Author: Bitcoin podcast Block Digest Lianchuang Shinobi; Translated by: Wuzhu, Golden Finance

This article is an article written by Shinobi ten years ago, discussing the fact that Bitcoin is in 2020 What's it.

The first article in this series of articles can be viewed by clicking on "How do practitioners view the BTC ecosystem in 2010 ten years later? 》

The second article can be viewed by clicking on "How do practitioners view the path of BTC construction in 2010 ten years later? 》

The third article can be viewed by clicking on "How did practitioners view BTC financial transactions in 2010 ten years later? 》

Review the history of Bitcoin. I promise that some events will come to your mind first, such as milestone events. If you keep thinking, your brain may start filling those milestone events as anchors from there.

Don't treat these as hard predictions, ignore the exaggerated descriptions I can't stop myself from adding everywhere, and note that these don't have dates. I'm going to make a list of "watershed moments" or macro shifts that I think will almost certainly happen or begin in the next decade.

Bitcoin has created an inherent contradiction within the current regulatory and legal framework, at least in the United States and anywhere the United States effectively issues orders, which involves how Bitcoin itself works and regulations and the two main themes of law.

KYC/AML Laws: These laws exist to ensure that financial institutions understand the individuals they are dealing with to prevent criminal activities, money laundering or terrorist financing through the use of their services. This requires invasive information collection, tracking and exchange of the above information between different institutions. It needs to throw privacy out of the blue.

Financial Privacy Law: The reason why things like KYC/AML exist like the United States are because of the Financial Privacy Act. There are legal restrictions on the circumstances and conditions for obtaining citizen financial records. These laws came after a Supreme Court case challenging KYC/AML law (ironically known as the Bank Secrecy Act) that ruled that financial records belong to institutions rather than clients.

Did you find the conflict? All of this is based on the view that records of financial activity are kept privately in privileged silos that are not visible to the public. Visiting is not the same as public access. This is not how Bitcoin works. All information on the blockchain is clearly visible and can be seen by everyone. So, while financial institutions must enforce KYC/AML laws and identify their clients, do they also need to protect the privacy of their clients’ financial activities unless there is a legal order to disclose this information?

We are in the stage where privacy tools are beginning to really work in the Bitcoin ecosystem, and we are already seeing some behaviorIndicates that the Bitcoin exchange marked this behavior as “bad behavior”, resulting in the account being censored (and possibly closed and/or seized later) in response to the use of privacy tools. Now, I can't see that the United States will repeal all KYC/AML laws in the near future, but I do see a very strong argument against exchanges and institutions making this kind of customer that they use privacy tools reaction.

The argument is simple: they have the right to protect their privacy from the perspective of the general public. The system will not keep all records confidential by default and will only be disclosed to the authorities selectively. According to the architectural requirements, everything is public and publicly verified. So, if I have the constitutional privacy rights under the old model, do I have no privacy rights under the new model?

Say it again now: This is definitely not a strong enough foundation to overturn all the requirements of KYC/AML and identifying customers. But I do think this is a strong enough foundation that could cement the Supreme Court’s ruling that businesses must not review or target customers simply because of using privacy tools in activities that are not related to these businesses. If things continue to move in the direction they seem to be developing, I think this legal challenge to such practices is inevitable. What will happen if I'm right? I think we'll find out if I'm right.

Besides prices, mining may be the easiest factor to show the average person how much progress Bitcoin has made in the past decade. Ten years later, from consumer-grade desktops to data centers. This change will continue to happen quickly, and part of the next transition is already underway. Vertical integration. Things range from desktop CPUs to GPUs to special ASICs. But these ASICs are still something that retail consumers, small group buyers and small professional operators can easily get. It's still easy to get efficient and latest hardware at different scales (although the price depends on your size).

This will change and signs have begun to appear. As companies begin to prepare, mining will become increasingly difficult to make profitable for retail and small market participants (ignoring professional hosting arrangements). This market is still very unstable, with miners from producers to equipment operators having very large capital investments and can be very dangerous during market downturns. Things tend to go crazy when the market fluctuates upwards, and for those who are not prepared, things can be very bad when the market fluctuates downwards. This time, things will become very serious when it comes to minimizing and managing risks.

