Technology |Explainer

Bitcoin boomed in 2017, where will it go next?

  1. Bitcoin came second place in Google's Year in Search 2017
  2. 'It will be like the dollar to all of the other cryptocurrencies'
  3. The Bitcoin community may come under more pressure

Bitcoin has now entered the financial and cultural mainstream, so WikiTribune interviewed a range of experts on what’s ahead for the once marginal cryptocurrency. Is Bitcoin here to stay or does the “reality fall short of the hype?”

Bitcoin boomed in 2017. For starters, it came in second place on Google Trends ‘Year in Search 2017’ for global news. Its price skyrocketed from around $1,000 in January to above $10,000 by November. When Bitcoin hit $19,000 on December 7, the popular cryptocurrency exchange Coinbase briefly crashed as it struggled to keep up with the surge of interest. Recode, a tech website, reported that Coinbase is now the No.1 iPhone app in the U.S.

Major exchanges have also now begun trading Bitcoin futures – a mark of its legitimacy for many. The Chicago Board Options Exchange has already started, while the Chicago Mercantile Exchange will follow suit on December 18. Futures are contracts that allow investors to bet on the price of something at a later date. So investors can now bet on the price of Bitcoin rising or falling without having to own it.

Is Bitcoin coming of age?

Bitcoin was created in 2009 by a pseudonymous figure known as Satoshi Nakamoto in reaction to the financial crisis of 2008. The idea was to create a transparent, peer-to-peer system of money that was stateless and decentralized. It runs on technology called blockchain – a digital ledger that records data, or blocks, which are secured and linked using cryptography.

Bitcoin’s journey has been marked with controversy as it traveled from black-market burrows – it was used on the illegal drug selling platform Silk Road – to the major exchanges. However, these institutional investments do indicate a long-term viability of the cryptocurrency, even in this early stage of its development.

WikiTribune interviewed some experts to better understand what comes next:

  • David Gerard is the author of Attack of the 50 Foot Blockchain and is a strong critic of the whole Bitcoin movement.
  • Christian Catalini is an economist and the Career Development Professor at Massachusetts Institute of Technology (MIT), and an assistant professor of Technological Innovation, Entrepreneurship and Strategic Management at the MIT Sloan School of Management.
  • Odysseas Sclavounis is a DPhil student at the Oxford Internet Institute and The Alan Turing Institute. He has researched the governance of blockchain.
  • Catheryne Nicholson is the CEO and co-founder of BlockCypher, a blockchain web service that enables developers to build, monitor and secure all blockchain applications.
  • Katharina Weltecke is a public information officer for the World Food Programme (WFP) – the food-assistance branch of the United Nations – in Germany. WFP is running a pilot program using the Ethereum blockchain for refugees in Jordan, called Building Blocks, to make cash-based transfers faster, cheaper and more secure.

Now that Bitcoin has entered the futures market, is this a sign that it’s here to stay?

Sclavounis and Catalini agree that while Bitcoin futures reflect the growing legitimacy of the cryptocurrency, it may face more pressure in the future.

“A lot of people are opening their eyes to what [is seen as] this asset-class. Bitcoin is great for them because they can suddenly earn way more money than they would usually have been able to,” Sclavounis said. “But as I understand it, the futures went live on Monday [December 10], and there’s been very little volume, so it’s yet to be seen. It still needs to grow organically, and that may still take some time.”

Catalini added that: “I think what will be really interesting to watch is also that as institutional investors come in, as futures come in, I don’t think the Bitcoin community realizes the amount of pressure that will be placed on them, including the core developers. And so issues like the scaling debate or the governance challenges that Bitcoin has had will become even stronger when there’s so much pressure, financial pressure, for Bitcoin to perform.”

For Nicholson, however, this is “just a sign that futures trading is alive and well and that people still like to bet.”

How will Bitcoin evolve?

“I don’t actually think that Bitcoin will be a currency in the sense that you use pounds to buy coffee. I think that Bitcoin will be more like a global commodity, like gold,” Sclavounis said. “The way I foresee things happening, it will be like the dollar to all of the other cryptocurrencies, basically, so it’ll be the kind of gold standard. Bitcoin will be the most serious cryptocurrency around, and all of these other cryptocurrencies will always look to Bitcoin in transactions.”

Catalini sees Bitcoin’s largest potential in developing countries. “And in cases where you don’t have robust financial infrastructure today, and you could really leapfrog by jumping into a technology that potentially give access to financial services at a much lower cost.”

Bitcoin has been called a Ponzi scheme, a scam, and compared to the Tulip mania. What do you say to this?

