Bitcoin for the Befuddled (2015)
Chapter 9. BITCOIN 2030
So let’s suppose Bitcoin is a runaway success. What would the world look like in 2030?
In the year 2030, 20 million bitcoins are in circulation; all but 1 million of the 21 million maximum have been mined.
Unfortunately, the future didn’t work out well for Crowley: He didn’t pay close attention to Chapter 3 and lost all his bitcoins in the infamous WhatsMyInstaSnapAppBook.com hack in 2019. Consequently, he’s spending his days as a real estate agent and driving semitrucks cross country on the weekends for a living.
So exactly what would 20 million bitcoins look like? Well, unbeknownst to Crowley, if the 20 million bitcoins were each the size of a penny and were stacked as tightly as mathematically possible, they would almost exactly fill the inside of Crowley’s US standard-sized, 53-foot semitrailer!
What Will a Bitcoin Be Worth in 2030?
Most likely, bitcoins will be worth zero in the year 2030: Despite the currency’s early extraordinary success, 2030 is just too far in the future and too many events could trigger its demise. However, we can predict what the value of a bitcoin would be if Bitcoin achieved mainstream adoption.
For the rest of this chapter, let’s imagine a world in which 1 billion people use bitcoins regularly. That number doesn’t include everyone, because traditional currencies will still be used as well. So how many bitcoins might a typical Bitcoin user own in this future world?
Given that 20 million bitcoins would be in use in 2030, on average each person would own 0.02 bitcoins. Of course, wealth is never evenly distributed, and in all likelihood the top 1 percent would own more than 50 percent of the bitcoins (unfortunately, Bitcoin is unlikely to solve this problem on its own). Therefore, the typical Joe would own approximately 0.01 bitcoins, most likely referred to at this time as 10,000 microbitcoins.
Referring back to the example of a semitrailer of penny-sized bitcoins, the typical Joe’s savings would consist of a fragment of a penny, about the size of a grain of sand a cubic millimeter in size.
As discussed in Chapter 6, the role that Bitcoin could fulfill that would produce the highest possible value per coin is as a store of value, in which case the typical Joe might store $1,250 of his savings in Bitcoin. If this extreme scenario were true, calculating the value of a single coin would be $1,250 divided by 0.01, or a ludicrous $125,000 per coin.
Bitcoin Mining in 2030
Using bitcoins to buy morning coffee, lunch, car fuel, and some online products, an average user might make 10 transactions a day.1 A billion people making 10 transactions each per day is a substantial number of transactions! In fact, the number would be just over 100,000 transactions per second, which is 25–50 times more than the number VISA processes today. If transaction fees remained low (a must if many people adopt the currency)—let’s say a penny each—the result would be $100 million dollars a day in transaction fees!
Although mining rewards in 2030 will be less than two bitcoins per block (based on the current schedule), if bitcoins have appreciated significantly in the interim, the mining rewards might still be considerable.
But most transactions might be off-chain transactions. (Off-chain transactions are Bitcoin transactions that are not handled by the blockchain but are instead handled by the ledgers managed by Bitcoin wallet vendors, in order to save on transaction fees for smaller payments.) Consequently, those 10 billion transactions per day may be only 1 million transactions per day as recorded on the blockchain. However, no matter how they are processed and reconciled, any payment system used by a billion people will generate many billions of transactions daily.
Mining would be very competitive, and the profit margins would be extremely slim. Only those with the most energy-efficient miners and cheapest electric power could stay in business. Assuming that the most efficient mining technology requires 0.1 J/GH, that electricity costs $0.10 per kWh, and that $100,000,000 a day in transaction fees is generated, the break-even hash rate would total more than 500 exahashes/s (500,000 PH/s)! Even assuming that mining technology is 100 times more computationally compact than it is currently, the amount of ASIC mining hardware required to achieve that level of mining power would fill around 5,000 small apartment buildings.
At a hash rate of more than 500 EH/s and an energy efficiency of 0.1 J/GH, a much greater amount of electric power will be needed to devote to mining. Over 50 GW would be used for Bitcoin mining, which is a bit less than 5 percent of the power produced by the United States today and about 0.3 percent of the global power output. Of course, if the expense of electricity increases, the network hash rate would drop. Bitcoin mining doesn’t require a specific hash rate to function; however, the cheaper the electricity, the more Bitcoin miners will operate.
At this point, we’ve had fun speculating about the price of a bitcoin in a world dominated by this currency and discussing the infrastructure that would likely evolve around it. But what might life be like for an average bit-coiner in the year 2030?
A Day in the Life of a Bitcoiner in 2030
Let’s follow Crowley as his day unfolds. It all starts when Crowley wakes up in the morning. Crowley wears his sleep-optimizing bracelet at night, which uploads his pre-waking vital signs anonymously to the Internet. Using this information, machine-learning systems across the world use bitcoins to bid on the time Crowley’s alarm clock should go off, given his physical condition and sleep/wake cycle. The winning bid is the one that lets Crowley sleep the longest.
