Author: Bitcoin Podcast Block Digest Co-founder Shinobi; Compiled by Wuzhu, Jinse Finance

This article was written by Shinobi ten years ago, exploring what Bitcoin would be like in 2020.

The first article in this series can be viewed by clicking 《How did practitioners in 2010 view the BTC ecosystem ten years later?》

The second article can be viewed by clicking 《How did practitioners in 2010 view the path of BTC construction ten years later》

The rise of Bitcoin banks (or 'Binks') is happening. Germany has approved banks to start custodying and handling Bitcoin and Bitcoin accounts for clients from 2020. Who will be the first?

This is something that will drive people crazy, I understand why, but I ultimately don't think this will happen, and it's a naive and childish idea. First of all, the existence of banks is not just about holding your money and processing payments for you. They provide loans. They do this for a reason, and it's a useful thing for the economy and society, it provides a return for liquidity providers (with risk), and allows entrepreneurs to pursue things they otherwise couldn't afford to fund. This alone guarantees their continued existence. Lending is based on trust, and they need coordinators and personnel to manage and track them. They need a central point: the bank.

That said, I guarantee they will thrive solely on custodying Bitcoin and processing payments on their own private second layers. People like having someone to call for customer support, they like having recourse when things go wrong, they like having experts handle things they're not good at. That's why people have Google or Facebook accounts instead of running their own SMTP servers or decentralized social media nodes. Now, I absolutely believe things will trend in that direction, and we've already seen the beginnings of that trend, but that trend will be a generational thing. It won't happen overnight, and may not even happen in our lifetimes. Or maybe things just teeter in that direction without ever fully going to the extreme. Who knows. But I do know what the world is like today, and I do know why the world is like that today. So it will happen, believe it.

But don't be afraid, all is not lost. Since David Chaum proposed the original "Ecash" design in the 1980s, centralized but private electronic cash has been possible. Extending these designs to include more complex "smart contract"-like things and centralized execution may not be impossible, or even particularly difficult. Providing Bitcoin-denominated accounts without KYC/AML intrusion or doxing is also entirely possible. The barriers to these things are not technical limitations, but legal, regulatory, and social barriers. These are things that can be shaped and guided. Yes, it would take a massive effort to overcome these types of barriers, but it can't be honestly said to be impossible.

There's even an incentive mechanism pushing people in this direction: regulatory arbitrage. Given that Bitcoin is global, fully digital, any jurisdiction that relaxes financial services regulation and laws can see revenue flow in from around the world by doing so.

The Political Stage

We are now in the spotlight of the global political stage. Ignoring this comes at your own peril.

Yes, the Bitcoin technology itself is apolitical. Neutral. All technology is neutral. But if you try to say that Bitcoin's impact on the surrounding world is not political, and that it doesn't politically support everyone's choice between individual liberty and authoritarianism, then you're asleep. I'm an American, so this will be somewhat US-centric, but here's how we'd put it:

Right-wing: The direction of the Republican party. I'm not saying it embodies this, just that it's a milestone in that direction.

Left-wing: The direction of the Democratic party. Same disclaimer as above.

The very existence of Bitcoin shapes an environment favorable to right-leaning political structures. Those structures behave in ways that prioritize individual liberty above all else. The stronger Bitcoin becomes, the more it will shape its surroundings to support such political structures. That's the reality. As Bitcoin grows, politicians will increasingly be forced to frame it in left-right wing terms. They'll do this because that's what politicians do, and there's a core of truth in that framing to reinforce it, plus the accompanying exaggeration, lies, and hyperbole.

This divide may primarily coalesce around two issues:

• Wealth inequality: Bitcoin will become a hot-button issue related to this. Bitcoin will certainly redistribute a lot of wealth, but not nearly enough.

• Environmentalism: The claim that Bitcoin is harming the environment won't go away anytime soon.

I'm probably wrong, but I personally believe these dynamics are almost set in stone. This is just the way Bitcoin gets drawn into the tug-of-war across the global political spectrum right now. All over the place, there's a massive tug-of-war between more localized small-scale sovereignty and less localized large-scale sovereignty being ceded to large sovereign entities. Bitcoin naturally empowers and encourages the former, and is the bane of the latter. As Bitcoin's scale continues to grow, it will become more and more intertwined with politics around the world, and this may be the broad outline of how it plays out.

This will play out at the national, state, and potentially even city level over a long enough timeframe. Ultimately, it may transcend debates within international institutions about how to regulate Bitcoin. It may start entering the realm of alliances between countries based on their stance towards Bitcoin. Once things really escalate to that level, exactly how it all plays out is indeed an open question.

You have two choices:

• Work within local political processes to push things in the direction of small-scale localized sovereignty.

• Exit where you can from political processes and their outcomes, and shut up and comply where you can't exit political processes and their outcomes.

Choose wisely.

Liquidity is Transforming the Crypto Markets

Bigger markets = more liquidity = bigger participants. This has been happening profoundly over the past few years. As the last bull market ended, the first cash-settled Bitcoin futures were listed. Since then, we've seen various Bitcoin products start (and stop) trading on traditional finance platforms. We now also have physically-settled (actual BTC delivery) futures on Bakkt, as well as options on those futures and their own cash-settled futures products. German banks have been granted permission to custody and provide crypto assets to their clients. Swiss financial institutions and institutions have been friendly with the ecosystem for years.

