A few days ago, in a closed group from my University dedicated to Crypto, someone asked a question you might have already heard before: When is Bitcoin going to die? It was quite an interesting question, and even though I’m not too big on Bitcoin, I thought about it for a while.

I recalled a few weeks ago I was finally convinced of the usefulness of Bitcoin: being a global Proof-of-Work (POW) cryptocurrency, a store of value if you will. Now, before all you Satoshi zealots jump at me claiming “That was not Satoshi’s original vision!” I get it, but the man is not around anymore, things change, and this cryptocurrency is evolving as is the whole crypto-space and the scope of what blockchain technology can achieve.

In any case, you might be wondering, what was it that convinced me of that? Like many good analyses from this space it all came from one man: Andreas Antonopoulos (I had to double check I was not butchering his name). In one of his Q&As he answers a question regarding the energy consumption and sustainability of mining, proposing that Bitcoin could be considered a green coin. Now, part of this argument assumes that Bitcoin is ready for global scale operations, which anyone would tell you it is not, but that’s not the point I want to make here.

Andreas declares that mining is a way to decentralize energy production on a global scale and it could be used to amortize the costs of energy projects, and especially renewable energy projects all around the globe. This is justified when we think about energy projects that are built considering the projected demand at that geographic location, which means you have an excess of energy that in turn leads to a lower cost of energy, making these places ideal for mining. I recommend you watch Andreas’ video for a clearer and more thorough explanation on this. He also claims that we could probably not afford two Proof-of-Work coins in the planet, meaning that once a global POW coin settles all other POW projects will have to either adapt by changing to either Proof-of-Stake (POS) or other low energy model, or die.

Now this is all good and dandy, but this just left me with even more questions! The following is my attempt at answering these, it is my personal analysis of the situation, and as such I’d love it if you could chime in and share your own viewpoints.

Why do we need at least one Proof-of-Work cryptocurrency?

In my opinion, what we need to consider when we ask ourselves this question is:

What gives cryptocurrencies their value?

Well first, and nowadays the most obvious reason, there’s speculation. With Bitcoin hitting the mainstream and people literally mortgaging their houses to buy crypto, a huge part of the value Bitcoin and crypto in general has is due to heavy speculation.

Second, we have the underlying technology behind it. This is where Bitcoin pioneered, and as a pioneer in the industry being almost 10 years old is where it’s lacking the most. The cracks are beginning to show in terms of scalability, but this is not an issue isolated to Bitcoin. Think of almost any other cryptocurrency managing the transaction volume Bitcoin is dealing with: it’s going to get clogged and the high demand is going to make transactions expensive. Of course, there are projects proposing solutions to this problem but none of them have been really put to the test just yet, and it is probably going to be a really long time before we can stress-test these networks for global scale operations.

(You can access a Python tool to check out and compare these and other variables of multiple blockchains yourself at: https://github.com/Tino-HG/Steemit/tree/master/Transactions_per_day)

Lastly, and most importantly to answer this question, electricity costs. Proof-of-Work gives these coins an intrinsic value directly related to the cost of keeping an operational network. This assumes, nonetheless, that the project has at least technological value and, in some cases, just a speculative value (okay, maybe in MOST cases nowadays), otherwise you would be simply wasting energy.

We can also think about Proof-of-Work as a means to “materialize” digital currencies, serving as a sort of link between the digital and physical world. This gives Bitcoin (and other POW currencies) a value which I believe is going to play a key role in the switch from physical currencies to virtual currencies: consensus is just not valuable enough to make this switch.

Adopting Blockchain worldwide

I believe there are three fundamental ways in which Blockchain technology will be adopted on a global scale:

First, we have the decentralized (or semi-decentralized, see: Lightning Network) model, in which both the ledger and value are decentralized. This model is the one adopted by most POW currencies, you have a decentralized ledger to keep track of a value being generated in a decentralized manner through mining and the use of resources to keep the network operational and secure.

Second, we have the centralized value model, in which there is a decentralized ledger, but the value of the currency is being backed by a centralized entity. Think of having a gold backed crypto or a fiat backed crypto (although I doubt this would be too good of an idea) operating through either a Proof-of-Stake (POS), Delegated Proof-of-Stake (DPOS), Proof-of-Activity, or an open source Proof of Elapsed Time Consensus Protocol, among others I might not know about or that haven’t been in invented yet. Clearly this model has its flaws, it goes against what the original vision of Bitcoin, and the big players would most likely still be the big banks and financial institutions. The user no longer must trust in the bank’s infrastructure, but they have to trust in the existence of the alleged backing asset being held by them. As you can tell this is not too different from the current banking system, except for the implementation of an open and decentralized ledger. Furthermore, I believe this to be the least likely of the three potential models proposed, since it implies institutions would have to put a lot of faith on users maintaining their network operational and secure.

Lastly, and what I think would be the worst-case scenario, we have a completely centralized model in which both the ledger and the value backing the currency are centralized. Think of state issued crypto-currencies, or currencies issued by financial institutions with a closed, proprietary infrastructure and protocol. This would be done to achieve the level of security and efficiency Blockchains might have in the near future versus the current banking infrastructure. This model could also be deployed to complement the current banking systems, meaning it would not be much of a revolution, especially for the end user.

Even though these three different models could use blockchain technology to achieve the same purpose they are diametrically opposite. On one hand we have a model which promises the complete decentralization of wealth distribution, a complete revolution in human history; while on the other we have models which determine that wealth distribution and currency issuance is to be trusted to a group of privileged institutions, effectively maintaining the status quo.

Why do we need a global POW crypto-currency, then? Think of it this way, if financial institutions were to introduce a model to modernize their global infrastructure using blockchain technology, why would they introduce a power-hungry consensus protocol to their network? Furthermore, it would make no sense to implement a protocol tailored for decentralization on a centralized network, making their infrastructure unnecessary bulky and convoluted.

Therefore, we need a global, mineable, POW cryptocurrency to at least dream of ever having a way to decentralize the issuance and peer-to-peer transfer of a globally accepted currency.

Having answered that question, an obvious follow-up should be…

Why would Bitcoin have to be the One Coin to Rule Them All?

It doesn’t.

With how fast things move in the crypto-space (especially prices) we tend to forget about how early we are in the life of this technology. New developments come at a fast pace, and some of them could change the outlook for this whole market in a whim.

Nevertheless, what Bitcoin has going for it at the time is the size of its network, and most importantly user adoption and market penetration. In the race to be “the one true coin,” many cryptos promise better technology, faster transactions, cheaper fees, and even a handful of gimmicks which in the end don’t add much value to their projects other than differentiating themselves from others just for the sake of it. While I believe that some projects are real contenders for the throne Bitcoin is currently sitting on, most of these would be better off as a layer on top, being an aid to the system’s failures and oversights and solving the problems the POW layer has (namely, transaction times and fees if we’re thinking short term).

That being said, we might see competition with blockchains which offer better and easier integration with different platforms or even a level of automation in the form of natively deployable smart contracts. Ethereum would be a perfect candidate for the crown (at least in my opinion) if it weren’t for the fact that it is soon changing its consensus protocol to a derivative of POS. I believe that once the real-life applications become more obvious to the end user we’re going to see the real competition flare up.

There are still many issues to be solved before either Bitcoin or any of its competitors are ready for full-scale worldwide adoption, so before any of those are ironed out it might still be too early to tell whether Bitcoin will fade into obscurity or not. But in the meantime, one thing is for sure: if it ever happens, it probably won’t be any time soon.