15 years after the white paper came out, how has the Bitcoin ecosystem evolved?

In the crypto world, there is a document that is equivalent to the Bible or the Declaration of Independence. It is the basic blueprint for the entire industry: the Bitcoin white paper .

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

The Bitcoin white paper, officially titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” came out in the wake of the 2008 global financial crisis, which shattered trust in traditional banking .

Satoshi Nakamoto’s vision was clear—to create a currency that was untethered to governments, uncensored, and borderless.

In just nine pages, the document outlines a blueprint for a decentralized ledger called blockchain and introduces the concept of Bitcoin as a currency. Its ingenious solution to the double-spend problem is to create a decentralized network of computers that will verify and record transactions in a public ledger, making them impossible to manipulate.

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

In some countries, BTC has become a store of value, digital gold, a hedge against inflation, and is synonymous with words like hope and freedom . Its scarcity limit is 21 million, which has aroused interest from participants in various fields. After fifteen years of evolution, Bitcoin has developed into a more complex asset, and many highly specialized financial products have been born around it.

Mining pools and hardware

The emergence of mining pools can be said to be one of the most obvious “bifurcations” of the white paper blueprint.

Satoshi Nakamoto’s original purpose was to enable individuals to mine Bitcoin using their personal computers. This is still technically true, but over time Bitcoin mining has evolved around one defining principle: scale.

Satoshi Nakamoto’s original vision ensured that anyone could participate in the verification and security of the network without the need for specialized equipment, making the ecosystem more inclusive and resistant to central control. The rise of mining pools and advanced mining hardware has changed this “original intention”, leading to an increase in centralization.

Satoshi Nakamoto wrote: “ Proof-of-work also solves the problem of determining representation in majority decisions. If the majority is based on one IP address, one vote, then anyone who can assign multiple IPs can subvert it. Proof-of-work Essentially one CPU, one vote.”

The first mining pool, originally called bitcoin.cz and later renamed Slush Pool, was created by Marek “Slush” Palatinus in 2010 to solve the problem of people starting to use GPUs instead of CPUs to mine Bitcoin. Mining pools are supposed to help independent miners find blocks, even if they don’t have access to high-powered computers.

GPU mining continued to boom in the early 2010s until Canaan Creative released the world’s first application-specific integrated circuit (ASIC) for Bitcoin mining.

ASICs have become more efficient over the years, driving the cost of these specialized devices into the tens of thousands of dollars. Plus, powering them requires a lot of electricity. This effectively makes Bitcoin mining completely unprofitable for independent miners at home.

Now, large companies appear to dominate the mining industry – albeit entirely digitally.

Bitcoin Improvement Proposal

Putting aside the completely different mining dynamics, the mechanics of the Bitcoin network have also changed over the past decade or so.

In 2012, the Bitcoin network introduced Pay to Script Hash (P2SH) through BIP 16 to simplify multi-signature transactions. Before P2SH, multi-signature transactions were cumbersome and risky, requiring upfront disclosure of the entire exchange script (defining payout conditions).

With P2SH, users send funds to a standardized Bitcoin address that represents a hash of the exchange script, thus hiding its complexity. Only when the tokens are spent, the complete script is exposed and its conditions are met, which aims to simplify transactions, enhance user-friendliness and increase scalability.

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

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

Exchanges , ETFs and traditional instruments

The Bitcoin trading market has also become more complex over the years, with various companies offering different products.

There is no mention in the white paper of the possibility of large institutions offering Bitcoin-related financial products. Satoshi Nakamoto’s intention was for Bitcoin to serve as an alternative, decentralized means of transaction rather than as a means for traditional investors to make money.

Not to mention, the concept of buying a Bitcoin ETF essentially means that users are placing their funds in trust with a large financial institution, rather than holding the Bitcoin themselves.

Satoshi Nakamoto’s distrust of banks is spelled out in the first two sentences of the white paper.

Satoshi Nakamoto wrote: “Commerce on the Internet relies almost entirely on financial institutions as trusted third parties to process electronic payments. While the system works well for most transactions, it still suffers from the weaknesses inherent in the trust-based model. Impact”.

As evidenced by the market’s enthusiasm for spot Bitcoin ETFs, various parts of the crypto ecosystem are eager to have some connection to this trust model, albeit contrary to Satoshi Nakamoto’s original intentions. Bitcoin (BTC) prices surged as investors anticipated the imminent approval of a Bitcoin ETF.

Although spot Bitcoin ETFs are not currently allowed in the United States, Europe launched its first ETF in August 2023.

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

DeFi / Ordinals Derivative Ecosystem

Bitcoin Ordinals Enter DeFi – An attempt to merge older blockchains with Ethereum -like demand for digital collectibles or NFTs.

However, it’s impossible to discuss Ordinals without mentioning its predecessor, Counterparty . The protocol launched on Bitcoin in 2014, long before the 2021 NFT boom, allowing people to exchange rare digital collectibles. Rare Pepe is a collection of NFTs inspired by the Pepe the Frog meme , originating from Counterparty.

Of course, when Bitcoin was born, NFT tokens did not exist. However, the 2021 Taproot upgrade allows for faster verification of multi-signature transactions, opening the door to inscribing text, images, SVG and HTML on the smallest denominations of Bitcoin (called “Satoshis”).

Ordinals were a huge success. On May 1 this year, Ordinals created the largest single-day trading volume of Bitcoin to date.

This record (over 682,000 transactions) was later broken in September 2023, with more than 703,000 transactions on September 15, 2023, while Ordinal reached a new peak. You know, when Bitcoin was in its infancy in 2009 and 2010, the average number of transactions processed per day was less than 1,000.

From mining to the Ordinals craze to ETFs, the resurgence of Bitcoin’s builder culture is palpable, but many of the same problems that Satoshi Nakamoto set out to solve still exist today.

The 15th anniversary is more than just a milestone, practitioners also need to think about how to continue to achieve a fully decentralized future. If the cypherpunks were the participants in the Boston Tea Party, then the Bitcoin white paper is a guiding light – a reminder to those brave souls who defied the times. What do we need to do in the next 15 years? How to continue bringing Bitcoin to a billion people?

References:

How Bitcoin has evolved since Nakamoto’s white paper debut

1 5 Years After the Bitcoin White Paper, Bitcoin Builder Culture Flourishes

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