Crazy Hypothesis: This Could Make Bitcoin $1 Million in Eight Years

Bitcoin Original Intentions: Restore to Satoshi Nakamoto's original maximum block size of 32MB. If blocks actually grow 54% per year (price grows 1.54^2 = 2.37 times per year - Metcalfe's Law), even without Segwit/Lightning Network or Bitcoin Unlimited, in 8 years we will have 32MB blocks, 100txns/sec, 1BTC = $1 million - 100% on-chain P2P cash.

Published by ydtm

1. “Bitcoin originally had virtually no block size limit, the 32MB block size limit was hidden because actual transaction volume could not possibly hit that limit. The 1MB “max block size” was an afterthought, added later as a temporary anti-spam measure.

2. Remember, no matter what the "max block size" is, the actual block size is usually much smaller than the "max block size" - because the actual block size depends on actual transaction demand and miners' calculations (to avoid "orphaned" blocks).

3. The actual (proven) “occupied bandwidth” on the Bitcoin network has increased by 70% compared to last year.

4. For most of the past 8 years, Bitcoin has obeyed Metcalfe’s Law, with its price corresponding to the square of the number of transactions. Therefore, 32 times larger blocks (32 times more transactions) will correspond to about 32*32 = 1000 times higher prices — or 1BTC = $1 million.

5. We could grow gradually — say, 8 years from now, to 32MB blocksize and 1 BTC = 1 million USD.

6. The actual block size of 32MB in 8 years would be an average of 32 ^1/8ths per year from now, or 54% per year (which is probably feasible because it would actually be less than the 70% increase in available bandwidth that occurred last year).

7. To achieve a Bitcoin price of 1BTC = $1 million in 8 years, you would need an average of 1.54 ² = 2.37 times higher price (growth) per year, or 2.37 ⁸ = 1000 times higher price after 8 years. This may sound like a lot - but it is actually the same as a 1000x increase in price from $1 to $1000, which has already happened in the past 8 years.

8. 8 years, for 1 BTC = $1 million, 32MB blocks might sound crazy - until "you do the math". Using Excel or a calculator, you can verify that 1.54 ⁸ = 32 (32MB blocks in 8 years), 1.54 ² = 2.37 (price is proportional to the square of the block size), and 2.37 ⁸ = 1000 (1000 times, currently 1 Bitcoin is $1000, 8 years from now, 1 BTC will be $1 million).

9. Combine the above math with the economics observed over the past 8 years (where Bitcoin has largely obeyed Metcalfe’s Law, where Bitcoin price has risen from $1 to over $1000, where existing debt-backed fiat currencies and centralized payment systems continue to show fragility and failure)… and a “million dollar Bitcoin” (with a reasonable 32MB blocksize) about 8 years from now looks possible — just need to hit 32MB blocks by the end of those 8 years.

10. Simply reverting to Satoshi’s original 32MB “max block size” would avoid the controversy, concern, and disagreement surrounding various proposals to scale Bitcoin (SegWit/Lightning Network, Bitcoin Unlimited, etc.).

11. The community could come together, use Satoshi's 32MB "max blocks", and have a good chance of reaching 1BTC = $1M in 8 years (or a $2B market cap, which equates to $82T in "money" in the world)

Maintaining Bitcoin’s decentralization by adjusting its economic incentives — fulfilling Bitcoin’s promise of “p2p electronic cash” — while keeping it 100% on-chain, with no changes or disputes — and keeping fees low (so users are happy), and the Bitcoin price high (so miners are happy).

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(1) The currently observed rate of growth in available network bandwidth (70% in the last year) should easily be able to support a modest increase in actual block size of only 54% per year.

Recent data shows that the actual “occupied bandwidth” available on the Bitcoin network has increased by 70% over the past year.

If available bandwidth grows by 70% per year over the next 8 years, then the actual block size will most likely grow at a slightly lower rate of 54% per year.

This means that in 8 years, a practical block size of 1.54 ⁸ = 32MB would be quite reasonable.

State of the distributed/bitcoin network: “In other words, a typical full node now uses 1.7 times as much bandwidth as it did in 2016. The network as a whole is 70% faster than it was last year.

https://np.reddit.com/r/btc/comments/5u85im/hacking_distributedstate_of_the_bitcoin_network/

http://hackingdistributed.com/2017/02/15/state-of-the-bitcoin-network/

Restoring Satoshi's original 32MB "max block size" in the next 8 years or so would be very similar to the 1MB "max block size" Bitcoin has used for the past 8 years: just a "cap" that's not really a barrier, and prevents any "unreasonably" large blocks from being created.

