Bitcoin is booming and has finally reached mainstream awareness levels. According to a recent survey by Lendedu, which asked 1,000 Americans whether they had heard of bitcoin, 78.6 percent responded ‘yes’. This is in contrast to a similar survey conducted by Bloomberg in 2013 when only 42 percent had heard of it.
Bitcoin can now be purchased via ATMs in many major cities, on various regulated online exchanges, and even at post offices in Austria. Furthermore, countries such as Japan and the Philippines have officially legalized bitcoin as a digital payment system as they recognize the value it can bring to their economies. Whether early bitcoin adopters like it or not, the reality is that bitcoin is slowly but surely becoming a part of the global financial industry.
A ‘fork’ in the community?
Given that bitcoin’s gradual integration into the global financial system goes against its disruptive, “be your own bank” ethos, however, it does appear that the once united bitcoin community is splitting into a number of distinct factions.
Segwit2x fans and those who want bitcoin to become a fully regulated part of the financial sector, leveraged by financial institutions, payment processors, remittance companies and investment managers. In this camp and pushing hard for legitimacy are bitcoin startups hopeful of becoming tech unicorns (a startup valued at over $1 billion) and their stakeholder-investors. So far, only San Francisco-based bitcoin exchange and wallet provider Coinbase can make this claim (given its 1.6 billion valuation after a recent funding round).
Also wanting bitcoin to become a fully legalized and regulated part of the wider financial community are leading bitcoin venture capital investors such as Tim Draper, Digital Currency Group, and Blockchain Capital, because that is the only way that they will generate the return on investment they’re aiming for. Effectively, legit bitcoin is what they’re betting billions on.
The winners of the November Segwit2X showdown, this group hold true to the ideals of community and consensus that bitcoin was founded on. They’re not necessarily anonymity zealots or dark-web shoppers, but they do believe in the rights of users to decide the future of bitcoin — not miners and big businesses in behind closed doors meetings.
They also don’t want to be hurried into hardforks they think dilute the strength of the brand and compromise its security. With bitcoin having increased in value by around 800% over the last 12 months, they appear to be operating in ‘if it ain’t broke, don’t fix it’ mode.
Those for whom the original vision of a digital currency that provided personal financial sovereignty while disintermediating global banking has never lost its appeal. They want nothing to do with the traditional financial industry, nor do they have any intention of utilizing regulated ‘bitcoin banks’ (the direction that many bitcoin wallet providers are heading in).
Users like this who want to stick with bitcoin as they knew it may opt for privacy-centric crypto solutions instead, switching to wallets and exchanges that don’t require any verification or using the Tor browser when transacting so their IP addresses can’t be linked to their transactions.
Now that bitcoin tracking software such as Chainalysis can link bitcoin transactions to the real world names of users, many bitcoin holders in this group might end up dropping it altogether and join the growing ecosystem of anonymous currencies such as Zcash (ZEC), Monero (XMR) or Dash
What does this community split mean for crypto in general?
Ultimately, whether individuals will use regulated ‘bitcoin banks’ and exchanges that require strict KYC onboarding processes or instead, choose to hold onto their financial sovereignty and use anonymous services, will not have much bearing on the cryptocurrency and blockchain sector overall — and its effects should be positive for all factions.
As libertarian bitcoin users switch to anonymous coins, for instance, more funds will flow into the development of privacy-centric solutions, which will lead to the value of anonymous cryptocurrencies skyrocketing. This is something that’s already apparent — as evidenced by the large value gains for Monero, Zcash and Dash over the last 12 months.
Correspondingly, public legitimacy for bitcoin driven by developments like the recent CME announcement of its plans to launch bitcoin futures trading, continues to push bitcoin prices higher, further increasing its attractiveness as an investment option.
Where the risks do lie, however, is in the debilitating effects on bitcoin specifically, caused by the now par-for-the-course social vitriol targeted at anybody who puts their hand up with a proposal on how bitcoin might be improved. After all, there are plenty of other currencies and crypto assets they could be dedicating their brainpower to, and it would be unfortunate for bitcoin if the public trolling saw the best and brightest assigning bitcoin to the too-hard basket in favour of more welcoming crypto communities.