Why Satoshi Nakamoto’s Vision for Bitcoin Has Not Been Realized Yet

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 offers 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 11%. Aside from the Bitcoin ETF approval, this year has actually been disappointing for the industry, with little progress despite much work during the bear market.

However, now is not the time to make a final assessment of 2024. We are not even through the halving year yet, and in past cycles, the effects of the halving usually took several months to become apparent.

But there’s perhaps a more important question to ask. Despite the vision of a peer-to-peer version of electronic cash outlined by Satoshi Nakamoto 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 might have been a bold statement in 2008, but in retrospect I think it was equivalent to describing the main benefit of the internet as the ability 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 while using tokens for other activities, including traditionally impossible products like flash loans.

Although the subsequent momentum has obviously weakened, one of the important reasons is the scalability issues of Ethereum, but during the bear market, this field has still made rapid progress. One of the most striking changes is that DeFi has gradually shifted from mainly interactions between users and decentralized applications to interactions between decentralized applications, which is 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 these concepts as being 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’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 spark?

2. Barriers to mass adoption

The recent approval of a 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 of Bitcoin, which indicates the need for a new first-layer solution. This process consumes a lot of energy and manpower, slowing down the speed of transaction execution. Its high reliance on energy leads 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 not useful as a programming language.

Layer2 solutions were built as a solution to Ethereum’s scalability issues. However, they ultimately served as a stopgap measure that introduced greater fragmentation and fragility. It is worth noting that 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 hinder higher levels of growth and competition between dapps, which are necessary to promote mainstream adoption.

More worryingly, despite the high-level developers in the Ethereum community, security issues remain a persistent problem, with 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 Bitcoin’s concept proves that its goal of becoming a monetary system is being achieved. However, in order for cryptocurrency to truly achieve widespread adoption and remain consistent with Satoshi Nakamoto’s original vision, blockchains must be scalable and easily programmable.

While Ethereum and its array of Layer 2 solutions attempt to address some of these challenges, they also introduce new problems. And while early networks such as Solana have made comparable progress in some areas, they are still far from the level needed to build a global asset layer.

As the next generation of layer-1 networks proliferate to challenge Bitcoin and Ethereum, end users and developers are gradually being equipped with the necessary tools to build and use intuitive, secure, and powerful Web3 applications, providing 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.