Bitcoin no longer aiming to be just digital gold
Bitcoin has gathered renewed attention in recent months. First, its successful Spot ETF launch was a major event. Bitcoins price has been recovering its bear market losses for months.
Now Reddit, the social media platform that is filing for its IPO confirmed in its filings that it holds Bitcoin on its balance sheet.
Most traditional investors view Bitcoin as a type of “digital gold”. Due to its technologically induced scarcity, its permission-less nature and its easy transferability it arguably does a better job of being gold in many ways. Bitcoin might not have proven itself as a short term inflation hedge.
But many still see it as a hedge against the relative decline of the dollar-denominated world financial system.
What Bitcoin has not traditionally been known for is its technological innovation. It does not compete with Ethereum or other smart contract Blockchains for the use case of being the “world computer” on which decentralised applications can run.
Bitcoin’s code is written in a scripting language that is not particularly suited for complex computation. Or at least that was the case until now.
One of the stories of this cycle is that bitcoin, the old “horse” of the crypto world, is learning new tricks. Nifty builders found ways around the technical limitations.
They have started to build scaling solutions on top that will enable significantly more use cases. NFTs on Bitcoin, known as Ordinals, have started to take off.
There is now also a token standard, BRC-20, that allows launching tokens on Bitcoin.
While Bitcoin traditionalists, including some core developers, are fuming at what they perceive as spam, others see the opportunity. Bitcoin is still the most decentralised and, due to its market capitalisation, most secure Blockchain. Also, the new use cases drive strong growth in transactions.
This in turn benefits miners who earn more fees. A virtuous cycle could ensue. Until that happens however, builders need to overcome many more technical hurdles. T
he hardest hurdle might be the social one: at least some of the traditionalists will need to buy into this new vision to avoid a repeat of Bitcoin’s 2017 community ‘civil war’.