Gerard said: “Bitcoin itself was founded sincerely. Satoshi Nakamoto had very naïve ideas of economics, politics and human behavior. But he wasn’t a crook. But crooks rapidly adopted Bitcoin, because there were lots of naïve and hopeful people full of enthusiasm but who didn’t know much, and serial scammers preyed upon them – a lot of Bitcoin scammers have turned out to be serial scammers, with a history in mail fraud and so on.”

Both Nicholson and Sclavounis said that the mania around Bitcoin certainly doesn’t help these criticisms, but there is an underlying value to the cryptocurrency.

“There are two very different things going on,” Sclavounis said. “There’s the run-up in the price, completely insane and totally crazy and nobody can believe it. But also Bitcoin’s blockchain itself, as a kind of data structure which has all of these nice properties like immutability, etc., that has a lot of value. The bubble will burst at some point. It may keep on going five years down the line, but that’s not really what’s interesting. It’s just that it’s big in the media currently, so people are paying attention.”

Nicholson added: “Everyone that started a Bitcoin/blockchain company back then believed in the tech. There was very little chatter on investing, buying, derivatives, future price of Bitcoin, etc. Now that paradigm has shifted. Almost everyone getting into cryptocurrencies now are doing so because of the price. At the current price, I’m not sure it quite substantiates the underlying value. But make no mistake, there is a very strong underlying value.”

Looking beyond Bitcoin, where will blockchain go?

Weltecke sees blockchain as a potential tool for improving humanitarian work. She said that in the future WFP is keen on sharing its blockchain database with other agencies. “WFP remains the only actor in this space. We wouldn’t use the full potential of blockchain but we really hope that other agencies would come and join us in this.” So far, she’s reported that the pilot in the Azraq refugee camp in Jordan is going well, and that WFP will be expanding to other camps in January 2018.

Gerard, however, is more skeptical of blockchain’s future, arguing that it’s not that innovative.

“People keep trying to adapt the blockchain as a technology, but the reality is far short of the hype. The only use case I’ve seen for a full cryptocurrency-style blockchain is cryptocurrency. Some products marketed as ‘blockchain’ are successful, but they’re functionally just a private database. Estonia’s KSI Blockchain, or the WFP’s private Ethereum chain with only a single user would be good examples – they both work well, but the first isn’t actually a blockchain and the second might as well be a database.”

Can Bitcoin scale?

According to the Guardian, Bitcoin uses more electricity than Ireland or a Visa processing center that handles over a hundred times as many transactions as Bitcoin has. Can the world afford the electricity needed for Bitcoin to become more than a niche player?

“The protocol needs to be changed to be able to scale, and all of the actors in the space have very different opinions about how that should happen,” Sclavounis said.

With only 21 million bitcoin available to mine, what will happen to Bitcoin’s business model once mining ceases and the miners are no longer verifying bitcoin transactions whilst they mine for new bitcoin?

Perhaps, at that stage, transaction charges for using bitcoin will be sufficient to reward the processors. Moore’s law may also continue to reduce such transaction costs. But the business model will change as we get closer to that 21 million and then alters when the last bitcoin has been mined.

Find out more

For more information on Bitcoin, blockchain and cryptocurrencies, here are some good places to start. To contribute please SIGN UP or SIGN IN, or go to TALK to discuss:

  • The original Whitepaper by Bitcoin inventor Satoshi Nakamoto may be heavy-reading but it’s worth a read if you want to understand its inception.
  • Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don and Alex Tapscott is considered the first book to explain why blockchain is disruptive. Though bullish at times, it offers a good overview on how the technology works and how it’ll impact the world.
  • Banking on Bitcoin is a documentary which gives a crash course on what Bitcoin is and an exploration into the lives of those adopting it.
  • Digital Gold: The Untold Story of Bitcoin by Nathaniel Popper charts the rise of Bitcoin and the personalities who helped build it.
  • BitCon: The Naked Truth About Bitcoin by Jeffrey Robinson, an author known for his work on international financial crime, is the first serious critique on the subject. He explores the get-rich-quick sentiment of the system and the cult-like indoctrination of the people who buy into it.
  • How Money Got Free by Bryan Patrick Eha, a former editor at business publication Entrepreneur, is a book about the pioneers of Bitcoin. These include entrepreneurs, hackers, drug dealers and ex-cons. The book is about the future of money, and opens up a debate about the relationship between money and liberty.

Talk (7)


Peter Stoll

"Actually the difficulty is adjusted o..."
Fiona Apps

Fiona Apps

"I think the assumption there is that ..."

Chris Hann

"Total supply cap is around 21 million..."

Peter Stoll

"I am not a Bitcoin expert, but am pre..."

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United Kingdom
Linh is a staff journalist at WikiTribune with a background in the humanities. She covers the Middle East, Asia, conflict and technology. Though based in London, she has freelanced across Asia, the UK and U.S.

