At the edge of our new year, there are too many people looking back, which for 2020 is a tad depressing. So instead I'm going to do a forward-looking post. Where do I see Bitcoin Cash in 3 to 5 years.
I'm an infrastructure person, I worked for years in a company that has as its sole product libraries and programming interfaces. I love the ability to enable other people to build beautiful stuff.
When I ask the question of where I see Bitcoin Cash in some years, I looked at this from a different perspective than most. I look at this with regards to how we can fix infrastructure in order to do things better, faster and how to enable new usecases. But don't worry, I won't get too technical. Much.
Here is 10 predictions for the next 3 - 5 years:
Payments in brick-and-mortar stores only really make sense if the merchant doesn't make you wait for a confirmation. Instant payments are required to fulfill the daily-money usecase.
We already have many places that accept instant transactions, but the risk is not low enough to expand this to become common practice. The biggest drawback of this risk is that merchants are forced to use a middleman, a payment processor, to assume the risk of fraud.
A mix of improvements in wallets, adding double spend proofs and DeFi contracts are all able to reduce the risk for merchants. Some merchants will want to keep paying a payment processor simply because its worth it to them, but many start to have the choice to avoid the cost and simply do peer to peer payments. Instantly, for extremely low risk.
The advantage here is that the sign-up cost for a store drops to close to zero. A point-of-sale tablet or existing phone and some education of staff. Even if they only get a couple of transactions a week, with the monthly cost being near zero this becomes a question of "why not?"
The benefit of Bitcoin Cash is that you don't have to ask anyone for permission to open an account, but the direct downside is that you may have to take care of your own security.
There will be a plenty of companies starting up that will sell this security. Recovering your funds when you lost your wallet by simply calling a company, that is very attractive to many people.
Another solution to secure against hacking is the idea of a hardware wallet. This is essentially the same as a wallet on a smartphone, but to be actually secure it has less features and is completely self-contained. There will be Internet-connected as well as no-internet based models with the payment going over Bluetooth / NFC.
This compares starkly to the current hardware wallets that can't work alone. They require a separate laptop or phone. With some smart engineering there is no need for that, the device can be stand-alone. The non-internet one just needs to be topped-up by you via your phone from time to time.
With already planned improvements in the payment protocol this kind of wallet would not need any special hardware on the side of the merchant either, making this is very attractive upgrade from the current bank-card.
The cost of such a device will soon be much lower than a smart phone, and certainly much easier to keep secure. I'm expecting the cost to drop to such low levels for such hardware that this opens up the Bitcoin Cash usecase to the next billion unbanked to participate in the global, Bitcoin Cash economy.
Many of today's services are really happy to do a monthly direct debit on our bank-accounts, taking the amount directly from you. The difference between today's banks and Bitcoin Cash is that each money transfer has to be approved by you, making repetitive payments a drag when using any crypto currency.
The cost of sending out invoices for those companies is likely going to cause many to decline integrating Bitcoin Cash as a legit way of paying for your phone-bill or anything you pay with a credit-card.
There are several ways to solve this, the easiest is a middle-man that collects all invoices on their platform and routes them to the right person for payment, adding payment reminders is easy at that point.
A wallet can integrate with this service (see also prediction 3, below) in order to make this completely automatic and invisible for the user.
A company that would allow periodic bills to get paid in Bitcoin Cash helps to avoid the cost of manual labor connected with not-automated payments. They will avoid the manual labor of people forgetting to pay, or simply paying late, as well as the labor cost for emails-databases and sending paper invoices.
Because as long as such costs are added for our Bitcoin Cash convenience, companies will decline to accept it.
A mostly automated solution will enable people to keep more of their monthly money in Bitcoin Cash and avoid the banking system lock-in. And since there are a large number of people that are not welcome in the banking system, the so-called 'unbanked', this suddenly opens up new markets for service companies.
When Satoshi shipped his first version of Bitcoin he put all functions in one application. From mining to the wallet and indeed the JSON-RPC programming interface that other applications use to access the BCH-network via the bitcoind application.
Some progress has been made towards splitting up the application: mining is now separate, the wallet is separate. Yet, mostly the nodes still have all those features in there.
Prediction 7 stems from the basic expectation that the blocks will become quite a bit bigger in the next years, and this makes the design from Satoshi that is now 12 years old stand out like a sore tooth.
