How the World Could Adopt Bitcoin Without Even Knowing It

Courtesy of: goodfreephotos.com/other-photos/hundred-dollar-bills-and-bitcoin-coins.jpg.php

I've always thought that Bitcoin was the slow and steady that would win the crypto race. Even after the latest SegWit tease, I still confidently told people that Bitcoin would get an update in the near future that would make it all things to all people. But now I'm not so sure...

Primarily, I'm no longer certain that there's anything wrong with Bitcoin in the first place. If a cryptocurrency is aiming for widespread adoption, then microtransactions and lightning fast payments might not be possible, much less practical. Simply increasing block size is merely a bandaid in such a proposition, as it's impossible to make blocks big enough to handle the kind of volume that widespread microtransactions would generate. Increasing block size could give us cheap microtransactions for a period of time, but pretty soon we would be right back where we started as its user base continued to grow. It would simply be a vicious cycle.

Not only that, but increasing block size would have other negative consequences, such as slower propagation and increased centralization, as fewer people could afford to run full nodes. With centralization, Bitcoin would lose its primary value, which has always been its trustlessness.

The only long term solution is for Bitcoin to fully make the transition from digital currency to "digital gold," which may have been the intention of its creators when they imposed the 1MB block size limit before exiting stage left. My more paranoid self even suspects the creators and/or developers may be much closer and more active than we think, having a hand in preventing consensus for a hard fork. That certainly sounds like "Satoshi Nakamoto's" style if you ask me.

As digital gold, Bitcoin would act more like a reserve currency, with miners acting as a decentralized central bank (yes, I know that's an oxymoron). Microtransactions would be handled by third party payment processors, who would settle payments in very large transactions, meaning very low fees and much faster transaction times than traditional wire transfers.

Most importantly, the average user wouldn't have any need for complicated wallets, private keys, ninja level cybersecurity skills, etc; they wouldn't even have to be aware that they were in fact using Bitcoin. They would simply get a traditional-looking debit card, or more likely an app for their phone, and use it anywhere that credit cards are accepted. The microtransactions would all happen offchain, meaning instantaneous transactions and fees that would likely be significantly lower than traditional credit card processing fees-or perhaps even no fees at all.

The thing most people don't realize about blockchain is that it's extremely inefficient, but that inefficiency is a necessary evil required to achieve trustlessness. However, it only makes sense if it's used in moderation. For example, do you really need an ironclad digital record of a two dollar coffee you bought last month? Or a .25 cent gumball you purchased from a vending machine? Because if we're wanting to move to a cashless, digital currency then those are exactly the kinds of purchases that are going to make up the bulk of the daily transaction volume.

On the other hand, if you're moving or hodling a million dollars, then you would still have the option of using a traditional wallet and holding your own private keys. People with less grandiose savings could simply go through brokers to avoid transaction fees. The brokers would simply pool everyone's deposits into large bundles and send them to the blockchain, thereby allowing everyone to invest in Bitcoin directly without having to pay high fees or worry about protecting their own private keys.

The thing is, there's no reason why these brokers couldn't be 100% transparent and trustless in their own right. They could even run their own blockchains, which would allow their customers to compare the broker's ledger to the Bitcoin blockchain, essentially guaranteeing that no fractional reserve type shenanigans were going on behind the scenes. Brokers and payment processors could also sacrifice a certain amount of trustlessness for increased scalability and ease of use, as well as theft prevention measures typical of traditional banking.

This all goes along with something else I've believed since I first started following Bitcoin-namely that virtually everyone would be using Bitcoin in the near future, and without really being aware of it. I've always thought that in ten or twenty years, it's quite possible that Bitcoin could be acting as the world's reserve currency, and do so in relative obscurity. People twenty years from now may look up from their screens during a commercial break and go, "Hey, remember that bittoken thing? Whatever happened to that anyways?"

I firmly believe that this transition will begin in the third world, as counterintuitive as that sounds. The vast majority of people in the third world are unbanked due to massive banking fees and widespread corruption, but due to globalization they're beginning to feel the immediate need to have a debit card. These Bitcoin-based third party payment systems are made for such people. They get to hodl their money in a comparatively secure currency, hedging against fiat hyperinflation and maybe even making gains in the process, plus they get a debit card that they can use anywhere.

And here's the nifty part. Many people in third world countries are receiving regular payments from family members living abroad, and these third party payment systems have the advantage of very low or no fees. This means that immigrants sending money to their family members abroad will switch to such services to avoid the horrific fees associated with international wire transfers to unbanked individuals. It won't take long before people in the developed world take note of what's happening, as their immigrant friends and coworkers will be telling them about all the advantages of using these services.

So it may be best to manage any hopes for a soon-coming Bitcoin fork, as the largest and most active players might not even see it as necessary, or in fact see it as a potential threat to Bitcoin's ultimate success. And while this would mean no more pizzas ordered with Bitcoin, it would also mean the long term survival of other cryptocurrencies. Bitcoin, as the world's reserve currency, could ensure deflation and trustlessness of the financial landscape as a whole, and do it all in the background in relative obscurity.