Bitmain’s financial situation during its IPO in Hong Kong shows how they made huge profits and then turned around and continued to take huge risks that just happened to work in the bull market. This hit them hard, and all manufacturers trying to make IPOs have conducted IPOs to varying degrees due to overall market volatility, and the Hong Kong Exchange rejected all manufacturers under this overall model. thisThe overall market for which these companies compete is considered too risky and is not suitable for businesses that are directly exposed on the Hong Kong Stock Exchange. As Bitcoin grows on the order of magnitude, this cuts off the capital they need to continue to expand. This is very bad.

Bitmain’s response in adaptation (ignoring the recent internal “coup” attempt) is to take action to reorganize its business to adapt to this painful lesson. They have many self-operated mines, which can operate mining equipment by themselves and host other people's mining machines. These types of operations have expanded internationally, including Texas and Washington in the United States and Quebec in Canada. The strategic value of operating these mines is to create predictable electricity costs and have a dual choice of deploying your own hardware for mining or selling capacity to other miners. Now, if they combine these… they position themselves as 1) making and selling shovels in the metaphor, 2) mining with it themselves, 3) selling shovels to others and trying to sell them where they mine . This is exactly what Bitmain does with its new service.

Wu Jihan also established new financial services and tools provided by Bitmain to help customers hedge some risks by taking risks on their own, as well as other more detailed arrangements that are beneficial to Bitmain. Given Bitmain’s internal struggle, it is not clear whether this particular strategy will continue, but it shows a recognition and response strategy for the risks inherent to this level of market volatility. This is absolutely necessary for the long-term survival of this area of ​​the ecosystem.

This is the direction of future development, and there is huge motivation behind it. Participants who play different roles in the mining industry will slowly begin to try to expand and process every layer they can handle internally: Production | Research & Design | Hosting | Operations | Electricity Procurement | Financial Risk Hedging | Lobbying. As economies of scale continue to put pressure on participants in the mining industry and streamline them to the most streamlined and most efficient level, they will begin trying to integrate as much of the entire stack internally to be able to control and hedge financial risks.

This economies of scale will have a second-order effect, which plays a role in Darwinian way among all miners. Will start diving into the base layer and begin to realize that they can exert influence.

We need to be very, very aware of this dynamic. Unless you find Harry Potter's wand and magic spells that instantly bring down all the world, they're there and we have to deal with them. There are only two real strategies to solve this problem, and one of them is not feasible.

The unfeasible strategy is to try to transfer things completely from the power grid to the black market. it's out of the question. You are talking about hidden data centers, and the cumulative network energy consumption is equivalent to the entire scale. There is no choice, if you want to try changing the fork with POW to solve this problem, good luck. You know where the door is.

The feasible strategies are at the same time: 1) If possible, promote where these businesses are located at the most local level2) promote the localization of sovereignty and power as much as possible at the non-local level. If Bitcoin holders and other relevant groups are not vigilant and actively involved in this area, the initial local peg will lead to a state peg, which in turn will lead to a federal peg on the mining base (power supply). These hooks are undoubtedly already there in some places. If social-level actions cannot effectively deal with this issue, we will fall into a very dangerous situation:

Finally slide to level supervision and directly interfere with the operation of mining business.

If Bitcoin’s value and market correlation continue to grow and expand exponentially, then the situation is that whichever has the cheapest energy reserves will dominate the mining industry.

This can easily evolve into a superpower dynamic similar to mining allocation, which, if achieved a stable (or "sufficiently stable") balance, could eventually lead to a more centralized and restricted access state. , not conducive to the full potential of Bitcoin.

This aspect of the Bitcoin network/system is the weakest in resisting the threat of real-world "physical space". Ultimately, if a people authorize it to do so, they will appear and confiscate your mining equipment. This must be an extremely resource-deficient or a very unique geographical area, otherwise it is unrealistic. The only way to solve this problem is social.

And coercion is not the only mechanism to interfere with Bitcoin. Distorted motivation is another means. Chain Anchor is a protocol proposal proposed by MIT to effectively bribe miners to initially prioritize transactions through KYC and then specialize in mining. The ultimate goal is to isolate non-compliant blocks. These distortions of economic incentives can only be solved by corrections to economic incentives.

