AMSTERDAM—A year in Internet time is an eternity, and that goes for the Internet's native currency as well. At the Bitcoin 2014 conference here last week, the rapid evolution of the digital currency's ecosystem was in full display.

Like last year's conference in San Jose, over 1,000 enthusiasts, developers, entrepreneurs, venture capitalists, and lawyers came together for what is the definitive global Bitcoin summit of the year. But the vibe and the crowd seemed different this time. Fewer ideologues and more VCs roamed the show floor, the hallway talk was more of regulatory compliance and business models than cryptoanarchy. Yet this shouldn't be surprising.

In my dispatch from the conference last year, I noted three big take-aways: that Bitcoin had started to grow up as hobbyists gave way to professionals, that regulation was inevitable, and that Bitcoin is about more than payments. Those trends continue unabated.

Over the course of the past year, both the House and the Senate held multiple hearings on Bitcoin, state bank regulators began developing rules to govern the emerging digital currency industry, the Bitcoin-powered anonymous black market Silk Road was shut down by federal authorities, and Mt. Gox—the once top Bitcoin exchange and marquee sponsor of the 2013 conference—imploded and filed for bankruptcy. At the same time, over $100 million have been poured by venture capitalists into serious Bitcoin startups looking to build the next Visa. In a short year, Bitcoin matured and professionalized considerably, overcame one bad rap (it's only good for buying drugs), gained another (good luck not having your bitcoins stolen), and got a tentative, awkward embrace from politicians and regulators.

One symbol of this evolution is Circle, a new bitcoin bank unveiled at the conference, which aims to bring bitcoin payments to the mainstream by making Bitcoin look more like traditional financial products and even offering fully insured deposits. Its CEO, Jeremy Allaire, has ruffled many a libertarian feather by frequently making the case that Bitcoin will not see widespread consumer adoption without regulation, including regulations that target anonymity.

In some ways, Bitcoin is following the same pattern as the Internet itself. In the days that John Perry Barlow was writing "A Declaration of the Independence of Cyberspace," we connected to the Internet via dozens of local mom and pop ISPs, and the sites we visited were independently hosted labors of love. It was an unregulated—and seemingly unregulable—anarchic space. Today, however, we get online via Verizon or Comcast to access Facebook and Google, all of which are co-opted in some way by the NSA. The cold logic of economies of scale tend to lead to greater centralization, and thus more regulation, and this will likely happen to Bitcoin, too.

For example, Coinbase, one of the leading bitcoin wallets, is also one of the leading merchant payment processors. So, when a consumer with a Coinbase wallet sends money to a friend who also has a Coinbase wallet, or pays a merchant who takes Bitcoin payments via Coinbase, the transaction takes place "off-blockchain," or outside of the Bitcoin network, not much differently than PayPal. If Bitcoin gains mainstream acceptance, we could end up seeing most transactions happen internally within a small number of dominant service providers. The wider Bitcoin network could just be used for settlement, say between Circle and Coinbase.

Such increased centralization is anathema to Bitcoin's more ideological proponents. It could be seen as recreating the same regulated banking system we have today, albeit more efficiently, and that's not what they signed up for. But while we may see the Bitcoin ecosystem consolidate to a few dominant firms eager to satisfy regulators, this is no reason to despair. Unlike the legacy financial system, Bitcoin is an open network, which means anyone can connect to it directly. A new entrant doesn't need permission before he can compete with established players, and two parties running wallets on their own devices will always be able to transact directly without the possibility of prior restraint.

An open network also means permissionless innovation—the ability to build on top of and extend Bitcoin in new ways. As I said last year, Bitcoin is about much more than just payments, even though that's where all the VCs and startups are focused. This is why in my mind the most exciting announcement at the conference this year was Lighthouse, a new decentralized crowdfunding application.

The app essentially does the same thing as Kickstarter. You announce a project and a funding goal and solicit pledges from supporters that will only be collected if you meet your goal. The difference is that because Lighthouse is decentralized, there is no intermediary Kickstarter-like company managing the crowdfund. There are two important consequences of doing it this way. No company means no fees, like the 5 percent cut of any money raised that Kickstarter takes. And perhaps more important, no intermediary means no one to tell you what you can and can't raise money to do. Last year, Indigogo cancelled Cody Wilson's crowdfunding campaign to finance the design of a 3D printed gun.

Mike Hearn, a former Google engineer and a prominent Bitcoin developer, built the application to scratch an itch: the slow development of Bitcoin's advanced features. He says that we have long known about Bitcoin's cutting-edge capabilities, including decentralized crowdfunding, micropayments, peer-to-peer credit markets, smart property, and much more. But while the protocol supports these capabilities, no one has built the applications and infrastructure to take advantage of this support and make the potential features real.

"To make these features come alive takes work," Hearn says, "and because they're inherently about decentralized infrastructure it's often hard to find anyone who will pay for that work. With no way to own the infrastructure once built, many traditional funding models can't function."

The software that needs to be written and released are public goods, and Hearn hopes crowdfunding will incentivize developers to do that work. Chief among these his target audience is himself. Hearn has created a company, Vinumeris, through which he will make and release next-generation extensions to Bitcoin if he can successfully raise the funds to pay for his time. His first project? Lighthouse itself, which will not be fully released unless it is crowdfunded.

So this year's takeaway is that while economic and political realities may drive Bitcoin toward more centralization and more regulation, the forces of decentralization are alive and well and pushing in the opposite direction. While the rebel vibe may wane, the revolution that Bitcoin unleashed is still pulling the world toward freedom.