Why Satoshi Nakamoto's Vision for Bitcoin Hasn't Been Realized Yet

Author: ADAM SIMMONS, Translation: Vernacular Blockchain

2024 is a critical year for the cryptocurrency industry, facing challenges such as scalability, user-friendliness and security, but the emergence of a new generation of networks provides hope to realize the vision of a decentralized financial system.

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

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

However, it is not yet time to make a final assessment of 2024. We have not even passed the half year yet, and in past cycles, the impact of the halving usually took several months to show.

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

1. Is decentralized cash the real goal?

Proposing decentralized electronic cash in 2008 may have been a bold statement, but in retrospect, I think it’s the equivalent of describing the main benefit of the Internet as being able to send electronic letters.

Payments account for a relatively small portion 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.

At DeFi Summer 2020, decentralized financial applications found true product-market fit. Decentralized exchanges like Uniswap create all the markets, eliminating the need for market makers. And collateralized lending protocols like Aave enable holders to generate yield when they leverage tokens for other activities, including products that were traditionally impossible, such as flash loans.

Although momentum has clearly slowed down since then, one of the main reasons being Ethereum's scalability issues, the field has still made rapid progress during the bear market. One of the most notable changes has been the gradual shift of DeFi from being primarily interactions between users and decentralized applications to interactions between decentralized applications, similar to the development of Web2, where most interactions are API-driven.

Now, in 2024, terms like real world assets (RWAs), decentralized physical infrastructure (DePIN), and digital identity are starting to gain traction. While they have fancy new names, many will remember that these concepts are similar to ideas from the ICO era. The difference is that now, combined with the innovations 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 global decentralized currency evolving into global decentralized programmable assets. But if this is true, then why haven't we seen the explosive growth that this revolution will trigger?

2. Barriers to mass adoption

The recent approval of the Bitcoin ETF undeniably marks the entry of Bitcoin into the mainstream financial system. 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 monetary system.

At the same time, the limited capacity of the Bitcoin blockchain in executing transactions will become increasingly apparent as the network grows and usage increases. The Proof of Work (PoW) mechanism is the most important constraint on Bitcoin, which indicates that a new first-layer solution is needed. This process consumes a lot of energy and manpower, reducing the speed of transaction execution. Its high reliance on energy has led to increased electricity consumption, raising concerns about its environmental impact.

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

Layer2 solutions were built to address Ethereum’s scalability issues. However, they ultimately served as a stopgap measure, introducing greater fragmentation and fragility. Notably, 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 known for being difficult to master. These barriers to entry have hindered higher levels of growth and competition between dapps, which are necessary to promote mainstream adoption.

More worryingly, despite the high level of developers in the Ethereum community, security issues remain a persistent problem, with multi-billion dollar vulnerabilities and security breaches constantly emerging within the ecosystem. From the first attack on the DAO in 2016 to billions of dollars lost each year, Ethereum has repeatedly proven that it is not suitable for developers to develop secure DeFi applications so that users can confidently participate in them.

3. The way forward

The expansion of other networks based on the concept of Bitcoin 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, blockchains must be scalable and easy to program.

While Ethereum and its range of Layer2 solutions attempt to address some of these challenges, they also bring new problems. 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 the next generation of first-layer networks surge to challenge Bitcoin and Ethereum, end users and developers are gradually equipped with the necessary tools to build and use intuitive, secure and powerful Web3 applications, which provides a viable way forward.

To sum up, one might argue that the future that Satoshi envisioned for Bitcoin can only be realized without Bitcoin existing.