This is the "transformation" I have the most confidence in this article. I won't call it a short-term "Oh my God, we're done!" urgent, but this is not a problem that bitcoin users can take it lightly.

I talked about Binks above, and the technology to “port” a subset of Bitcoin properties to Binks, and the motivation to do so. This is a judicial arbitrage game with huge potential profits. But considering that it is the 21st century now, this could have an interesting potential twist: cyberspace itself can be said to constitute a jurisdiction. Does anyone remember the dark web market? Therefore, "New Switzerland" may have two ways of development: a physical jurisdiction that legalizes financial services without KYC or KYC streamlined versions and provides a safe haven for such businesses, or a "outside jurisdiction" (with Quotes are because the server is hosted somewhere) dark web business.

Let's take a look at a real world decision to become a Bink haven jurisdiction without KYC or streamlined KYCarea possibilities. First, Bitcoin is a borderless global currency/settlement network with which anyone with internet access can interact. Therefore, the potential customer base that can deposit and withdraw Bitcoin in one of these blogs is anyone in the world who has an internet connection and can get Bitcoin. This is the potential inflow of capital that may attract in the craziest optimism. That's why you can charge taxes. Second, given a host jurisdiction, these binks can be legally registered and become responsible entities. Even without KYC, encryption technology can provide the basis for fraudulent assertions and refutations of these assertions, at least in terms of the basis or initial filters, where legal disputes can begin. These binks can provide anonymous accounts denominated in BTC, anonymous and untraceable online cash denominated in BTC, loans, custodial services, oracle services for complex smart contracts executed by Bink. All financial services in the traditional world are available via smartphones, and either without KYC or very little, it feels like 2013, and then there is some icing on the cake.

This is a huge potential profit for a jurisdiction. As a jurisdiction, a legal system that has the potential to build enough trust to allow international clients to truly enjoy this. OK, so from a customer perspective, how do you deal with the issues that arise between you and Bink? If you are a citizen of the country, it is simple: you take legal measures. If you are not a citizen? Well…it’s complicated to take legal action in an international jurisdiction to say the least. And expensive. But if we are in this stage of Bink operation, then we assume this hope it will work and attract businesses, right? Therefore, this asymmetry between citizen Bink clients and non-citizen Bink clients can be explained and legislation is developed to alleviate the complexity of non-citizens’ handling of their disputes with Bink. More importantly, this legislation can actually be implemented equally for citizens and non-citizens.

Another question is how will the rest of the world react? The United States especially likes to tell the world how to manage their affairs. Especially their financial affairs. How much progress can you really push before the U.S. drones hit you? Unless someone tries to do this, no one will know.

With that being said, I think the jurisdiction where this situation may actually happen will be one of the very few unique jurisdictions. It may be that North Korea, Iran, Venezuela and other places that are subject to severe sanctions and are excluded from the global financial situation. Despair is a powerful driving force. Either the division movement in Spain or Italy succeeded, or France slowly boiled until we saw the French Revolution in the 21st century. Great turmoil will change greatly afterwards. What if the King of Thailand decides to host a bink without KYC (or KYC-lite)? Thailand is inEconomically, it has been heavily dependent on foreign tourism income. Why can't foreign Bitcoin deposits be accepted? Tourism has had many negative effects on the country…unless you think the United States will invade, Bitcoin deposits won’t appear.

I'm not saying that this kind of thing is likely to happen in such a relatively short period of time in the next decade, but I don't think this idea is absolutely crazy.

Okay, let's look at the "dark web, unknown jurisdiction, total anonymity" scenario. As far as deposits and clients are concerned, the situation is exactly the same as the former, who can handle BTC withdrawals and deposits for anyone in the world. However, illegally operated Bink cannot legally register in any jurisdiction and cannot establish any legally responsible entity. This is a significant difference in trade-offs compared to Bink escrows entrusted by accomplice jurisdictions. This is a place that is harder to try to bootstrap the bink network effect because it accepts your network cash and deposits rather than direct BTC settlement. Bink’s network effects are completely rooted in trust in Bink operators. This is much easier as a legally registered and responsible entity for a known jurisdiction. The pattern of your relationship with Bink is already very clear. This is the opposite of how dark web bink works.