These types of institutional entities and pools of liquidity entering the space will fundamentally change the structure of this market. With that comes government regulation, government restrictions, and government demands - the things that accompany the traditional world. How much of the liquidity in this market gets drawn to the platforms constructed by these participants will determine the extent to which traditional government regulation and reaction has influence over the entire ecosystem's pricing mechanisms. The more liquidity on these restricted platforms, the more indirect government control over Bitcoin's pricing mechanisms. This indirect control over pricing mechanisms may translate to another degree of lack of control over future consensus dispute outcomes. This is something to be wary of.

In my view, this influx of massive liquidity into this market will easily end up crowding out those currently occupying a large share of market platforms - the unreliable, no-KYC speculators. This will make the entire market more restricted, harder to avoid government bureaucracy and regulation, and may even make it difficult to maintain the ideal consensus on the protocol itself if it goes to that extreme.

This will most likely ultimately lead to a hard dividing line between the black market and the transparent market in the Bitcoin trading platform, and even Bitcoin itself, if things do not develop as we wish, the Bitcoin upgrade will ultimately bring about large-scale privacy improvements. Or, if we live in a jurisdiction that recognizes the right to privacy, but we become lax in defending our own privacy rights, this situation is changing and must be adapted to in any case.

Decentralized Infrastructure

Twitter censorship. Facebook censorship. Youtube censorship. Political bias. Political interference. Even DNS and VPS censorship. This is the world we live in, involving companies that provide services on the Internet or operate Internet infrastructure. This is not universally the case, and this censorship is not evenly applied to all things or activities, but it is an undeniable trend that is growing.

This needs to be attacked socially (though in a very thoughtful and cautious way), but also technically. Fediverse is an experiment that creates an intermediary space between protocols and services, where anyone can run a Mastodon instance (and many things) and connect them through federation. Bluesky is a recent initiative by Twitter's Jack Dorsey to explore the feasibility of transforming Twitter from a private service to an open protocol, and to attempt to do so if feasible. We also have goTenna developing consumer products to truly decentralize the physical infrastructure of data transmission. Bandwidth is limited, but it's a start. There are also many DIY mesh network projects.

This makes me think of efforts in this area that are directly related to Bitcoin itself. goTenna has collaborated with Samourai Wallet to develop txTenna. This allows someone to initially broadcast their Bitcoin transactions through a mesh network to hide their identity, deliver the transactions within the local goTenna network, until they find a node that can push it to the Bitcoin network via the Internet. Venezuela also has the LochaMesh project, born out of the country's instability leading to intermittent power and Internet access. Their design combines communication tools as well as Bitcoin and Lightning Network functionality, and from my last understanding, they are trying to commercialize their DIY project to make it easily accessible to consumers.

If I didn't mention the Blockstream satellite feed, I would be remiss. I wouldn't call it fully "decentralized" infrastructure, as it is still highly centralized, but I think it is a significant change that would be foolish to ignore. First, it is centralized. It is entirely dependent on the satellites of a centralized company; these companies can shut them down at any time. Second, it is free and completely private. As a one-way broadcast of the satellite, all you have to do is set it up and point the antenna to the sky, and you will receive the Bitcoin blockchain. This leaves no network footprint to identify you as a Bitcoin user, and one of its benefits is the free transmission of large amounts of data. So you rely on a central entity, but gain a great deal of privacy.

Over the next decade, these types of projects and different ways of designing and operating infrastructure will continue to thrive on the fringes of Bitcoin and the Internet. There are many ways to write these things. I think this integration can go further. Relying solely on mesh and radio technology is not enough to scale the entire network globally, but it can fill gaps or handle the distribution of "subnetworks" that are primarily focused on propagating transactions and validating blocks. Nodes can receive blocks from the satellite feed and then propagate them through a short-range mesh network that can handle higher throughput. This synergy could even translate to mining; using compact blocks, miners could transmit only block headers and a small segment of data to construct the actual blocks from your memory pool. If the latency tradeoff is feasible, miners could try to slightly hide their physical location during block propagation using these types of mesh networks, while receiving real-time block relays anonymously from the satellite feed.

I also see great potential for the coexistence or integration of Lightning Network and mesh network technologies. Global Mesh Labs is developing the Lot49 protocol, which integrates the Lightning Network to pay for data relay fees, incentivizing mesh network nodes. This is a very interesting direction that could develop synergies between Bitcoin and mesh network protocols, but its feasibility remains to be seen. Personally, I am very optimistic, but my expectations are cautious. Even without this tight coupling of the two, mesh networks are very useful for Bitcoin. I think the inevitability of localized Lightning subnetworks growing, where everyone peers through the mesh network, only interacting with locals, and receiving blockchain feedback to ensure security, makes sense to me. Some bridging nodes could move funds in and out of these subnetworks as needed. Globally, these types of network structures make sense to me and seem to be the natural pattern that things will form.

These things will not become mainstream in the next decade, but with stubborn zealots and lunatics iterating rapidly on the fringes, rapid progress and development is expected.