The first breaking point is the JSON interface. When you have a 32MB block you send over this, it will start to cause a very measurable delay that is going to make people want to try something else because there is a lot of work to convert it for sending, which also makes the message twice as large. As we hope to get much bigger blocks, this will make this problem grow right with it.
I expect that the effort started in Flowee the Hub various years ago to use a super fast binary protocol will hopefully become used more, or (because developers are stubborn) be duplicated by other teams.
The JSON serialization is the simplest to explain scaling issue that still faces a lot of software in our industry, but there are many more. I'm the founder of Flowee, a project with various parts that are designed around the idea that scaling is about infrastructure and architecture first. And as the blocksize grows, this will be felt by many other software tools and teams and they will scramble to keep up with Flowee.
The people we call miners have specialized hardware to do the mining. Creating a setup that produces valid blocks involves a lot of software parts and too long a list of protocols about how those parts talk to each other.
This complexity is a direct effect from the history of mining having various disruptive events. Initially, mining happened inside the Bitcoin software and we went via various steps to get where we are now.
Mining architecture still has assumptions today that have not been valid for a long time anymore, but nobody put the time in to design something new. One of the mean reasons for this is that the mining infrastructure is literally the income of the miners. A bug or issue has a direct effect on the bottom line.
As the block-size will grow and Bitcoin Cash becomes a larger percentage of income for SHA256 mining, those bad assumptions will become problems. Problems cause money to get lost and the incentives will thus push for a rethinking of how we can do mining architecture.
My feeling is that we will separate out the mining-mempool from the validation-node and do multi-threaded block creation with stratum on the other side.
To improve the architecture of mining, we need to go back to primary concepts and design something that scales better. The resulting setup will allow miners to mine bigger blocks for less risk. And this will be profitable for miners to run if they actually want more users and higher prices and more fees mined.
This won't be an easy change, likely a multi-year one as lots of testing is needed when its your income we are talking about.
We already are seeing efforts go into mitigating the risk as we also move away from one mining node implementation. The Verde team started "The Validator" service that ensures all nodes agree a block-template is valid before it is mined. These efforts ensure another vital part will scale towards a global Bitcoin Cash economy.
End of last year most Bitcoin Cash full nodes started the new Scalenet. A new Blockchain with the same rules as Bitcoin Cash, but with a maximum of 256MB blocks. There we experimented, fixed issues and generally got ready for real scaling of our infrastructure.
Flowee the Hub worked quite well, with one volunteer testing it on his Raspberry Pi, 4th generation. The 256MB blocks worked just fine, at speeds that show it can keep up without problems.
The historical relevance of us successfully syncing 256MB blocks on a raspberry pi is based on the argument some years ago that we can never move from the 1MB block size because some people find RPi support important. This shows that scaling using a bigger blocksize in tandem with hardware and software improvement is not just viable, it is proven.
I predict that we will successfully sync 2GB blocks on a (then) modern RPi in a couple of years.
Thank you for reading this far, it was fun to write and I think it shows a hopeful but realistic view of the future of the Bitcoin Cash technology.
Technology doesn't mean anything without people, though. Creating bigger blocks is not really useful if we don't get economic activity to fill those blocks. Which basically means we need to make it easy for more people to start using Bitcoin Cash.
As our community grows and we get bigger blocks, we will also get growth in the area of developments. After all, should our ecosystem grow a million more users, this will attract plenty of new developers too. And what is easy to miss is that those million new users will have a percentage of developers among them in the first place.
As we grow our ecosystem we get not only more end-users, we also grow the number of builders, innovators and investors. This is what makes decentralized innovation so exciting, up until now we have mostly created seeds that will sprout later as we get more users, developers and innovators on board.
With that knowledge, lets move on to the next prediction:
Some time not too far from now we will see more existing companies take an interest in Bitcoin Cash in order to add support in their existing products.
Up until recently most of the support we have seen has been based on new products specifically made by crypto enthusiasts. They have greatly enhanced the usability of our coin and it is easy to think that this model will continue.
What is much more likely, though, is entire existing industries will instead choose to add support for Bitcoin Cash where that is useful for their customers. This preserves existing customer relations and to them is simply another feature to add.
The expectation here is that as we grow as we have, we will reach a point where the people will come to join us and add value to our coin simply because the amount of spending users they gain by doing so will make it worth it.