Dark web scams do not have to bear legal liability, seek help, and take legal procedures, and nothing. The guarantees you get can be enforced through encryption, everything else is enforced through blind trust, without recourse. That's it. This brings a major guided problem to this scam. If you cheated on the client and they had no right of recourse, how do you make the client trust you and hand over their deposits to you? In my opinion, this dilemma guarantees that this scam will never develop to the scale of a scam with legal status in a safe haven jurisdiction.

Dark web scams may never be used by mainstream users, they will be businesses that are only patronized by users under very limited circumstances. People engaged in dangerous and illegal activities. fraud. Those who are under scrutiny and completely excluded from the traditional financial system. I just feel that the average person wouldn't be willing to risk depositing BTC into a bink that they have no legal recourse and are only related to pseudonyms. It is now possible to create a stronger guarantee than it is now through encryption, but this is starting to enter a strange territory. As I said above when talking about possible technological developments over the next decade, there is a possibility of constructs that completely blur the boundaries between services and protocols. If everything goes well, maybe dark web bink can make up for the difficulty of building trust by building stronger encryption protections.

I think something like this is likely to start working in the next decade (especially a simple trust-based dark web bink), and the only question is how rampant will the exit scam be?

Bitcoin is evolving into a currency, something we all are witnessing and participating in. From speculation to value transmission, and then to the accounting unit. A core and absolutely necessary dynamic to accomplish this evolution is the massive liquidity arbitrage between Bitcoin, fiat currencies and goods and services. This arbitrage will enable businesses to truly accept and use Bitcoin. Once Bitcoin is large enough and relatively stable, businesses can accept it and pay suppliers without the kind of volatility risk that currently exists. The closer the stability of Bitcoin is to the corresponding fiat currency, the safer it is to accept and use Bitcoin directly, rather than selling it as fiat currency immediately. Arbitrage traders will trade these gaps, and companies may arbitrage these currency pairs themselves! Is it better to accept the return of Bitcoin or fiat currency? Use discounts to inspire. Is it better to pay for suppliers in Bitcoin or fiat currency? That's what you have to make a decision. This dynamic is what really pushes Bitcoin into the currency field.

Now, the world's geopolitical balance is changing rapidly. After 9/11, the United States has played an imperial role in the past 20 years, destroying many, forcing the world to isolate others. We obviously started to see other reactions to this, starting to develop alternative settlement systems and reduce dependence on the US dollar. and Russia have begun to establish its own SWIFT alternative to settle payments. They are even trading oil in non-USD currencies. Venezuela has even tried to facilitate oil trading in its own centralized “cryptocurrency” Petro. The world was tired of the excessive intervention of the United States and began to take action to create platforms and systems that were not under the control and scrutiny of the United States.

This trend will undoubtedly continue and inevitably begin to affect Bitcoin itself. Bitcoin <> Fiat Currency <> There is no reason why arbitrage dynamics between goods and services must start from the retail market. In fact, I think it's likely not. Over the next decade, I am very confident that an alliance with the United States will begin trading and closing oil in bitcoin. If Bitcoin’s market cap, liquidity and price continue to grow at a historical rate, this is inevitable. Protocols and networks can handle it, products and services that hedge the risk of volatility are increasing every year, and overall liquidity will provide more utility than single non-dollar fiat currencies and interesting “crypto” currencies.

Events like this will bring large-scale capital inflows and price fluctuations that you can't imagine, and I think the possibility of this situation not happening in the next decade is extremely low. Fasten your seat belt.

The next decade will bring great changes and developments, and it will surprise you. I really don't think many people in this ecosystem really understand this. Obviously, the people who create things, the CEO of the company, the participants who actually participate in these transformations and changes are all aware of it. It is also safe to say that the smart and balanced observers also know it. But most people who hold bitcoin or take part in or watch this field at will…I don’t think they know anything.

The past decade has been a transition from crypto-punk daydreaming to playing in the minor leaguesChange. The next decade will be a transition to the major leagues. Have we all screwed up? Did we hit a home run? If we hit a home run, will anyone get hit?

Who knows. I think people who are good at observing can see the inevitable results of the megatrend, see the megatrends themselves and predict the different directions they may go.

The situation is very serious now, and it requires serious action and thinking.