Bitcoin has had an absolutely insane year. At one point, its price was up nearly 2,000%, from about $1,000 in January to $19,922 mid-December. It exploded in the media and it caught the attention of pretty much everyone – from Wall St. billionaires to the average Joe just trying to make a quick buck.
Now, however, it’s time for Bitcoin to pass the baton.
I’m not talking about the price; estimating where the price of Bitcoin or any other cryptocurrency will go is pure guesswork. But in terms of development, Bitcoin’s progress in 2017 can easily be summed up in three words: Next to none.
In fact, the only reason Bitcoin hasn’t completely broken down is that it’s not actually used as a payment platform, and most of Bitcoin trading is essentially virtual. That’s right; the millions of daily trades you see flying through exchanges aren’t written in Bitcoin’s blockchain, the decentralized database onto which all transactions are recorded. If they were, most of those trades wouldn’t happen, and Bitcoin’s backlog — a list of transactions that are still waiting to happen — would be a lot larger than the current number of roughly 221,000.
Bitcoin has been outgrown in every sense of the word. Yes, it still has the first mover advantage and it still benefits from the unknown identity of its elusive founder, Satoshi Nakamoto. But its underlying technology needs to be upgraded. For a multitude of reasons best described as politics, this hasn’t happened in years, and there’s little hope that the situation will change in the near future.
Can Bitcoin’s problems be fixed? Well, they already have been, only not on Bitcoin’s blockchain. Ethereum, Bitcoin’s closest competitor in terms of market cap, is a platform for decentralized apps. It’s had its own problems with network congestion and slowdowns, but there are currently thousands of apps actually running on top of it, and the number of transactions on its blockchain recently surpassed one million per day — more than double than Bitcoin on its best day.
And new projects such as EOS, Cardano and NEO claim they’ve gotten even further, with their networks allowing for far more transactions per second than both Bitcoin and Ethereum (though none of them have been tested in the real world the way Bitcoin and Ethereum have).
With all these newcomers claiming they’re better than Bitcoin, it may appear that the original cryptocurrency is destined for oblivion. Bitcoin maximalists and devotees will say that for Bitcoin, slow and steady development is a good thing, and with hundreds of billions on the line, they may be right.
And development, while glacially slow, is happening. Several groups of experts are working on Lightning Network, a system that would make Bitcoin transactions orders of magnitude faster. The underlying protocol recently reached version 1.0 and tests were successfully performed, but there’s plenty of work ahead before it can be safely implemented on Bitcoin’s network.
Still, Bitcoin needs to move forward. The world of cryptocurrencies is a completely new market that doesn’t adhere to rules that apply to other markets, but I don’t recall a case where a disruptive first mover came ahead by being slower than everyone else.
Whatever happens, Bitcoin does have a future. Its technology, however outdated, has worked without major screwups for nine years, and it will likely continue to work for a long time – perhaps as long as there are computers to mine it. Development might pick up speed in the future. And even if it gets overrun by competitors, it still may retain some value due to its pre-programmed scarcity (only 21 million Bitcoin will be mined, ever).
But next year? Prepare for an absolute onslaught of news about Bitcoin competitors. As these new projects, many of whom are well-funded thanks to ICOs, rush to fix Bitcoin’s issues of scalability, privacy and governance, millions of dollars, both crowdfunded and VC-based, will pour in. There will be major partnerships; there will be technological breakthroughs, and there will be exciting new ways in which the blockchain can be utilized.
As for Bitcoin, it’s bound to stay a major news topic, especially if its crazy price growth continues. But in the world of cryptocurrencies, it soon won’t be the only topic, and it may even not be the most important one.
Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH.