Jim Harper is Vice President of the Competitive Enterprise Institute, where he works to adapt law and policy to the information era. He served as Global Policy Counsel for the Bitcoin Foundation in 2014.

This article is an exclusive contribution to the series of opinions rendered in 2017 by CoinDesk.

2017 was another gloriously miserable year for bitcoin.

As in 2016, the gains in the price of bitcoin belies the deep deficits in the world of cryptocurrency. The stock of Bitcoin's social capital, the human institutions around this most important technology, remains terribly deficient, and Bitcoin's ability to deliver anything other than wealth to "HODLers" has fallen precipitously.

Do not get me wrong: the wealth is great! But some of the biggest potential benefits of Bitcoin – global financial inclusion, significant gains for financial confidentiality, stable money supply for those who do not have it and increased freedom – seem more distant than a year ago. or at any point in the history of Bitcoin.

Big gains, bigger pond

Yes, bitcoin has increased its price relative to the trust currencies this year. By many.

Increasingly recognized as an asset class uncorrelated to most others, bitcoin and crypto should be part of the portfolio of any savvy investor. This bodes well for Bitcoin and for investors. But, the "market capitalization" of bitcoin deserves to be put in perspective.

Among the arguments in favor of conservatism in scaling up bitcoins this year, there was a value of $ 30 billion (then $ 60 billion, then $ 100 billion) at stake. These are big numbers, until you consider that the "market capitalization" of the four largest currencies in circulation is about $ 22.5 trillion.

The "size" of Bitcoin is less than 1% of mega-currencies, maybe half if you count everything else. If it was possible to measure the effects on humanity, bitcoin would probably be even smaller than tenths of a percent.

The pocket calculator has had a greater influence on human progress than bitcoin. Velcro has improved human well-being more than cryptocurrency.

Given its potential, it is an overwhelming condemnation of the influence of Bitcoin up to now.

Social capital of Bitcoin

Every invention has the potential to change the world to some degree. Most of them do not do it. This is because they lack social capital.

Social capital is "everything else" around a company, a technology or a product: knowledge of it, adoption of it, customs and favorable laws , integration into existing human institutions, etc. At one point it was necessary to build social capital around bananas.

Bitcoin still has surprisingly low social capital. Few people know it. Fewer still think that it is beneficial or viable. Even less hold it, let alone use it. The legal environment may be a tame threat at the present time, but the general lack of orientation towards Bitcoin keeps this threat alive.

Maybe these assertions sting, but do not blame the messenger: Bitcoin simply has not reached the level of integration into society that it could and should have now. This means that when the price of bitcoin decreases from all the heights it reaches, it sinks deeper and stays low longer.

There is a shallow reservoir of real institutions supporting our future crypto.

Scaling to low heights

The debate on scaling is responsible for much of Bitcoin's current failure versus potential, and it illustrates the lack of social capital to shovel.

Again this year, the disputes over how to cultivate bitcoin consumed a tremendous amount of energy that would otherwise have been used to build bitcoin along other dimensions. The slowness of scaling up certainly results in adoption.

Now, adoption is not the only goal. But the scaling up debate has been so acrimonious because neither Bitcoin Core, the main team of project developers, nor advocates of the main alternatives have been able to chain and unite. communicate a clear philosophy that drives their goals for bitcoin.

They did not describe in an accessible way how their technical decisions reach the right balance among the priorities of the bitcoin community. (These things are not easy to do, of course.)

Instead, SegWit2x was a slugfest that has now been "suspended" in bitterness.

Politics, then progress

But along the way, a path to progress has appeared in the bitcoin country.

The weeks leading up to the much-anticipated 2x fork had all the sensations of a political campaign. With every argument exhausted, there was nothing left to do other than ranting.

The debate has moved inexorably towards the staff. There was even some sort of "October surprise", with the news that the main developer of SegWit2x, Jeff Garzik, was involved in a new cryptocurrency called Metronome. (As in the political campaigns, this development was shocking or not shocking, according to the pre-existing views of Garzik and SegWit2x.)

But as these political storms collapsed, bitcoin money was introduced to the world, almost like a side note. This forked version of the bitcoin block chain includes an 8 MB block size limit and the SegWit changes are removed. After a brief spurt of interest, Bitcoin Cash began his long, slow surprise by continuing to exist.

Then, as part of the collapse of the SegWit2x effort, bitcoin money has become Core's main competitor for bitcoin leadership. Thus, a political campaign has ended in competition.

Bitcoin Cash does not try to change the software that miners and nodes run at the same time, as did SegWit2x. It must work to gain market share: the miners, the nodes and the users who adopt this version of bitcoin.

Two bets

It's a business challenge, with the vectors of competition: transaction costs, coin prices, transaction speed, mining rewards and omnipresence, network size, censorship resistance and other essential dimensions of the security.

Brand recognition is one of them. That's why "Bash" is a serious insult to bitcoin fans.

In silver, network effects are a dominant dimension of quality, if not the dominant dimension, and Core l 'a. So, bitcoin money has a very long and difficult challenge before.

But the bet put forth by bitcoin cash advocates is that the value proposition of a rarely negotiated and expensive digital gold is weaker than a widely used currency that maintains enough of the same properties. 39, a currency based on blockchain. Bitcoin Core is a security bet above all else.

As we end this gloriously miserable year in bitcoin, we should thank and say good luck to all competitors.

Their efforts to retain or seek the lead will strengthen bitcoin, and if they build the social capital of bitcoin, they will strengthen bitcoin all the more.

Disagree? CoinDesk is looking for submissions for its 2017 series in Review. Send an e-mail to news@coindesk.com to present your idea and make your point of view heard.

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