Bitcoin’s Renaissance. Let’s Understand it.

In the 14th century, Europe experienced one of the greatest movements towards modernization: the Renaissance. Until then, the Western worldview was dominated by the Church, a central authority. Suddenly, there was a shift towards humanism, individualism, and secularism, fostering advancements in art, literature, science, and philosophy. This era produced some of the brightest minds, including Leonardo Da Vinci, Michelangelo, and Galileo.

Some of the most remarkable masterpieces from this era include Da Vinci's "The Last Supper" and "Mona Lisa," as well as Michelangelo's "David" and the Sistine Chapel ceiling.

Historians often credit the Renaissance to the rediscovery of classical texts and increased global trade. However, internationally best-selling economist and author Saifedean Ammous in "The Bitcoin Standard" highlights another key reason. He argues that high taxation and inflation imposed by feudal lords after the Roman Empire fell left people mentally defeated. To escape the Dark Ages, Europe needed sound money that couldn't be easily inflated. The florin minted in 1252 played this role, becoming the foundation for Europe's commercial revolution.

Psychologically, the Renaissance allowed people to feel secure knowing their accumulated wealth wouldn't suddenly be devalued. This mental security enabled them to pursue creative endeavors, leading to major breakthroughs in invention and art. The role of sound money is often underplayed in history books and is poorly understood by most.

Fast-forward to today, global economies are driven by power-hungry politicians, leaving the average citizen at the mercy of central bank policies with little control over the value of their wealth. We lack the mental security that our wealth will hold its value in 10 years, trapped in a cycle of accumulating currency dependent on short-term government agendas. Most of our entire careers focus on wealth accumulation, stifling progress in intellect and innovation.

We are back in the dark ages.

In 2009 when Satoshi Nakamoto published arguably one of the most sound forms of money, very few understood its true properties and how adopting it could lead us into what could very well be Renaissance 2.0 by challenging fiat currency. To better understand Bitcoin, let’s quickly track its timeline and the battles it has fought in order to reach its period of Renaissance.

Bitcoin’s journey to its Renaissance

• The first 3 years (2008-10) had little to no movement as the idea of a blockchain and Bitcoin was only understood by few developers.

• In 2010, BTC got listed as a tradable asset at an exchange rate of $0.30 marking its first win as a recognised token.

• In 2011, BTC matched in value to the USD just 1 year since being listed! This is when it caught media attention and was quickly adopted in dark-web for its anonymous nature.

• In 2013, BTC crossed $100 and very quickly crossed $1000 in the same year! This was due to reasons like Greece’s economic crash, and growing adoption & tech advancements making it easier for people to buy, sell and store in wallets.

• From 2014-18, Bitcoin experienced a rollercoaster ride. Mt. Gox (a CEX) collapsed due to a hack. Competing blockchains like Ethereum and Solana emerged, improving on Bitcoin's lack of programmability. Major upgrades included SegWit and the Bitcoin Cash hard fork. This drove Bitcoin to $20,000 but then it quickly corrected to $3,000.

• Between 2020-23, the world faced significant uncertainties, including a global pandemic and wars in Ukraine and Israel. These events disrupted trade relations and exposed flaws in fiat networks. Consequently, several companies saw Bitcoin as a reliable reserve currency, driving its price up to $60,000. During this time, centralized governments noticed Bitcoin's growing popularity and tried to stifle it with blanket regulations or outright bans. This led to a brief price correction, but Bitcoin soon returned to its previous all-time high of $60,000.
  
  This period also divided the crypto community into two distinct groups: Bitcoiners and Degens. While other chains made rapid technological advancements, they also encountered more errors, leading to security breaches and high-profile collapses of mismanaged exchanges and networks. These issues damaged public sentiment on cryptocurrencies. However, Bitcoin's market cap steadily pulled away from the rest and now stands at nearly 3X that of the next best, Ethereum.

• And that brings us to 2024, where interest in Bitcoin has peaked as more people realise its inherent property of being able to store and preserve value over time. Similar to how in the race between Gold & Silver, the former pulled away so far ahead due to its inherent property of rarity, Bitcoin has the edge over any other cryptocurrency due to its 21M limit which will only appreciate its value over time.

The only major hurdle in its path ahead? The bitcoin network suffers from scaling its network to serve the $900T global economy, as is popularly explained in the Blockchain Trilemma. But that’s where our Renaissance artists come into picture, helping paint the Mona Lisa’s & David’s of Bitcoin.

Scaling Bitcoin into its Golden Era

Bitcoin currently handles about 600,000 transactions daily, moving around 1% ($13B) of its global supply. This is very small compared to the 730 million fiat digital transactions estimated per day in 2023.

One could argue that people wouldn't use Bitcoin for daily transactions but would hold it as a wealth reserve. However, even in this scenario, people would need to buy Bitcoin from the existing 19.5 million supply, requiring transactions. As more people hold Bitcoin, acceptance as a payment method would grow, creating a need for a financial ecosystem, similar to what happened with Ethereum.

Currently, Bitcoin's infrastructure can handle 3-7 transactions per second (TPS) with an average fee of $6. Increased adoption could cause unprecedented congestion, deterring transactions. This needs to be fixed ASAP.

There were 4 noteworthy attempts at solving the scaling problem:

1. In 2015, a proposal called the Lightning Network outlined a way to offload micropayments to a off-chain channel improving the throughput and reducing fees. The only con was its risk of centralisation as no effective solution was designed to decentralise the way in which these channels were setup.

2. In 2017, Bitcoin experienced a hard fork, resulting in the creation of Bitcoin Cash with higher transaction capacity. However, it lacked strong community support, leading to fewer miners adopting it, which reduced its security. Although Bitcoin Cash still exists, it has diminishing traction as Bitcoin continues to improve natively.

3. In 2017, SegWit was activated as a soft fork, separating witness data from the tx object and reducing transaction size. This directly lowered fees and laid the foundation for improving Bitcoin's programmability. SegWit later enabled the creation of inscriptions, the NFT equivalent on Bitcoin.

4. Lastly in 2018, the Taproot-Schnorr proposal dramatically improved the privacy and flexibility of Bitcoin scripts which when later activated in 2021 allowed developers to create more smart contracts on Bitcoin although not at the same complexity as Ethereum.

2024 witnessed a tectonic shift in the tech community to scale Bitcoin as more people recognised its merits. With Bitcoin ETFs being approved, a huge influx of institutional capital into the ecosystem is bound to down the line trickle-down skeptical users into the ecosystem. The rising interest is also supported by the fact that 50+ projects are currently racing to solve some of the most pressing challenges by attempting to create a second layer that improves upon the current designs of lightning and inherits the security of Bitcoin.

With the help of a modular first approach, each prong of the scaling problem is being tackled by multiple projects with some handling the data availability, others handling the state validation and security of verifier networks. Bitcoin's infrastructure urgently needs to scale rapidly to prepare for a new wave of users. These users will demand either a faster L1 for transacting and holding native currency, or a flourishing ecosystem of dApps on a faster, cheaper L2 built by inheriting properties of Bitcoin's secure L1. Rollups offer a solution to this need, and Rollups-as-a-Service (RaaS) becomes a critical bridge for transitioning into this new era.

Whilst people debate if Bitcoin should inherit some of Ethereum’s programmability features to build the next generation of commerce on it or that it should solely remain a P2P form of money, one thing is clear; we’ve entered Bitcoin’s renaissance era. Revel in it’s glory and join us in this historical moment as we build the new age of money.