People Power
Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.
People Power
Bruce Lee famously told his students to “be like water,” to adjust to challenges and find a way to flow around or through them. But that’s not the only way to become unconquerable.
Bitcoin is more akin to one of those strange non-Newtonian fluids that suddenly harden when subjected to pressure. This resilience and imperviousness to sudden shocks is by design, but it draws its strength from ordinary people just as much as it does from its coding. And that’s something its critics can’t or won’t admit: that the reason Bitcoin’s unbeatable is because it empowers anyone to take control of their financial destiny, and that every participant — whether miner or investor — helps perpetuate the revolution.
The last few weeks have provided a perfect illustration of the role that we play in furthering the Bitcoin revolution, even against the full weight of a global superpower like China.
When the Chinese authorities banned Bitcoin mining and the global hashrate plunged, the Bitcoin network reacted almost immediately with the biggest downwards difficulty adjustment in its history. This meant less work was now needed to mine a given quantity of bitcoin, making Bitcoin mining more lucrative. In fact, last week we saw mining revenue return to levels last seen in May when the price was around $45,000. And with mining becoming more profitable, more people are incentivized to start mining, so inevitably, global hashrate regenerates.
I’ve written before about Bitcoin quietly doing what it should, and about Satoshi Nakamoto’s genius in anticipating and designing effective workarounds to every potential pitfall his or her creation could conceivably face. But Bitcoin’s design, its core protocol, is only part of the story. Satoshi also understood the role that we would play in growing and sustaining Bitcoin.
As a permissionless system where anyone can mine coins, it doesn’t matter if one or many jurisdictions try to prevent mining. This just makes it more worthwhile to set up a mining operation somewhere else, whether it’s a massive Bitcoin farm or an assembly of ASICs in your shed. All you need is an energy source, such as a windmill on your roof — or a volcano, if you’ve got one at the bottom of your garden.
The beautiful thing about Bitcoin is that it’s a technology designed to complement and draw strength from the most powerful force on the planet: humanity’s deep yearning to be free, to prosper, and to be in control of their destiny. And the problem for those in authority who want to ban Bitcoin is that they would need to exert such a level of authoritarian control over the citizenry that it would make a mockery of these core human values.
As the founding father of Liberalism John Stuart Mill put it so well: “The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it.”
He could have been writing about Bitcoin, and in a way he was. Because you can’t strangle Bitcoin without killing the very freedoms on which society is built. My advice to Bitcoin’s opponents is to be like water, to go with the unstoppable flow, and embrace the people-powered revolution.
Cache Is King
Another day, another good news story that goes almost entirely unreported in a media more fixated on Bitcoin’s price and China’s crackdown on miners. Last week saw another significant development in Bitcoin’s infrastructure, with the news that an additional 250 bitcoin capacity was added to the Lightning Network in June.
By supporting near-instantaneous transactions, Lightning enables Bitcoin to become an even better medium of exchange. To do this effectively, however, the network requires a reserve of liquidity, much like the memory on your laptop or phone. The bigger the “cache,” the greater the volume of transactions it can handle.
Lightning’s public channel capacity now stands at an all-time high of 1,651 bitcoin, meaning that it can currently support up to around $50 million worth of transactions at any point in time. Bitcoin’s bandwidth (and therefore its utility) is growing all the time. But just as importantly, it gives us yet another metric to evaluate Bitcoin’s rapid progress on the path to hegemony.