How to Scale Bitcoin? You’re Asking The Wrong Question

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Hi there folks, hope you’re doing well. I know the market is kinda down and we’re all sad and remembering the good old days in December. It has been a pain to watch the charts these past couple of weeks, but lucky enough I’ve been busy reading about the early discussions around Bitcoin to take my mind out of it.

Why is the market crashing? What’s bringing it down? Who’s responsible for this calamity? When will it recover?

I, too, get haunted by all these questions as some of my personal investments are in cryptocurrency. Because I understand these ups and downs are not only expected, but a delicate part of the never-ending cycle of speculation, I try not to worry too much about price.

I’m sure it will eventually…

rise

What will be the trigger which causes exponential adoption?

Will it be a killer app?

Will it be institutional investors?

–this article shouldn’t be taken as financial advisement as it represents my personal opinion and views. I have savings invested in cryptocurrency so take whatever I write with a grain of salt. Do not invest what you cannot afford to lose and always read as much as possible about a project before investing. Never forget: with great power, comes great responsibility. Being your own bank means you’re always responsible for your own money–

The key to increasing adoption

Maybe it will be people realizing Bitcoin is a great store of value. Sure it does bottom down (like any asset, commodity, currency, etc) except its value is intrinsically connected to the network of users, energy spent and difficulty algorithm.

Meaning, it’s a digital way to store value without a central party. That’s already an achievement, if you ask me.

The way I see it, the overall discussion around technology and ways to scale Bitcoin, isn’t that important for general adoption. Not that it wouldn’t make it easier for companies and institutions to transact, as scalability means faster transactions times and (hopefully) lower fees for the Bitcoin ecosystem, but because that’s not the core question we ought to answer.

The struggle is not technological, rather philosophical.

It’s not a fight we can battle with gifted engineers, but one that must be fought around core-values.

At this point in time, it doesn’t matter at all how the technology develops if we don’t get the core principles right, people. The absolute purpose of Bitcoin is to decentralize currency, not leaving any room for the few to rule over the many.

The connection between physical and digital

The next time someone says “Bitcoin has no value because there is no underlying asset” remind them of the energy spent to mine it. The beauty of Proof-of-Work is that it requires an underlying asset outside the digital realm to be spent (energy = money), in order for consensus to be reached.

Thanks to the laws of physics, we still do not have a way to convert back the totality of the energy spent output into the same energy input – so when miners spend electricity to mine Bitcoin and reach consensus, there is no way to get back the raw input: energy.

The stake, in Bitcoin, is energy spent which cannot be redeemable or refunded in any way.

I know Proof-of-Stake algorithms and protocols like Ethereum’s casper work similarly, in the sense miners would lose their stake if they tried to attack the network. However, the problem is that there is no input outside the digital realm being spent in a great enough quantity, to increase the probability of good behaviour from miners.

Energy becomes part of the entire ecosystem connecting the digital world to the physical, giving it an intrinsic value.

If you’re wondering how we can make sure there aren’t too many miners mining Bitcoin, creating a humongous energy spend, think of supply and demand.

What happens in Bitcoin is that, the more miners (validating nodes) who join the network, the harder it gets to mine Bitcoin, thus adjusting the difficulty level of the hashing algorithm.

As the network becomes more secure, you need less nodes validating so you can afford to make it harder for miners to get a reward.

This is, miners need to spend more energy to get a Bitcoin block reward.

How is any of this related to the initial adoption logic?

When we consider all of the above points, we realize the most important discussion is still around the core-values of Bitcoin. Everything in the Bitcoin network works in a way to avoid the absolute centralization of money and ways to control its supply – even though human nature tries to circumvent those features, for the sake of efficiency.

Scalability will happen, just a bit differently than you might expect.

We already have the unique piece that allows for scalability to happen: an underlying asset people can use a store of value.

Whatever is built on top doesn’t really matter if the underlying layer, Bitcoin’s blockchain, is still used as the…

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