We know that for most of the past 8 years, the actual block size has always been much lower than the 1MB "max block size". This is because miners always set their own block size (lower than the official "max block size") - to maximize their profits while avoiding "orphaned" blocks.

If we restored Satoshi’s original 32MB “max block size” — with actual block sizes gradually growing (still staying well below the 32MB “max block size” cap), and those block size settings simply continuing “as is,” without introducing any new (risky, untested) “game theory” or economics — a lot of worry and controversy would be avoided, and the community would rally around “ Bitcoin Original .”

So, simply reverting to Satoshi’s original 32MB “max block size” would have many advantages:

1. It will keep fees low (so users will be happy)

2. It will support higher prices (so miners will be happy) — as explained in section (2) below;

3. It will avoid the need for any potentially controversial changes such as: SegWit/Lightning Network (due to Blockstream’s insistence on a selfish and dangerous “soft fork” that makes all UTXO “spendable by anyone”, providing unreasonable 1 to 4 fee discounts on certain transactions); and BitconUnlimited (with the newly introduced parameters of larger block sizes “EB”/accepted depth “AD”).

(2) The 54% annual growth in Bitcoin blocks will correlate with a price increase (following Metcalfe’s law) of approximately 1.54 ² = 2.37 times higher per year, or 2.37 ⁸ = 1000 times higher price — i.e. 1 BTC = 1 million USD in 8 years).

Observed empirical data suggests that Bitcoin does obey "Metcalfe's Law" - which states that the value of the network is roughly proportional to the square of the number of transactions.

In other words, for most of the past 8 years, the Bitcoin price has corresponded to the square of Bitcoin transactions (which is roughly the same as the block size).

Historical Footnotes:

Bitcoin prices have been trading slightly below Metcalfe’s Law since late 2014 — when privately held, central bank-funded offshore expansion company Blockstream was founded by (now) CEO Adam Back u/adam3us and CTO Greg Maxwell — two individuals who demonstrated the worst understanding of Bitcoin economics ever, with the most extreme consequences for the community.

Since then, Blockstream has launched a massive propaganda campaign and raised $76 million in funding from central banks, saying that they would go bankrupt if Bitcoin succeeded, and used censorship of Bitcoin to attack the on-chain scaling that Satoshi originally planned for Bitcoin.

The legendary Albert Einstein once said that the tragedy of humanity is that we do not understand exponential growth.

Many people might think it is very crazy that 1 Bitcoin could actually be worth $1 million in just 8 years.

But for the price of Bitcoin to reach $1 million, it would actually need to increase by “only” 1,000 times in 8 years. Of course, some people still find this crazy.

But let’s break it down year by year.

What we are going to calculate is the "8th root" of 1000 or 1000 raised to the 8th power. This will give us the "annual growth rate" we need in order for the price to increase 1000 times after a total of 8 years.

If “you do the math” – which you can easily do with a calculator or Excel – you’ll see:

1. The actual block size has been growing at a rate of 54% per year for 8 consecutive years, which is 1.54 ⁸ = 1.54 * 1.54 *1.54 * 1.54 * 1.54 * 1.54 * 1.54 * 1.54 = 32MB, which is the block size 8 years later.

2. Metcalfe’s law (bitcoin price corresponds to bitcoin transactions or number / block size squared) would give 1.54 ² = 2.37 — i.e. 54% larger blocks (higher volume or more transactions) per year could support a price that is approximately 2.37 times higher.

3. The price increases by 2.37 times every year, and the price after 8 years will be 2.37 ⁸ = 2.37 * 2.37 *2.37 * 2.37 * 2.37 * 2.37 * 2.37 * 2.37 = 1000 - if the price increases by an average of 2.37 times each time for 8 years, from the current 1 BTC = 1000 US dollars, then after 8 years, 1 BTC = 1 million US dollars.

So, even though it may seem crazy at first, we could still get 1 BTC = 1 million USD in 8 years, it’s actually not that far away — based on some simple math:

Observed available bandwidth (already growing at 70% per year), and the increasing fragility and failure of many “traditional” debt-backed national fiat currencies and payment systems.

Does Metcalfe's Law Apply to Bitcoin?

