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Bitcoin 2.0: Fantasy Or Inevitability?

Last Updated March 4, 2021 4:46 PM
Justin OConnell
Last Updated March 4, 2021 4:46 PM

The blockchain – upon which Bitcoin is based – has been the center of heated discussion in recent months. The blockchain is a means of sending digital messages between parties whose purported history can be trusted. 

Bitcoin 2.0 companies and the “promises” of the blockchain have become a recurring theme in the Bitcoin space. Some have discussed how “the greatest potential for Bitcoin may reside in its underlying technology rather than as a currency.” In 2015, talk shift from Bitcoin to the Blockchain, of that there can be no doubt.

Many banks entered the space. The general feeling in the public mind is these banks were thus investing in the Bitcoin blockchain. Not necessarily the case. Instead, they were learning about something they might design and patent themselves which is similar to Bitcoin. Bitcoin is not patented so there are no worries there for a bank’s legal departments.

Despite the movement into the space, there are still serious and unanswered questions about the implications of blockchain technology, particularly distributed ledgers.

Will distributed ledgers become all they’re cracked up to be? Will Corporations of the future be Decentralized Autonomous Corporations (DACs) that answer to transparency and internet protocol as opposed to government incorporation processes? Will nation-states vote on blockchain-based voting systems? Will the modes of future media distribution also be decentralized on the blockchain? Will people register their newborns on the blockchain? Will marriages take place on the blockchain? Some people even believe the internet itself, in the future, will be on the blockchain.

So there are massive implications for the future of online life in the wake of the blockchain.  At this point, all this is very theoretical. Where there are working models, there are needs for greater manpower, greater resources, and so on, if some of those abovementioned technologies are ever to become reality within the scope of the so-called “Bitcoin Community.” It’s more likely well-funded large institutions will design much of the tech filed under the umbrella of blockchain since they have the money, organization, and wherewithal. Not all of these players will care about Bitcoin like Patrick Byrne.

Ethereum, BitShares, and all other Bitcoin 2.0 propositions come as the Bitcoin protocol itself could become the true Bitcoin 2.0 as developers in the space attend conferences called “Scaling Bitcoin” in order to determine how to change the Bitcoin code so it can scale. In other words, it could very well be that Bitcoin-XT – or other variations of the code thought up by designers in the Bitcoin space – will be its own Bitcoin 2.0, Bitcoin 3.0, and so on, and Bitcoin 2.0 technology will thus be rendered to a marketing scheme.

Both Ethereum and BitShares have come with their own sets of problems. Where the BitShares team habitually over-promises and under-delivers, Ethereum loses $9 million because its investment strategy was the wholly one-dimensional and naive strategy of buying Bitcoin. That management of funds should not exactly evoke confidence in the Ethereum team. A better option would have been a diverse investment portfolio designed to make conservative returns for Ethereum and the Bitcoin ecosystem. While there’s no guarantee that would work, it at least is more nuanced.

Those funds could have been re-invested into the grassroots Bitcoin industry. Interest in the blockchain is increasing and Bitcoiners are selling the blockchain as the true power of Bitcoin. Banks are studying the blockchain as well to determine whether or not the systems can improve their banking structure.

This could result in many different blockchains. Private ones. Public ones. Private-Public ones. Whatever. Not all of it bad. Bitcoin will have had a huge effect on the world, just more subtle than typically envisaged as private institutions develop their own alternatives that fit with their models.

What’s for sure, however, is that a large part of what’s been mused about in the Bitcoin community is largely theoretical. Some, moreover, has seemingly been done before, either in Bitcoin itself or with prior technologies like BitTorrent. While bitcoiners think their projects are disruptive and groundbreaking, they might not be correct about their visions.

Steve Albini didn’t see the point in a smart contract, for example, as it is described by much of the Bitcoin industry. It’s not that he didn’t understand, it’s just that it didn’t seem useful to him.

“What most of the underground culture has been based on is not finding an alternative version of something in the mainstream culture, like in [the Bitcoin] example, finance, but making those things we find repellent about the mainstream culture irrelevant,” Albini told Tony Sakich of Decentralize.fm .

“It’s not let’s have our own lawyers and contracts and our own automated version of bill collecting; let’s not have lawyers, let’s not have contracts, let’s not have bill collecting, and not let’s have our own version of exclusive relationships that we police, but let’s not have exclusive relationships and not have any police.”

Many of the Bitcoin 2.0 theories must still be developed further, and that includes the theories propping up the idea.  And whether or not they matter in any significant way won’t be seen until they are developed and have use-cases. Moreover, many of the “amateur” products in the space could see any potential resources drained as financial institutions enter into the space and begin developing their own blockchain technologies thus circumventing the need for the traditional Bitcoin grassroots.

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