White Paper’s publication has reached its 15th year, how has the Bitcoin ecosystem evolved?

Bitcoin Ecosystem's Evolution A Look into the 15th Year of White Paper Publication

In the world of cryptocurrency, there is a document that holds the same status as the Bible or the Declaration of Independence. It is the foundational blueprint of the entire industry: Bitcoin Whitepaper.

This revolutionary document was written by Satoshi Nakamoto and was released on October 31, 2008. Today marks its 15th anniversary.

The official name of the Bitcoin whitepaper is “Bitcoin: A Peer-to-Peer Electronic Cash System.” It was introduced after the global financial crisis of 2008, which shattered people’s trust in traditional banks.

Nakamoto’s vision was clear – to create a currency that is not bound by governments, censorship-resistant, and borderless.

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In just nine pages, the document outlines the blueprint of a decentralized ledger called the blockchain, and introduces the concept of Bitcoin as a currency. Its ingenious solution to the double-spending problem involves creating a decentralized computer network that verifies and records transactions in a public ledger, making manipulation impossible.

Since 2008, Bitcoin has not only survived but thrived, becoming a global phenomenon and the best-performing asset of the past decade. It has sparked a wave of innovation in the cryptocurrency space, attracting and inspiring individuals like Vitalik Buterin to develop more programmable protocols.

In some countries, BTC has become a store of value, digital gold, and a hedge against inflation. It has become synonymous with hope and freedom. With a scarcity limit of 21 million coins, it has piqued the interest of participants from various fields. Over the course of fifteen years, Bitcoin has evolved into a more complex asset, giving rise to highly specialized financial products around it.

Mining Pools and Hardware

The emergence of mining pools can be seen as one of the most notable “forks” from the whitepaper’s blueprint.

Nakamoto’s initial intention was to allow individuals to mine Bitcoin using their personal computers. Technically, that is still possible, but over time, Bitcoin mining has become focused on one defining principle: scale.

Nakamoto’s original vision was to ensure that anyone could participate in network validation and security without specialized equipment, making the ecosystem more inclusive and resistant to central control. The rise of mining pools and advanced mining hardware has altered this “initial vision,” leading to increased centralization.

Satoshi Nakamoto wrote, “Proof of Work also solves the problem of representation in majority decisions. If the majority is based on one IP address one vote, then anyone who can allocate multiple IP addresses could overthrow it. Proof of Work is essentially one CPU, one vote.”

The first mining pool was initially called bitcoin.cz, later renamed to Slush Pool, created by Marek “Slush”
Lianguailatinus in 2010, with the aim of solving the problem that people started using GPUs instead of CPUs to mine Bitcoin. The mining pool was supposed to help independent miners find blocks, even if they didn’t have high-performance computers.

GPU mining continued to thrive in early 2010 until Canaan Creative released the world’s first Application-Specific Integrated Circuits (ASIC) for Bitcoin mining.

Over the years, the efficiency of ASICs has continued to improve, leading to the rising cost of these dedicated devices, reaching tens of thousands of dollars. Additionally, powering them requires a significant amount of electricity. In practice, this has made Bitcoin mining completely unprofitable for independent miners at home.

Nowadays, large companies seem to dominate the mining industry – even though it is entirely digital.

Bitcoin Improvement Proposals

Setting aside the completely different mining dynamics, the mechanism of the Bitcoin network has also undergone changes in the past decade or so.

In 2012, the Bitcoin network introduced Lian Guaiy to Script Hash (P2SH) through BIP 16 to simplify multi-signature transactions. Before P2SH, multi-signature transactions were both cumbersome and prone to risk, requiring the disclosure of the entire spending script (defining the spending condition) in advance.

Through P2SH, users send funds to standard Bitcoin addresses representing the hash of the redeem script, thus hiding its complexity. Only when spending the tokens, the complete script is revealed and its conditions are met, aiming to simplify transactions, enhance user-friendliness, and improve scalability.

Segregated Witness (SegWit), also known as SegWit, is another important Bitcoin Improvement Proposal (BIP) that came into effect in 2017. It addresses the scalability of transactions and effectively increases the block size limit from the original 1MB to 4MB.

SegWit opened the door for a proposal called Taproot in 2021. Taproot makes transactions more efficient and private while allowing users to engage in more complex transaction types.

Exchanges, ETFs, and traditional tools

Over the years, the Bitcoin trading market has become increasingly complex, with various companies offering different products.

The whitepaper does not mention the possibility of large institutions providing Bitcoin-related financial products. Satoshi Nakamoto’s intention was for Bitcoin to become an alternative, decentralized means of exchange, rather than a means for traditional investors to make money.

Not to mention, the concept of buying Bitcoin ETFs essentially means that users are entrusting their funds to large financial institutions rather than holding Bitcoin themselves.

Satoshi Nakamoto’s mistrust of banks is clarified in the first two sentences of the whitepaper.

Satoshi writes, “Commercial on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust-based model.”

The market’s excitement over spot Bitcoin ETFs proves that, despite going against Satoshi Nakamoto’s original intentions, various parts of the crypto ecosystem are eager to establish some form of connection with that trust model. Bitcoin (BTC) prices have skyrocketed as investors anticipate the approval of Bitcoin ETFs.

Although the US currently does not allow spot Bitcoin ETFs, Europe launched its first ETF in August 2023.

Bitcoin futures ETFs have received approval from the US Securities and Exchange Commission (SEC), with ProShares Bitcoin Strategy ETF (BITO) becoming the first ETF to launch in October 2021.

DeFi/Ordinals Derivative Ecosystem

Bitcoin Ordinals enter DeFi – an attempt to merge the older blockchain with Ethereum-like digital collectibles or NFT demands.

However, it is impossible to discuss Ordinals without mentioning its predecessor, CounterLianGuairty. Launched on Bitcoin in 2014, long before the NFT boom of 2021, the protocol allowed for the exchange of rare digital collectibles. Rare Pepe, inspired by the Pepe the Frog meme, originated from CounterLianGuairty.

Of course, NFT tokens did not exist at the birth of Bitcoin. However, the Taproot upgrade in 2021 allowed for faster validation of multi-signature transactions and opened the door for text, images, SVGs, and HTML to be inscribed on the smallest denomination of Bitcoin, known as “sats”.

Ordinals has achieved tremendous success. On May 1st of this year, Ordinals created the highest single-day trading volume for Bitcoin to date.

This record (over 682,000 transactions) was later broken in September 2023, with over 703,000 transactions on September 15, 2023, reaching a new peak in Ordinal inscriptions. It’s important to note that when Bitcoin was still in its early stages in 2009 and 2010, the average daily transaction volume was less than 1,000.

From mining to the Ordinals craze to ETFs, the revival of Bitcoin’s builder culture is evident, but many of the same problems that Satoshi Nakamoto began to address still exist today.

The 15-year anniversary is not just a milestone; industry professionals need to consider how to continue realizing a fully decentralized future. If we liken the participants of the crypto punk movement to the Boston Tea Party, then the Bitcoin whitepaper is a guiding light – a reminder to the brave souls challenging the times. What do we need to do for the next 15 years? How do we continue to bring Bitcoin to billions of people?

References:

How Bitcoin has evolved since Nakamoto’s whitepaper debut

15 Years After the Bitcoin Whitepaper, Bitcoin Builder Culture Flourishes

Bitpush News Mary Liu

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