Because Crowley likes to take long, hot showers in the morning, he used to run out of hot water. But recently, a resident in his apartment building installed an industrial-grade hot water heater and is now selling hot water to other tenants to help with the cost. A chip in Crowley’s hot water faucet automatically dispenses bitcoins directly to a chip in the hot water heater. As Crowley turns the shower knob clockwise, more bitcoins are dispensed and more hot water streams from the shower head.
As Crowley leaves his house, he beams a few satoshis from his wristwatch to one of the robotic lawnmowers mowing his lawn. A lawnmower repair shop down the street builds these mowers and provides them for free. Each lawnmower collects its own earnings and uses the bitcoins to pay programmers on the Internet to improve its AI algorithms so it can earn more. In addition, the mowers visit the lawnmower repair shop to get upgrades and pay there with their bitcoin earnings as well.
Today, Crowley misses his bus on his way to work. Apparently, the winning alarm clock bidder failed to detect Crowley’s hangover this morning and cut the time too close. Usually, his bracelet would now dispense 20 satoshis to the winning bidder as a reward; however, because the bracelet calculates that Crowley has missed his bus, it draws upon a 100 satoshi insurance pool from an escrow account that the winning alarm-clock bidder had to set up as part of the bidding process. As a result, the winner loses money on today’s bid (the programmer has some algorithm debugging to do).
With the satoshis from the escrow account, the bracelet starts an impromptu Bitcoin auction with all nearby parked, self-driving cars to determine if any are willing to rent to Crowley. After entering the winning car, Crowley is off to work.
Today, Crowley’s real estate client is buying a house. Ever since the 2023 Digital Real Estate Reform Act, all houses are managed by simply tracking ownership of a single, specific satoshi assigned to each property. This satoshi acts as a colored coin, much like a title search in 2014. In effect, if the satoshi is handed to another person, the new person is assigned legal ownership of the property.
In 2030, Crowley just asks his Bitcoin wallet to do a title search by tracking the ownership of the satoshi linked to the house throughout the blockchain. Not only is this equivalent to an exhaustive title search and guaranteed to be 100 percent accurate, but his wallet software does this search instantaneously and for free.
WHAT IS A COLORED COIN?
One of the defining features of money is that it is fungible: If you want to buy a candy for a nickel and you have several nickels in your pocket, you should not have to think about which nickel to use—any of them is fit for this job. However, since the Bitcoin blockchain is public and we can therefore track the history of a single coin across time, it is possible to create a different type of money that is not fungible—a type of money where different coins may be tagged with different sorts of “colors.”
For instance, suppose you are setting up a concert in a theater that can seat only 400 people. One way to make sure no more than 400 people show up on the day of the concert would be to hand out 400 milibits of Bitcoin to your 400 closest friends and then simply tell all of those people, “Please come to my show! However, if you can’t make it to the show that day, feel free to trade or sell these milibits to anybody. They’re yours to use as you see fit!”
Then, on the day of the concert, you would ask anyone who shows up to send one of these 400 milibits back to you. By analyzing the blockchain, you could theoretically follow each milibit through the past and verify each was among the 400 you initially sent out. There is nothing special about these original 400 milibits, other than the fact that you decided to arbitrarily give these 400 a special extra value (entry into a concert). This is referred to as coloring these coins. The benefits of this process would be (1) that no more than 400 people can show up to your concert with valid tickets and (2) your friends would have complete freedom to do whatever they wanted with the coins they were given. This same system could also be used to track ownership of more significant assets; for instance, to determine who owns the title on a house.
Of course, in practice it would be painful to track each of these coins in the blockchain yourself. However, software exists to automate the process of coloring and tracking bitcoins in this way. The most established protocol and tools for doing this share the name of “Colored Coins” and are available at http://coloredcoins.org/.
To complete the sale of the house, the buyer and seller simply enter a multi-signature transaction: In a single transaction, the buyer sends 150 microbits of bitcoins (the cost of the house) to the seller’s address, and the seller sends the single-colored satoshi to the buyer. By using a single transaction, no sale can happen until both parties have signed the transaction with their private key. The transaction also contains a 1 percent commission that is sent to the real estate agents’ addresses.
Because the blockchain was used to track property ownership, the entire title insurance and closing costs for the house (sans agent commission) is just the transaction fee, which may cost less than a penny.
After his workday is done, Crowley sends some money to his mom, who is a Nile crocodile. Her village, like every village in Burundi in the year 2030, has a Bitcoin booth that converts bitcoins to Burundian francs for a mere 0.5 percent commission. Of course, anyone can buy most items directly using bitcoins anywhere in the world nowadays, so that commission is not a necessary expense.
Instead of catching the bus, Crowley decides to get some exercise on this beautiful day and get dinner on his walk home. Unbeknownst to Crowley, a woman named Sofia who lives on the street he’s walking down has just made a big salad for her family and realizes she’s made too much and will have leftovers.
