14 years since the white paper: Can Bitcoin continue to grow?

Fourteen years to the day after Satoshi Nakamoto published the famous Bitcoin white paper, the first cryptocurrency’s once meteoric rise is showing signs of slowing.

In June 2011, Bitcoin reached 25,000 unique wallet addresses active each day. In February 2015, it had 250,000. Bitcoin hovered just under 600,000 unique daily addresses for most of 2017 – and had 668,000 unique addresses by the end of February 2022.

The number of unused bitcoins in the past year reached a record high in September of 12.5 million bitcoins, or 65% of the total circulating supply, per crypto analysis firm Glassnode. So it could be that investors who see bitcoin as digital gold holding value despite a hawkish Fed, or retail traders giving up trading during a bear market, are contributing to a decline in active addresses per day.

Still, the total number of Bitcoin addresses continues to grow, surpassing one billion in July 2022, according to Glassnode.

Bitcoin boomed with Big Tech

Bitcoin — which often trades like a tech stock — had an adoption rate surpassed by just, well, tech stocks. Facebook increased its users from 20 million to 200 million in two years. Twitter developed at the same pace, from 200,000 to 200 million active users in four years.

Twitter’s growth trajectory has slowed in recent years, from 330 million monthly active users in 2017 to 345 million in 2022.

In the same period, Facebook grew from 2.1 billion to 2.9 billion using the same calculation.

As the technology boom of recent years cools, Bitcoin may also see its exponential growth weaken.

Evidence instead of trust

“What is needed is an electronic payment system based on cryptographic proof rather than trust,” reads the Bitcoin White Paper’s opening page.

Satoshi wrote the Bitcoin white paper in late 2008, in the midst of a financial crisis caused in part by banking caution. The message of a trustless financial system hit home.

“The more people saw bitcoin as an alternative to gold or other base money, the more likely it became that others would think the same. Eventually if enough people believe it, maybe the central banks believe it too, and then it’s real,” Greg said di Prisco, partner at blockchain venture fund Distributed Capital Partners, in a Telegram message.

Bitcoin after the merger

The white paper popularized proof-of-work, Satoshi’s blockchain validation mechanism that prompted miners worldwide to fill repositories with GPU rigs.

But with Ethereum’s successful Merge to the more energy-efficient proof-of-stake, the crypto’s rising star left behind proof-of-work – even if Satoshi’s white paper was key to its development.

“If there was no proof of work, we wouldn’t have ended up with proof of stake,” said Harsh Rajat, founder of the Ethereum-native Push Protocol.

Ethereum, with its army of developers implementing a multi-stage roadmapseems to have captured much of crypto’s imagination – and has been steadily picking up bitcoin’s market share since at least 2020.

By making the Ethereum blockchain far more energy efficient, the merger created “long-term existential risks for Bitcoin,” Alliance DAO core contributor Imran Khan told Blockworks via Telegram.

Not to be outdone, bitcoin’s hash rate has actually increased since the merger.

“I don’t see any compelling reasons to believe that people are going to move en masse from proof of work to proof of stake,” said Patrick Scott, an advisor to DeFi platform Clip Finance.

With crypto still in its relative infancy, reading too much into Bitcoin’s future would be a fool’s errand.

Consider that there are developers today who were infants when Bitcoin began.

“Technology has a way of surprising us,” Rajat said of crypto’s future. “[But] the idea that was projected by Satoshi will remain in soul and spirit.”

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