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18 December 2017

12:03:23, 18 Dec 2017 . .‎ Fiona Apps (Updated → Adding link)

17 December 2017

13:22:52, 17 Dec 2017 . .‎ Linh Nguyen (Updated → revised edits, put back in highlight and hero image that was removed)
04:44:06, 17 Dec 2017 . .‎ Charles Anderson (Updated → approved update)

16 December 2017

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  1. Other

    I am not a Bitcoin expert, but am pretty sure that the power consumption issue has been misrepresented–not only by the Guardian article cited, but by many others. I don’t know enough to propose a precise rewrite, but hope someone will come along and improve the article in this matter.

    The essential point is that the bitcoin software , as designed, intentionally modulates the difficulty (there is actual a formal parameter of the process named difficulty) of the process the miners execute in order the set the rate of new bitcoin generation to the pre-determined curve. If the miners buy, install, and operate a doubling of capacity worldwide, power consumption doubles, but the rate of new bitcoin award stays the same. Were the price to plummet, miners with operating costs above their new lower reward rate would turn off their machines, but the system would operate unchanged for transaction clearing. Clearly redundant computation not needed to support the actual transactions is the predominant power consumption term.

    Surely there is some minimum computational effort required to support the actual blockchain update, with sufficient redundancy to assure the integrity of the system, but I’m confident it is at a tiny (probably infinitesimal) fraction of the current level.

    So the “can’t scale because too expensive to support” claim is misdirected. It is not the computational requirements which create this situation, but, oddly, the extreme escalation in the market price of bitcoin.

    A rational miner, committing new capital, needs to assess that the value of bitcoins they will be awarded during the operating life will constitute a good return on the invested capital and operating costs (principally power). When the market price for bitcoin in this calculation is higher, it attracts more such investments.

    So it is the scheme by which miners are compensated, coupled with the extraordinary price rise, which drives the (yes, I agree) extremely excessive power consumption. It is not the technical characteristics of blockchain transaction support, nor even the specific version in the current implementation.

    1. Rewrite

      I think the assumption there is that miners are actually paying for the electricity they’re using to mine. Which, at least in China, they’re not. Lots of operations have been shut down after being found out (this is one link but obviously not the-be-all-end-all-reference

    2. Rewrite

      Total supply cap is around 21 million. Miners after that will not be awarded newly minted coins for their efforts. The only reason to continue mining after that is to validate transactions…what is in it for them at that stage?

      As far as computational effort, it is a function of the block size and the burden of proof to validate the transactions which are capped at a certain number per block. So, at some point the mining becomes less rewarded and many will disappear from circulation. As it is, the majority of mining takes place across about 4 huge operations, perhaps undermining the decentralised goal of the currency itself.

      1. Rewrite

        Actually the difficulty is adjusted once every 2016 blocks with the specific aim of maintaining a 10-minute block time. The adjustment goes both up and down. A little bit of searching can get you painful amounts of detail on the specifics and the history.

        A published table at the bitcoinwisdom site, which I suspect to be accurate, shows the upward adjustments as high as 21.39% and downward adjustments as strong as -6.09% in a table listing the values (and changes) over the last year and a half.

        In case I’m not being clear–the overwhelming majority of the computational effort involved in bitcoin mining is makework. Deliberate padding is automatically added to the base requirement to balance the computational resource currently deployed to this task to the desire rate of completion (and thus the currently desired rate of new coin production–which is on a scheduled rate decline toward the final cap).

  2. Rewrite

    The article is good, but a bit superficial in the analysis by the experts. Bitcoin is the surface of the story – the brand name that gets the space recognised. To understand blockchain and other future currencies the article needs to consider the new breed of companies tackling real world problems with the use of decentralisation.

    1. Rewrite

      Fair points Chris. It’s somewhat tricky to go deep with prediction articles. And yes, there is a larger ecosystem beyond Bitcoin, but the story is about how Bitcoin itself has risen in popularity and where it’s heading. The story is not about blockchain or cryptocurrencies.

      However, there’s a section about blockchain which explores the humanitarian work of the World Food Programme and how blockchain helps to tackle the refugee crisis in Jordan.

      Nonetheless, WikiTribune will be doing more stories beyond Bitcoin in the future. I’m happy to hear your suggestions on which companies are doing great work in this space. For instance, I’ve been hearing a lot about this one called IOTA, which is a cryptocurrency that doesn’t even run on the blockchain.

      1. Rewrite

        IOTA is fascinating, Ripple (and their currency XRP) is perhaps more tangible for an audience and the comparison between the two would show the depth of the market and range of projects that are happening. From the machine to machine transactions of IOTA, to the tech that is assisting banks to facilitate cheaper payments with Ripple.

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