Predictions about the future of financial systems (Part 1)
A roadmap based on technical understanding of Bitcoin, Ethereum and the lightning network

In a previous post, I shared about the biggest failures in predicting the future, specially when it comes to the technology domain. It’s a fun post to check. In 1964, Sir Arthur Clarke said the following famous quote:
Trying to predict the future is a discouraging and hazardous occupation, because the prophet invariably falls between two stools:
- If his predictions sound at all reasonable, you can be quite sure that in twenty or, at most, fifty years, the progress of science and technology has made him seem ridiculously conservative.
- On the other hand, if, by some miracle, a prophet could describe the future exactly as it was going to take place, his predictions would sound so absurd, so far-fetched, that everybody would laugh him to scorn.
This has proved to be true in the past, and it will undoubtedly be true, even more so, of the century to come. The only thing we can be sure of about the future is that it will be absolutely fantastic.
When Arthur Clarke made his astonishing predictions about a global internet system, all he had at that time were the following technical elements:
- Sputnik-1 satellite, launched on 4 October 1957, which could emit only beeps in 2 frequencies ( 20.005 and 40.002 MHz) and lived only 21 days before it ran out of batteries.
- Explorer 1 became the United States’ first artificial satellite on 31 January 1958.
- System/360 introduced by IBM on April 7, 1964. It was its first computer to use interchangeable software and peripheral equipment. It has 8–64 Kb memory, run only 34000 instructions/second, weight 770 kg, and cost $133,000+.
With that knowledge alone, he managed to extrapolate correctly that everyone in the future will have access to computing and communication. This prediction sounded far fetched at the time and almost impossible! Imagine your grandma carrying 770 Kg of computer home back from shopping after spending all her lifetime savings. Compare that to your phone (64 Gb memory, doing billion of calculations per second, weighing almost nothing, and costing less than 1000$).

What many people failed and still fail to imagine, is the exponential growth of technology, and the fact that: once something is invented (no matter how hard it is to invent it), it can never-ever be un-invented. Fast-forward to today’s situation, for financial systems. We’re in year 2020, where most of people still hold their savings:
- In private banks (requires trusting a third party)
- In a currency that can be created at will (potentially unlimited supply)
- By central governments with changing policies, no transparency and potentially lot of corruptions. Just try to guess the amount of any classical currency in circulation. (I bet you can never tell exactly how much dollars or euros are in circulation).
- Very slow, often limited, expensive international transactions with lot of hidden fees.

Meanwhile in 2009, Bitcoin, the world first cryptocurrency was created. This can never be un-invented. It offers the following properties:
- Full decentralization (you can hold your own key and trust no one)
- Hard capped supply (limited by the protocol)
- Very transparent blockchain, and issuing policy (new bitcoins at each block)
- Fast, unlimited international transactions. There is no distinction between sending a bitcoin to someone in your country or to someone in a different continent (just think of e-mail vs post mail).
Now you ask why then, Cryptocurrency didn’t overtake yet the current financial system? The answer is mainly for the following reasons:
- Education and knowledge: it takes time for people to learn and adopt new technology (Check the video above, making fun of internet). Plus, currently, crypto is very complicated and not very user friendly.
- Technical limitations to be solved: Bitcoin can only do 4 transactions/second (compared to Visa or Mastercard 65000 tx/s). That’s due its highly decentralized and trustless nature. But if we have already a faster Visa and Mastercard, why do we need bitcoin? (Again, check the video above). A faster radio is not better than a slower internet. Bitcoin offers an unprecedented level of transparency and trust. Visa can block billions of credit cards in ONE click, and doesn’t operate worldwide.
- Infrastructure: it takes time to setup the crypto infrastructure needed worldwide, in terms of exchanges, regulations, policies. It took around 30 years for the internet to go from dial-up modem speed (56Kb/s) to fiber optics (76 Mb/s)
- Applications: it takes time to build startups and applications on top of cryptocurrencies. Compare it to the internet, the IP (internet protocol) invention goes way back to 1983. But Amazon is created in 1994, Google in 1998, Facebook in 2004, WhatsApp in 2009, Instagram in 2010, TikTok in 2016. Imagine the void of applications on internet from 1983–2000!

So what could happen next?:
- Education and knowledge: More universities started courses about cryptocurrencies and blockchain technologies. More research grants are given for blockchain related topics. More engineers and PhDs will be graduated. And hopefully more effort will be put in make everything more user-friendly.
- Technical limitations: More scalability problems are being solved through side channels, lightning network, off-chain solutions.
- Infrastructure: Exchanges are getting more secure, upgraded to handle more users. Decentralized exchanges and decentralized finance (DeFi) are taking off.
- Applications: No doubt that is the most lagging domain, since it’s a chicken and egg problem: Application makers prefer to wait for more users before investing in making a new applications, and users prefer to wait for more applications before investing in learning a new domain/tech. In 2017, the first hyped crypto application took off in form of CryptoKitties: a digitally collectible and tradeable cats on Ethereum blockchain. Since that time, Crypto.com lunched the first payment card that pays cashback in cryptocurrency. Many more useful applications will come soon.
In the next post, I will discuss more in details how the landscape of cryptocurrencies could look like 20 years from now, stay tuned!