For this reason, she takes a picture of the leftover salad and uploads it to a food-sharing website. On that site, reviewers are paid with bitcoins to supply estimates of the tastiness of this salad. Within a few seconds, Crowley’s phone rings because earlier he had put in a request for a meal of at least an 8 out of 10 rating in tastiness for no more than 15 satoshis that he could obtain on his way home, and Sofia’s salad meets his request!
When Crowley rings Sofia’s doorbell, an NFC chip in the doorbell communicates with Crowley’s wristwatch to establish a contract for the dinner salad: Automatically, the doorbell sends Crowley’s wristwatch a bill for 15 satoshis for entry into Sofia’s impromptu restaurant.
How does Sofia know she can trust Crowley in her house? Crowley subscribes to an anonymous rating service, which for a 1 satoshi fee guarantees to Sofia that Crowley’s trustworthiness score is 9.5 out of 10. This rating service is built into the Bitcoin blockchain in the form of a script. Users pay small fees to be part of the rating service, and the rating service (a computer program) uses these fees to pay for its online ads. In effect, it is a financial entity without an owner, living in cyberspace and paying for its own resources. This type of entity, called a distributed autonomous corporation, is made possible by blockchain technology.
After a long day at work, finally at home, Crowley relaxes in his recliner in front of the tube. In the middle of his favorite movie (Harry Potter and the Forked Blockchain), a pizza commercial appears. “Darn!” he exclaims. “That was a healthy salad I had for dinner today, but I could really go for a pizza chaser.”
The reason this commercial suddenly interrupts Crowley’s movie is not coincidental. Just at that moment, a pizza van driving by his house enters an automatic Bitcoin ad auction with Crowley’s TV, earning the right to show its pizza commercial!
All Crowley has to do is simply open his mouth: In response, the gesture-recognition system in Crowley’s TV automatically sends 8 satoshis to the pizza van.
In short order, the pizza van places a slice of pizza on a conveyor belt that extends from Crowley’s house.
Within seconds, a robotic arm reaches out from the base of Crowley’s recliner, grabs the slice of pizza from the conveyor belt, and stuffs it into Crowley’s mouth.
You might have thought that a world built entirely on decentralized Bitcoin transactions would be a horrific dystopia. But after reading the awesome description of a day in the life of a typical bitcoiner in the year 2030, where everything operates via Bitcoin, we’re sure your worries have been conclusively put to rest.
The Bitcoin End Game
In 1687, Isaac Newton published his Principia, arguably the single greatest piece of intellectual writing in the history of mankind. This book made Newton famous because for the first time in history, someone had discovered simple mathematical formulas that could precisely describe the motion of the planets and other objects under the influence of gravity.
As great as this achievement was, the Principia had hidden within it another idea of even greater significance: the idea of infinitesimal calculus.2 Most of the technology on which modern society depends—computers, cell phones, and even atom bombs—could have existed in a world without a theory of gravitation; however, it is highly unlikely this technology could have existed in a world without calculus.
In 17th century Europe, not everyone could appreciate the value of calculus. Newton had crafted this very abstract innovation almost solely as a tool to solve the far more romantic and poetic problem of explaining the motions of the planets for the first time.
Certainly, it is far too early to estimate where and whether Satoshi Nakamoto’s Bitcoin whitepaper will appear in the annals of important scientific publications. But one fact is clear: In the same way that Newton had to first discover calculus to explain the motions of the stars, so Satoshi had to first discover the idea of a distributed anonymous ledger, the blockchain, to invent the idealistic notion of a fully distributed cryptocurrency.
However, unlike calculus and the laws of gravitation, the concepts of a blockchain and cryptocurrency are inextricably linked; they are yin and yang. A distributed form of money simply cannot exist without the security provided to it by the blockchain. Similarly, a blockchain cannot be created without giving people incentives to create it, and the only possible incentive that could work is a distributed form of money!
So therein lies the genius of Satoshi Nakamoto: A person who was able to imagine two distinct technologies that on their own were clearly impossible and impractical. Sometime in the mid-naughts when Satoshi formulated his original whitepaper, for the first time in the world a person was able to clearly realize that although both technologies were impossible on their own, if you combine the two ideas into one enmeshed system, they become not only possible, but actually practical!
The true future of Bitcoin is evident: The technology of the distributed asset ledger combined with an incentive-producing currency is certain to remain with us for all time.3 It is a mechanism that allows for great gains in efficiency in many situations in which trust previously had to be delegated to a central arbiter. Although there is no question that governments and central authorities will continue to exist and play a meaningful role in the world’s future, much of the current work performed by these governments and other authorities is also needlessly repetitive and mundane.
Just as robots have helped the world reduce menial physical labor, so cryptocurrency technology now gives us the tools to automate the menial labor of bureaucracy. Optimistically, the entirety of humanity will benefit as a result.