Ethereum (ETH) creator Vitalik Buterin has an idea of what the state of Bitcoin (BTC) will be in twenty years.
In a new interview with economist Noah Smith, Buterin says he believes crypto assets will become about as volatile as gold or the stock market in the medium term, moving away from the big bubbles and crashes of the past.
The crypto visionary also says that while crypto could satisfy some key narratives over the next two decades, mainstream adoption will be the biggest factor in determining the fate of digital assets.
“By 2040, when cryptocurrency finds its way into a few niches: it replaces the store of value component of gold, it becomes a kind of ‘Linux of finance’, an always-available alternative financial layer that is, after all, the backend of really important stuff, but not completely supplanting the mainstream, then the chance of it either disappearing or completely taking over the world in 2042 will be much smaller and single events will have much less impact on that possibility.”
Looking ahead, Buterin says he has concerns about Bitcoin’s future security. As block rewards gradually drop to zero over time, the Ethereum founder says the mining ecosystem could lose incentive to keep the network safe.
“A consensus system that costs unnecessary electricity is not only bad for the environment, it also requires the annual issuance of hundreds of thousands of BTC or ETH. At some point, of course, output will go down to near zero, at which point that won’t be an issue, but then Bitcoin will start addressing another issue: how to keep it safe.”
Buterin says there may come a time when Bitcoin may be forced to at least move to a hybrid Proof-of-Stake consensus mechanism to overcome the security flaws in its mining ecosystem.
“In the case of Bitcoin, I’m concerned for two reasons. First, Bitcoin’s security over the long term will come entirely from fees, and Bitcoin simply fails to generate the amount of fee income needed to secure a system that could be worth trillions of dollars. Bitcoin fees are around $300,000 per day and haven’t grown that much in the last five years…
Second, Proof of Work offers much less security per dollar spent on transaction fees than Proof of Stake, and migrating Bitcoin away from Proof of Work does not seem politically feasible. What would a future look like when there is $5 trillion worth of bitcoin, but it only takes $5 billion to attack the chain? Of course, if bitcoin is actually attacked, I expect the political will to at least move to hybrid proofs of engagement will emerge quickly, but I expect it will be a painful transition.”
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