More than a decade after Satoshi Nakamoto’s Bitcoin whitepaper was first published, his creation is unquestionably the most dominant cryptocurrency on the planet. It has spawned a sea of imitators and iterations, but it’s still trading at a daily volume that’s nearly double its closest competitor, and other altcoins are even further back. By many metrics, it has been a rousing success.
On the other hand, Nakamoto’s vision for Bitcoin has hardly been realized. In the white paper, Bitcoin is described as “Electronic Cash.” Nakamoto describes the system as an “electronic payment” system that can address inherent problems with “commerce on the internet.”
The Bitcoin of today is certainly a long way from being “electronic cash” (cash, after all, is accepted everywhere). And it’s quite clear that most Bitcoin transactions are related to investment, not commerce. For example, analysis firm Chainalysis estimates that about $69 million in Bitcoin was spent via various Bitcoin e-payment services in June of 2018 — compare that to the overall BTC trade volume for that month, which was over $125 billion.
Little has changed in the year since. Even Bitcoin's most ardent proponents could not deny that the vast majority of online shoppers make all of their purchases without touching so much as a single satoshi. Bitcoin’s influence on ecommerce has been negligible.
Instead, it has become an object of speculative investment and a hedge of sorts of tech-savvy investors who want to park money outside of the traditional financial system. This reality is even reflected in the shifting speech patterns of Bitcoin enthusiasts. On Bitcointalk.org, Bitcoin’s earliest large community, the phrase “store of value” occurs just five times prior to 2013, and never in the forum’s first two years, 2009 and 2010. So far in 2019, it’s come up in more than seventy threads.
(Of course, the growth pattern of “store of value” mentions is influenced by growing overall interest in Bitcoin; but it’s still worth pointing out that very few people saw Bitcoin as a “store of value” in the early days.)
Betrayed by Exchanges?
Part of the problem, of course, has less to do with Bitcoin than the infrastructures and regulations that have sprung up around it.
In the white paper, Nakamoto calls out a few specific problems with traditional e-payment systems, like high transaction costs and the client information merchants have to collect in a trust-based transaction. Bitcoin as a technology has addressed these. Although transaction fees have fluctuated quite a bit over the token’s history, they’re currently much lower than the fees users would incur for digital transactions using, say, PayPal or Venmo. And because Bitcoin is trustless, it is possible to conduct transactions without collecting any of the buyer’s information while still being confident you’ve been paid.
The problem is that Bitcoin as a user experience has more hassles and red tape than the technology requires for most real-world uses.
Imagine, for example, that I want to sell something using Bitcoin. I pay nothing for the transaction, and it completes quickly. But I can’t pay my mortgage with Bitcoin — damn the banks! — so I need to withdraw what I was paid in fiat currency. Typically, this requires setting up an account and withdrawing via an exchange, which means providing a bunch of personal info to a third party, potentially paying a withdrawal fee or some other sort of service fee, and often waiting at least a day or two for the withdrawal transaction to clear in my bank account.
None of this is related to any flaw in Bitcoin’s technology, but it is evidence that Bitcoin hasn’t become ubiquitous enough to actually let users avoid the transaction hassles that come with traditional payment systems.
And although Bitcoin itself is decentralized and difficult to regulate, the fact that tokens typically have to flow through exchanges to be useful for most purchases means that in terms of the average user's experience, Bitcoin hasn't really achieved its early vision on that front, either. You may be able to send and recieve Bitcoin freely, but if you want to spend it, you'll generally need to pass it through an exchange or some commercial crypto payment service to convert it to fiat. Those businesses are just as centralized and regulated as any traditional finance business.
The fact that Bitcoin has proved valuable as a speculative investment also means that many Bitcoin fans are now cheering for an influx of "institutional money," despite the fact that the token was initially embraced in part because many thought it represented the potential to liberate people from traditional financial institutions.
Of course, it’s worth pointing out that even though it’s been over a decade since Nakamoto’s paper, Bitcoin is still quite young. It was only two decades after the first email was sent that most people started hearing about the internet, for example. The first mobile phones were rolled out in the late 1970s, but it wasn’t until after 2000 that mobiles become ubiquitous, even in developed countries.
That Bitcoin hasn’t reached Nakamoto’s aims yet isn’t evidence that it has failed permanently. But for those who’d like to see the currency live up to its vision and be something more than “digital gold,” there’s no denying that it still has a long way to go.
This is an opinion piece and it represents only the opinions of its author.
