'What it comes down to is whether you believe decentralisation has a future; whether cryptocurrencies have the potential to transform the financial industry,' one expert says
"I've been working on a new electronic cash system," someone by the name of Satoshi Nakamoto wrote exactly one decade ago. "[It's] fully peer-to-peer, with no trusted third party."
What Nakamoto went on to describe to the obscure mailing list of cryptographers and so-called 'cypherpunks' he was writing to, was a new form of money called bitcoin, which claimed to offer a revolutionary alternative to the traditional financial system.
The paper, titled 'Bitcoin: A Peer-to-Peer Electronic Cash System', explained how a computer network could support a decentralised cryptocurrency by replacing the need for banks with an online ledger known as a blockchain.
10 years later, bitcoin has grown into a payments network worth more than $100 billion, while simultaneously spawning more than 2,000 other cryptocurrencies and an entire industry of online exchanges, digital wallets and trading apps.
So how far has bitcoin really come since 2008 and how much further could it and other cryptocurrencies still go? On its 10th birthday, The Independent spoke with experts and analysts to understand the significance of Nakamoto's email that began it all.
A reaction to the 2008 financial crisis
Many bitcoin advocates point to the decentralised nature of bitcoin, meaning no bank or government controls its supply – a concept that had not been seen before on any significant scale before.
This means it is immune to mechanisms like quantitative easing, which saw trillions of dollars pumped into the economy following the 2008 financial crisis, as well as costly remittance fees when transferring funds internationally.
A nod to the instability of traditional banking was even included in the first block of bitcoins that was produced in early 2009. The text read: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." Nakamoto believed bitcoin could provide a solution.
"Bitcoin's birth in the depths of the financial crisis is not surprising. Many joined the bitcoin movement early on as a move against censorship and monetary control over cross-border payments," says Jonathan Levi, CEO of blockchain firm Hacera.
"The traditional financial system, that I was part of at the time, had got ahead of itself in the complexity of its products and risk oversight... Bitcoin and blockchain at its core is an incorruptible record of transactions, that's an idea that any regular person can get behind."
David Carlisle, head of community at the cryptocurrency intelligence firm Elliptic, echoes this view that cryptocurrencies offer a real solution to the problems associated with the financial industry.
“There’s a lot of talk about what bitcoin will and won’t achieve. Evangelicals and naysayers have been quick to pick sides, [but] what it comes down to is whether you believe decentralisation has a future; whether cryptocurrencies have the potential to transform the financial industry," he says.
“We believe that the enduring appeal of cryptocurrencies lies in their liberating and democratic nature; it is accessible to all, borderless, and offers fewer barriers to entry than traditional financial services."
Backing from the banks?
Given the subversive ideas embedded within Nakamoto's white paper, push back from the existing financial system was expected from the beginning.
Yet in order to truly take off, some believe that bitcoin and other cryptocurrencies need the support of the governments and banks that they seek to bypass. The backing from such institutions is already underway, at least in terms of bitcoin's underlying technology.
“Due to trying to take the market share away from one of the most important tools of power – money – central banks and governments all over the world tried to kill bitcoin, albeit unsuccessfully," Angel Versetti, CEO of blockchain firm Ambrosus comments.
"Having failed to kill bitcoin, they have decided to become its champions and proponents. Not only has this established Bitcoin as a unique financial phenomenon and a new asset and a social construct, but it also showed the resilience and power of the underlying technology, blockchain."
Achieving its promise
Bitcoin critics often point to the lack of mainstream adoption, which can be attributed to a variety of factors.
These include price volatility that makes it unsuitable to use as a day-to-day currency – or even a store of value – as well as its reputation as a tool for underworld criminals.
In order to overcome these challenges and achieve its potential, experts say certain industry regulation is needed, as well further technological progress with the network.
"In order to achieve any kind of mainstream adoption, crypto-enabled services need to be able to keep the bad guys out," Mr Carlisle says.
"Over the next 10 years, we’d like to see increased efforts to embrace compliance. No regulation means no rules, which creates an environment where laundering, fraud and other forms of illegal activity can thrive."
Whether or not bitcoin achieves success as a mainstream currency may be largely irrelevant when considering the ultimate impact of Nakamoto's white paper.
“The publishing of the bitcoin white paper by Satoshi Nakamoto a decade ago kickstarted a new era of technological innovation and global disruption that is continuing to this day. Through community consensus, bitcoin’s protocol has evolved through the years and has remained the standard for the cryptocurrency market and bitcoin purists," says Max Kordek, co-founder of blockchain startup Lisk.
"However, the white paper is also responsible for the emergence of the underlying blockchain technology. Back then, the technology was simply a concept, a potential vehicle for technological innovation and inspiration. Ten years later, we have a robust global community forging the path ahead, carrying the technology forward.
"Satoshi Nakamoto has inspired hundreds of dedicated teams around the world to build on his vision for a future powered by blockchain, a future in which individuals are empowered to bring real change to the world.”