Research institution Messari | 2022 Predictions Report Summary Chapter 3: Top 10 Bitcoin Concepts

The research institution Messari's 2022 prediction report is divided into ten chapters and spans over 130 pages, with a significant portion dedicated to emotional and colloquial content. Here are the key points:

Ten Chapters

• Ten Major Events and Investment Themes
• 10 People to Watch
• Ten Thoughts on Bitcoin
• U.S. Cryptocurrency Policy
• Market Infrastructure
• NFTs and Web3 Systems
• DeFi 2.0
• Ethereum, Layer 2, and Cross-chain Bridges
• DAO within DAO
• Additional Inclusions: Speak Freely

Ten Thoughts on Bitcoin:

1. Peter Schiff is Wrong

The current macroeconomic environment should have been the golden age for gold: "High inflation, lack of trust in the government, soaring prices." However, gold has been heavily defeated by Bitcoin over the past decade.

If you had invested $100 in gold 10 years ago, today you would have a $102 return, which underperforms inflation; if you had invested $100 in Bitcoin, you would have a $1.7 million return today.

Note: Peter Schiff is a well-known gold supporter and Bitcoin critic.

2. Bitcoin Cannot be Surpassed (Flipped)

Messari believes that the probability of Bitcoin losing its top spot in market capitalization next year is only 20%. If this happens, it indicates that the market favors the returns and potential of the global computer ETH over the digital gold BTC, much like the concept of "Google's market value exceeding M0 cash flow."

Messari provides several reasons and quotes the views of others, including BitMEX founder Arthur Hayes' article:

• Ethereum cannot simultaneously be the strongest computer and the strongest currency, according to Arthur Hayes
• The largest cryptocurrency network may be larger than the largest distributed technology "company," according to Arthur Hayes
• The overall performance of cryptocurrencies forces Bitcoin's dominant position (market share) to decrease but remain the first
• Ethereum actually faces more competition from underlying public chains, see Chapter Eight for details
• Bitcoin's scarcity is the purest "monetary meme," dogecoin, shiba inu coin cannot compete in the long term
• Only Ethereum can threaten Bitcoin

3. Bitcoin Moving Towards Multi-chain

Messari quotes udiverse's perspective:

If there are thousands of interactive blockchains in the future, users will not care, nor need to know which chain they are on, as long as the Bitcoin native chain continues to operate, holders do not need to worry about cross-chain and other technical details.

Currently, over 1.5% of Bitcoin's supply is running on the Ethereum chain through BitGo, doubling from last year, and Messari believes this may just be the tip of the iceberg. Bitcoin will also start moving towards multi-chain DeFi, with the "Wrapped BTC" expected to reach at least 3% of the total supply next year.

4. The Gift of Bitcoin ETF

Bitcoin ETF is one of the significant developments this year, but compared to "futures ETFs" and purchasing spot directly on exchanges, it has no advantages, with high long-term holding costs.

Messari's Ryan Selkis, who strongly dislikes Gary Gensler, believes this fully highlights the incompetence of the SEC. The "Bitcoin futures ETF" epitomizes the general public's aversion to Bitcoin: "Complex, highly volatile, scary investment."

He predicts that in the next five years, the amount of Bitcoin locked in similar ETF products will be less than 10% of the total supply, as large institutions enter the market, smart people will buy spot directly to reduce costs.

5. Decline of Chinese Mining

For years, China's Bitcoin has had over 70% of the hash rate, but after the mining ban in China, the hash rate distribution map no longer shows China's presence. Messari finds this change incredible but still believes that China's Bitcoin hash rate is greater than zero, with sporadic miners still mining.

All FUD

• Hashrate FUD: The collapse of Chinese mining has not affected the security of the Bitcoin network
• Climate FUD: The Chinese ban has reduced the use of dirty energy, coal power for mining activities
• Geopolitical FUD: China views all crypto transactions as criminal, but Bitcoin still reaches new highs

Regarding the argument that "mining helps develop renewable energy," research from the University of Cambridge provides an interesting answer. When China enters a period of abundant hydropower, Sichuan's hash rate sees a significant increase, proving that miners seek the cheapest energy to lower costs.

