrent, OpenStreetMaps (OSM), and so on, open source does rule the world.
Plus, consider their associated programming languages. Are they proprietary? Of course not.
Why would cryptocurrency be any different?
Bitcoin has opened the doors to a multitude of projects that will certainly change the world. I’m sure that many of the truly open source protocols – such as Ethereum, Stellar, Roostock, Ocean, OpenZepelin, Upfiring, Aragon, and BetProtocol, among many others – will enable new forms of capturing value and organisation through the use of incentives and rewards.
I can only imagine how entrepreneurship and our own relationship with work will change. Does it make sense to have rigid terms if we can be rewarded for most of our time and skills? I argue smart contracts and decentralised apps (dApps) will change that relationship in the same way double-entry bookkeeping allowed for the discovery of new worlds.
Bitcoin was indeed the spark of the rebellion. Now that other cryptocurrencies have shown strength and endurance by surviving the worst bear market in history, maybe time will be kind to some of these projects. The longer we patiently wait, the higher the chances one of these 2000+ projects enables the catalyst that will bring mass adoption.
I myself am not worried.
Gains are cool and all, but what really excites me is the impact rewarding time and skills directly will have in how humans trade, organise, and communicate. By changing how value is captured and distributed, we are creating a whole new world, surely different than the one we know today.
Conclusion
Bitcoin (and other open source crypto-projects) was created to be a truly digital and global monetary system. Its ultimate goal is not to allow users to make super-fast transactions, but to enable users to store and exchange value in an open, permissionless, private, and transparent way.
Decentralised cryptos weren’t built to be fast, but to be permissionless. By minimising bad outcomes instead of maximising good outcomes, Bitcoin will always be focused on helping the greatest number of people as possible, and not improving the efficiency of the service for current users.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.