What will Bitcoin become when it grows?

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This week, Bitcoin turns 14. As the world’s best-known cryptocurrency enters its teenage years, it faces a future that, while seemingly marred by uncertainty, is also filled with endless possibilities.

After all, it was the genesis of Bitcoin in 2009 that gave birth to the emerging blockchain technology and ushered in the decentralization revolution across the globe. With blockchain and cryptocurrency having cemented their place in the mainstream, and Bitcoin even being compared to gold due to its usefulness as a store of value, its growth potential is obvious to all.

But just like every coming-of-age story, what lessons could the industry learn from its tumultuous journey so far, and what can we expect in a new world that discovers meaning and meaning? ?

Birth of bitcoins: a story of hope

Amid what was arguably one of the most devastating financial crises in history, public distrust of central governments and financial institutions reached an all-time high after the colossal collapse of the giant Wall Street Lehman Brothers in 2008, but from the ashes came Satoshi Nakamoto, the pseudonym of a person or group of individuals who originated Bitcoin, a trustless model for electronic cash transactions.

Nakamoto’s white paper painted an optimistic and hopeful picture of the future at a time when loss and mistrust were rampant in the financial world. At the heart of it all, Bitcoin was created to solve long-standing problems plaguing the financial system by providing anonymity and transparency in peer-to-peer payments, eliminating the need to go through intermediaries like the banks we deemed to be trustworthy and necessary before the Wall Street fallout.

Indeed, interest was piqued with Bitcoin’s first financial use case when hungry programmer Laszlo Hanyecz paid 10,000 BTC for two pizzas from fast food chain Papa Johns. But when other use cases beyond business transactions emerged, the world sat up and listened. Bitcoin didn’t just promise a better future, it delivered when crypto began to address broader socio-economic issues across the globe.

Consider the oft-cited example of people in the Philippines turning to the crypto game Axie Infinity as a source of income when the Covid-19 pandemic hit despite start-up issues such as the many controversies surrounding the game, its ability to release communities of poverty is undeniably encouraging. Or look no further than the efforts of Women’s Entrepreneurship Day organizations to empower women who also form the majority of the world’s unbanked population, financial inclusion could actually become a reality for historically marginalized communities. . It is evident that crypto is emerging as a legitimate asset class with the potential to drastically reset the financial landscape.

A teenager with growing pains

Alas, adolescence is never an easy phase. Much like the mood swings and identity crises that any teenager experiences, Bitcoin has seen wild market swings and even had its very existence called into question. Beyond price volatility, many cited its huge power consumption at 91.4 TWh, the grid can power all of Finland for an entire year as the biggest problem the legacy grid has to solve. On the other hand, others have argued that its consensus mechanism enables the realization of Nakamoto’s vision for a decentralized and democratic financial ecosystem.

At the same time, even more challenges abound for the broader crypto space. Whether out of greed, hubris or sheer misfortune, what we thought were industry heavyweights like Three Arrows Capital and FTX single-handedly destroyed investor confidence and faith in crypto with their respective Lehman moments reminiscent ironically the financial asset class crisis was born.

With bad actors threatening to spell the end of Bitcoin and the crypto industry, where do we go now?

The Path to Maturity: Limits Beget Security and Stability

As the saying goes, it takes a whole village to raise a child. Bitcoin and other cryptocurrencies will continue to develop and mature, but we must come together as a community to support the growth of the fledgling industry on all fronts. We need constant innovation, we need visionaries in space, but above all, we need limits.

When the parameters are set by regulators and policymakers, innovators can develop and experiment with emerging technologies in a stable, sustainable manner and within safe limits. Without clear regulatory frameworks, innovation will only introduce risks to the ecosystem and ultimately stifle its own growth. Fortunately, we are making progress in countering this possibility throughout Asia. More recently, Hong Kong announced the framework for a new regulatory regime for digital assets to combat money laundering and terrorist financing risks, and Japan continues to adjust its crypto laws to respond. dynamic market demands.

Despite the loss of confidence following the recent crypto crash, the continued institutional buy-in is also a reminder that it was the centralized entities that failed first and not the underlying crypto technology.

Ultimately, the lessons we learned from Bitcoin’s short 14-year history will continue to shape the future of digital finance. For the long-term viability of crypto, it would be vital that measures incorporating accountability, regulatory discipline and general liability come into play, lest we forget where Bitcoins came from and its altruistic promise to recreate the world. finance so that it is democratic, safe and inclusive.

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