One of the most prolific contributors to Bitcoin’s development warns that the leading blockchain network is on a dark path toward global regulation.
Matt Corallo said in a blog post Saturday that Bitcoin’s long-assumed mission as a private, scalable, and trustless monetary tool is now being questioned and that years of effort are failing to deliver on that vision in any real sense.
“Sadly, the whole idea of creating Bitcoin (or any cryptocurrency) is actually useful for trading on the tendency to have untrusted parties in the flow of funds,” Corallo wrote. “We have not succeeded in building a cryptocurrency payment rail without the participation of (untrusted!) parties.”
The next few years are as existential for Bitcoin as the block size war.
Back then it was about who decides what Bitcoin is, now it’s about who decides what Bitcoin is. https://t.co/1opMik2t5Y
— Matt Corallo (@TheBlueMatt) May 11, 2024
The end result, he predicts, will be a world where government authorities succeed in limiting or controlling cryptocurrencies for their own purposes.
“That’s not to say that these features aren’t good or don’t offer scalability. They are,” Corallo said. decryption“But they often rely on centralized intermediaries.”
Bitcoin scaling technologies used today, such as sidechains like Liquid or Rootstock, enable faster and cheaper payments, but require users to trust the company or federation to avoid having their funds stolen. Meanwhile, Corallo added, the more popular Lightning network has a very poor user experience, forcing custodians and Lightning Service Providers (LSPs) to build front-ends for real-world use.
Corallo’s criticism also applies to rollups, a new form of Bitcoin scaling technology inspired by other blockchains. In fact, developers believe that trustless scaling across cryptocurrencies remains difficult because programmable blockchains like Ethereum have failed to crack the code.
“The point to make is that this is not limited to Bitcoin and applies to cryptocurrencies as a whole, and this problem cannot be solved with some kind of soft fork to increase expressivity,” Corallo said. decryption. “I’m not judging whether or not I should do a particular soft fork to improve expressivity, but I’m just pointing out that this is a largely irrelevant issue.”
Obstacles in these areas have led to a noticeable change in the way users perceive Bitcoin. Corallo wrote that many new entrants “are only interested in the 21 million coin limit and see any form of non-KYC payment rail as hostile to their investment value.”
Over the past year, some of Bitcoin’s most ardent institutional supporters have dismissed the asset’s role as a medium of exchange entirely.
Paypal co-founder and Lightspark CEO David Marcus said in September that BTC “is not a currency that people use to buy things,” arguing that the Lightning Network’s fiat currency will become the public’s preferred payment method.
Earlier this year, MicroStrategy Chairman Michael Saylor praised Bitcoin’s role as a store of value and called its role as a currency a “distractor” that would be “contentious” with regulators.
Is the medium of exchange distracting?
The title of the white paper was:
“Bitcoin: P2P Electronic Cash System” pic.twitter.com/pRSUwXMe3l
— Nicholas Gregory (@gregory_nico) May 8, 2024
In fact, the US government recently arrested the developer of Samourai Wallet, a Bitcoin wallet designed to facilitate private transfers through CoinJoin transactions.
Samourai’s software did not control user funds, but it required a centralized server to coordinate the mix of transactions, providing a single point of failure for regulators to target.
The crackdown prompted a “final warning” from prominent U.S. government whistleblower Edward Snowden, who urged developers to implement Bitcoin protocol-level privacy changes.
According to Corallo, the cryptocurrency industry has already squandered opportunities to ensure regulatory protections for non-custodial cryptocurrency intermediaries and instead focused its efforts on securities law reform.
To make matters worse, the current state of mining pool centralization also makes Bitcoin’s base layer “suitable for regulatory capture.”
“Looking at where Bitcoin stands today, it is hard not to see a bleak vision for the future,” the developer concluded. “If Bitcoin users want to preserve and fight for what we’ve built, we must focus on radical improvements to default wallet privacy across the ecosystem, aggressive investments in regulatory changes, and operational scalability solutions around the world.”
Edited by Ryan Ozawa.