Companies that ship spreadsheets, supply payroll services and many other financial services will see the rise of popularity as a good way to create engagement and steal users from their competitors which don't support BCH. Additionally we will likely see integration into existing games, websites and similar.
A growing Bitcoin Cash ecosystem attracts those that want to grow with it, which causes the growth to accelerate.
The wallet is probably the most interesting component in the entire ecosystem of Bitcoin Cash. The people actually using it to interact with Bitcoin Cash is the one metric that will rise as we grow. Where now we have 100 miners and 100000 wallet users, the ratio will absurdly tilt to the wallet users as time goes on.
This basically means that the wallet is much like a webbrowser. Everyone that wants to use BCH needs one. Where we saw Microsoft exploit its platform advantage, I expect we will see companies try this here too. Be wary of closed-source wallets!
Similar to the webbrowser and the w3c protocol innovation, we will see a huge amount of improvement in the payment protocol simply because this is a user-facing product. If your wallet is less friendly than the competitors, you lose users.
Payment protocols help the user-experience (UX) and likewise, privacy options will become standard on most wallets because it is a just a good item on the feature-list users pick their wallet on.
Many other features will be integrated into wallets in order to make it an experience instead of a tool. From document-timestamping on the Blockchain to location-aware advertising for Bitcoin Cash service-providers.
The smart phone wallet is the main user interface for our userbase. Innovation will happen there that nobody has today even thought about. And it will all be in order to make the end-users happy.
After all the above predictions this one may be obvious to some, but I do think it deserves its own point.
We today have some solutions for merchants to receive Bitcoin Cash, either as an Android or ios package, or people can buy a crypto-specific point of sale solution from a company like goCrypto.
Those solutions seem to be good enough for many, but what is very interesting is that the software and hardware are mostly open source and easy to duplicate. The speed with which goCrypto has expanded is a testament to the demand for a crypto payment solution. And since the actual products are easy to duplicate, there will be more competition.
It is then just a matter of time before the point-of-sale incumbents take note and add it as a for-pay add-on or even free. They have the scale already and for many the hardware is already installed making the cost vs gain a pretty easy sell.
Combine this with the risk solutions (prediction 10), and the existing DeFi solutions to sell the risk of price fluctuations, and merchants need nothing else to start accepting our coin.
The benefit here is hard to overstate. Merchants will have an ever lower threshold to entry, a completely different marketing avenue is making Bitcoin Cash seem even more legit. Basically this will make the number of brick-and-mortar merchants that accept Bitcoin Cash grow tremendously.
Where we today see wonderful websites that integrate a Bitcoin Cash wallet, they are stuck re-inventing the wheel and users are stuck with a dozen wallets each having a dozen dollars. This doesn't scale and people will lose money, websites will find innovation slowing down due to the simple fact that a wallet-in-a-webpage is a bad idea for many different reasons.
I expect that we will get a proper wallet built-in into a popular browser. Brave is hinting this way, but their business model seems to get in the way of things. I fully expect that in the next 3 - 5 years we will see a browser take the jump and merge one.
What this gives users is that this fully opens up the micro-payments market. For instance a user can decide to spent at most $3 on her music-streaming site today and she will pay only for what she listens to. Completely safe and no need to send some money to the site or some site-specific wallet first. Not to mention a hugely improved user experience compared to what is possible today.
Micro-payments open up a new revolution on the Internet where currently the only way to get paid is from advertising, which implies your input stream depends on one of the major players. This move will bring an alternative for many content generating sites. Imagine the impact on reporters and traditional media to no longer be dependent on number of clicks but again on actually providing value. We might just see a rejection of the current system where we are the product for advertisers and move back to a system where there is just the user and the content-creator.
When we talk about big players having extraordinary power, we should not skip the VISA/Mastercards of the world. Now, I'm not talking about companies being cut off from their income, we know already that Bitcoin Cash provides an alternative, as Wikileaks and pornHub have shown.
What I find more interesting is the other 5 billion people that are currently unable to participate because they are unbanked. Many have Internet, but can't access paid services because they have no access to the banking system.
Imagine what would happen when those people start being able to participate in our global Bitcoin Cash economy, without intermediates, without censorship. Something as simple as a Bitcoin Cash wallet in standard browsers can kickstart that.
What do you think? Do you think these predictions are any good? Comment below! And if you want to be part of the movement and make this happen, please join us at Flowee as we are building this today, for a better tomorrow. https://flowee.org or on gitlab/github.