Data from the past 8 years shows that Metcalfe’s Law does apply to Bitcoin — you can check out some charts here:

(3) Satoshi’s original 32MB “max block size” would provide a super-simple, super-secure, non-contentious method that perhaps everyone could agree on: Bitcoin’s original promise of “p2p electronic cash”, 100% on-chain, with the ultimate 1 BTC = $1 million.

This can be achieved using only the words of the whitepaper - e.g. no need for potentially “contentious” changes like SegWit/Lightning Network, Bitcoin Unlimited, etc.

As we know, the Bitcoin community has been abuzz with controversy lately — mostly regarding various controversial scaling plans.

Some people are concerned about SegWit for the following reasons:

1. It’s not actually a scaling proposal — it only provides 1.7MB blocks, and is only achievable if everyone adopts it, based on some fancy, questionable blocksize or new “block weight” calculation;

2. It will be implemented as an overly complex and anti-democratic “soft” fork — depriving people of their right to vote via a simpler and safer “hard” fork, and adding massive and unnecessary “technical debt” to Bitcoin’s codebase (e.g., making all UTXO “anyone can spend” at risk, making future upgrades more difficult — but giving long-term “job security” to Core/Blockstream developers);

3. Thousands of lines of code in existing wallets, exchanges, and businesses will need to be rewritten (and tested!);

4. It would introduce an arbitrarily set "discount" of 1 to 4 to favor certain kinds of transactions.

Others are concerned about the Lightning Network for the following reasons:

1. There is no decentralized (p2p) routing in the Lightning Network, so the Lightning Network is a terrible step towards centralized, censorship-prone hubs or “crypto banks” and a return to the “bad old days.”

2. If you don’t monitor them regularly, your funds “locked” in the Lightning Network can be stolen;

3. The Lightning Network will steal miner fees and make on-chain p2p transactions expensive, essentially destroying Satoshi’s p2p network and turning it into SWIFT.

Others are concerned about Bitcoin Unlimited for the following reasons:

1. Bitcoin Unlimited extends the concept of emergent consensus to the block size itself, introducing new parameters EB (Excess Blockize) and AD (Acceptance Depth).

2. Bitcoin Unlimited is a newer, smaller development team.

(Note: Of the currently available scaling options, I support Bitcoin Unlimited — because its emergent consensus block size scaling has been proven to work historically, and because Bitcoin Unlimited is actually maturely coded and running on about 25% of the network.)

It is normal for normal people to have the above-mentioned “worries”!

But what if we could get to the point where 1 BTC = 1 million USD without introducing any controversial new changes or discounts or consensus rules or game theory?

What if we could get 1 BTC = $1 million using only the whitepaper itself — by simply restoring Satoshis’ original 32MB “max block size”?

(4) We can easily achieve “Million Dollar Bitcoin” by gradually and safely growing blocks to 32MB — Satoshi’s original “max block size” — without changing anything else in the system!

If we simply reverted to “ Bitcoin Original ” (Satoshi’s original 32MB blocksize), then we could avoid all of the aforementioned “contentious” Bitcoin changes — and the next 8 years would be quite realistic:

1. In fact, block size is growing at 54% per year — within the 70% increase in available “occupied bandwidth” we actually saw last year.

2. This would give us a reasonable, completely feasible block size of 1.54 ⁸   = 32MB ... 8 years later.

3. The Bitcoin price is increasing at a rate of 2.37x per year, or 2.37 ⁸ = 1000x over the next 8 years - which is similar to the price over the past 8 years, when the price went from less than $1 to over $1000.

4. This will give us a possibility that the Bitcoin price will be 1 BTC = $10,000 in 8 years.

5. There is still a lot of decentralization — lots of fully validating nodes and mining nodes) because:

1. Cornell research showed that 90% of nodes could already handle 4MB blocks — and that was a few years ago (so we can already handle blocks even larger than 4MB today).

2. A 70% annual increase in available bandwidth, combined with a 54% annual increase in used bandwidth (plus new “block compression” technologies like XThin and compact blocks), means that almost all existing nodes will be able to easily handle 32MB blocks in 8 years; and

3. If the price steadily rises to 1BTC = $1 million, the “economic incentive” to run a node will be strong

4. In about eight years, that would put the total market cap at $20 trillion — equivalent to the total “money” in the world, which some estimate to be around $82 trillion.

So maybe we should consider reverting back to Satoshi’s original vision for Bitcoin, with a 32MB blocksize — using only the whitepaper and avoiding controversial changes in just 8 years — so we can reunite the community to get to “million dollar Bitcoin” (and a $20 trillion market cap).