Messari also predicts that the CCP will realize that PoW actually promotes the development of renewable energy. Therefore, there is a 70% chance that miners will return to China.

6. Bitcoin Promotes Renewable Energy Development

For three consecutive chapters, the discussion has been on Bitcoin mining and its Proof of Work (PoW) mechanism. Messari believes that Bitcoin's role in combating carbon emissions and promoting renewable energy development globally has the following observations:

1. Facing Reality: Suppressing carbon emissions in the short term politically is impossible
2. Nevertheless, efforts should be made to combat the largest carbon emitters to address climate change
3. Bitcoin mining can utilize wasted/idle energy to reduce carbon emissions
4. Miners can fund emerging renewable energy markets and low-income countries with cheap energy
5. ESG｜In addition to the misconception about environmental damage, Bitcoin also provides solutions for social and governance issues

7. Proof of Work is Useful

Proof of Stake (PoS) is considered a better, more environmentally friendly consensus mechanism than Proof of Work (PoW), but Messari believes that the two are fundamentally different and not complementary or substitutes, and should not be compared.

Proof of Work provides a global, fair settlement network that does not rely on token holders. PoW separates the "reward for verifying transactions" from "ownership," which is crucial for a network intended to be an alternative to sovereign currency.

The success of PoW paves the way for PoS research, but this does not mean PoS will surpass PoW as a better, more secure consensus mechanism. Although PoW is not perfect, it is the first and may still be the best consensus mechanism for applications in borderless currencies.

8. Proof of Work Protects Minority Rights

Messari cites an article pointing out that Bitcoin's Proof of Work and User-Activated Soft Fork (UASF) make it more inclined to protect minority rights compared to a hard fork's tyranny of the majority.

Regardless of whether users participate in Bitcoin's soft fork upgrade, everyone is still part of the ecosystem. After the upgrade, it is still backward compatible with outdated versions of Bitcoin software, ensuring that users who have not upgraded can still use the network. In contrast, Ethereum has had multiple hard forks, forcing all users to upgrade.

Messari emphasizes that they have investments in both Bitcoin and Ethereum and believe that both will succeed without bias. However, this issue is worth further research, listing views from various sources:

• Ethereum founder Vitalik Buterin
• Bitcoin Magazine editor Pete Rizzo
• Paradigm research partner Hasu
• The book "Blocksize War"

9. Bitcoin Roadmap

Bitcoin welcomed the Taproot major upgrade on 11/14, making Bitcoin transactions cheaper. The adoption of Schnorr signatures allows all transaction types such as the Lightning Network, multisignature transactions to appear as ordinary transactions, further enhancing privacy.

Messari believes this indicates that the Lightning Network may begin the next stage of development and erupt next year.

Although the Taproot upgrade is often mentioned to bring smart contract functionality to Bitcoin, Messari is more optimistic about its advantages for privacy and the Lightning Network. It emphasizes that, as mentioned in the third point of this article, Bitcoin will move towards multi-chain in a large-scale "Wrapped" form, but Taproot will not bring mainstream smart contract applications to Bitcoin.

After years in the crypto field, Messari claims to have curbed enthusiasm for Bitcoin to develop functions beyond payment settlement and value storage, especially compared to the Federal Reserve's daily 800,000 transactions, Bitcoin's daily on-chain transactions have reached 300,000.

With over 190 countries globally, Bitcoin's significance lies in becoming a borderless value transfer settlement layer.

10. El Salvador Driving Lightning Network Adoption

Although the total capacity of Lightning Network payment channels has grown threefold from the beginning of the year, it is only $200 million, while ERC-20 stablecoins settle up to $5 trillion.

However, Messari believes that whether stablecoins or other crypto assets, they cannot compare to the achievement achieved by Bitcoin being adopted as legal tender in El Salvador this year.

Messari does not deny that its optimistic view of the Lightning Network may fail again, but based on the following positive factors, the total capacity of Lightning Network channels may grow tenfold next year.

• El Salvador's proactive promotion
• Twitter's adoption of Bitcoin tips using the Lightning Network
• Edward Snowden predicts more countries will follow El Salvador's lead.

Messari concludes this chapter by expressing high hopes for Bitcoin to function as a legal tender in the future.