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The temptation is strong to write Bitcoin off as yesterday’s next big thing (outpaced, in chronological order, by the metaverse and generative artificial intelligence). That is, if we rely solely on media coverage. But if we look at the unprecedented level of institutional acceptance, the major players involved, and the ongoing technological innovations, we realize that Bitcoin has never been in better shape. And it may well live long and prosper.
But when it’s not breaking records as far as valuations, why talk about it? Simple: Bitcoin is not just an asset for speculative trading, but a communication protocol used to exchange a native asset – the eponymous bitcoin (BTC). This protocol is made up of a software component (the code) and a hardware component (the infrastructure of computers and processors running the software).
The software is maintained by a community of developers, while the hardware is provided by a community of entrepreneurs, the so-called “miners.” Beyond the price, which simply represents the equilibrium between supply and demand, it's interesting to analyze Bitcoin’s human component: the reasons people choose to participate in this experiment and the factors that might lead them to abandon it, potentially leading to Bitcoin’s collapse. This is the subject of my doctoral dissertation.
Created in 2009 by Satoshi Nakamoto, Bitcoin is a distributed cryptocurrency based on advanced cryptographic systems and the famous "blockchain," a sort of distributed ledger shared among network computers that securely verifies and records every transaction.
Such a structure is subject to several threats (free-riding, hacking, congestion, dissatisfaction) that test its ability to endure over the long term, what I call “sustainability.” Scientific literature suggests that these problems tend to be solved primarily through a centralized approach, i.e., by a company that coordinates the necessary work and deals with the motivations and internal issues of the various roles. However, there are also decentralized approaches, such as polycentric governance, that can mitigate these challenges, leading to the hypothesis that Bitcoin could achieve long-term sustainability. But that depends on the simultaneous fulfillment of the system’s goals and those of each stakeholder: end users, developers, and miners.
Bitcoin's objectives as a payment system
Bitcoin aims to be a “censorship-resistant” payment system, meaning no transaction can be controlled. This resistance ensures that anyone holding Bitcoin can spend it freely, however they please. This means offering complete freedom to the end user. Technical features (no single database, use of cryptography, use of blockchain) and organizational features (no company that authorities could shut down or influence) currently ensure this goal is met.
End User Satisfaction
End users choose to use Bitcoin for a combination of reasons – some related to Bitcoin’s intrinsic qualities as a new technology and payment system, others driven by external factors like regulation or Bitcoin adoption. The latter is driven by a strong ideological component; in other words, this cryptocurrency isn’t used solely for speculative purposes. Additionally, ease of access and perceived innovation are other key motivators.
Miner satisfaction
The crucial role of miners is to verify transactions made by users, to protect the network from fraud and tampering. To do this, they must solve increasingly complex cryptographic problems, requiring ever greater computational power. As an incentive to participate in the system, each time they solve one of these problems, they receive a fixed amount of newly minted Bitcoin.
One threat to Bitcoin's sustainability is related to the halving mechanism, in which the number of Bitcoin awarded to miners as a reward is halved every four years. From 2008 to 2024, this amount has already been halved five times, dropping from 50 to 3.125 units, while the computing power required and energy costs for miners have surged. However, research shows that this issue is mitigated by Bitcoin's “layered” structure. In addition to the layer that regulates the creation and functioning of Bitcoin, others have been added that allow, among other things, low-value transactions with very low fees – a sort of Revolut or Satispay in the Bitcoin world. One example is the payment protocol called the Lightning Network, which ensures miners an additional stream of income.
Developer satisfaction
Finally, developers play an equally crucial role, as Bitcoin must technically adapt to emerging user needs. Thanks to a strong ideological component, partly linked to the Open Source culture and a configuration without a central control point, the Bitcoin developer community has managed to coordinate over the years without a foundation or an influential founder. This aspect is crucial for Bitcoin, as its goal is to maintain a censorship-resistant structure. Any central point could represent a possible point of failure, vulnerable to third-party influence, making Bitcoin a potentially censorable experiment, as recently happened with Telegram.
The bottom line is that end users are satisfied, as evidenced by the circulation of Bitcoin worth about $1.8 trillion and the value of a single BTC around $90,000 (19 November, 2024). Far from being a “next big thing” of the past, Bitcoin is a very real presence today, with sustainability prospects for the foreseeable future.
Leonardo Maria De Rossi, Bitcoin as a Sustainable Polycentric Digital Infrastructure, Copenhagen Business School [Phd]. PhD Series No. 30.2024 https://doi.org/10.22439/phd.30.2024.
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