BTC’s Brightest Future Lies Ahead
But it needs to make some additions that will make it even stronger.
Before you call me a heretic, hear me out…
BTC can fulfill its electronic cash vision, but not through increased block size or any of the other nonsense tried before. It has to do what cash does… cash isn’t just for transactions, it’s also for savings.
Bitcoin can become the world reserve currency once it adds these two major missing puzzle pieces. Satoshi’s original design isn’t flawed, but it is incomplete. Upgrades have and will continue to happen, so let’s not pretend we’re defacing the Mona Lisa by adding some more stuff when it makes sense to do so.
BTC needs an L2, specifically a staking layer. This is a self-custody savings account that will generate a yield. Transaction fees from the network should be sent to this L2 treasury address, which is then distributed back to BTC savers. No additional BTC is created, but the network wealth is distributed in a more fair way.
Why should BTC holders get something for nothing? Well, it’s not nothing. There are some big benefits to this:
First of all, after every fiat currency finishes dying, your 1 BTC still equals 1 BTC. There’s no incentive to buy and hold something that doesn’t grow, when you have several other choices these days of things that do earn a yield. It doesn’t matter who is right in the debate of what protocol is better (BTC, ETH, SOL, and so on), but what is a fact is when the fiat measuring stick disappears, you get more ETH and SOL for supporting the network; BTC needs to compete.
Second, miners may gripe about not getting fees anymore, but the BTC they still earn from block rewards can also earn a yield, so they have a passive income allowing them to sell less BTC (while fiat is still around).
Third, funds doing market neutral strategies can reconsider their dependence on futures markets if they’re able to earn a yield by holding spot bitcoin. Futures markets artificially inflate the supply of BTC to near infinity, which enables market manipulation and suppression of BTC prices (again, in dying fiat numbers).
Fourth, a staking layer provides proof of reserves. Alongside exchanges providing that info, and trusts/ETFs providing that as well, we could have a pretty reasonable certainty when all other entities are not being truthful with their reserves. Anything well over a projected supply of coins that haven’t moved in ~8 years (to account for early lost wallets) would be a big red flag and cause for worldwide investigation, and BTC’s real supply would be more easily kept honest.
This creates a much more healthy and secure global finance ecosystem facilitated by in large by this savings/staking layer. It could also help with automatic wallet address rotation for if/when quantum threats make trying to break a SHA-256 hash affordable (not any time soon).
One last thing… cash is how tremendous wealth that is too big to be traded parks itself. Trillions of dollars/yuan/yen/euro can’t swing trade in BTC. It needs to be parked, essentially “bridging” the value into the BTC protocol and not ever removing it. In order to do that, that cash has to be able to earn a yield (which is then used to prop up/invest in all kinds of things).
The BTC in the savings/staking layer is NOT available for lending. That’s how you get stuck holding a bag of crap that becomes worthless and lose your actual good assets.
In my opinion, Bitcoin has to go this route, or it will lose market share to Ethereum which has already figured this out, but unfortunately went down this path at the cost of security. Bitcoin must always be Proof of Work, but the L2 can facilitate those coffee transactions through much faster cheaper blocks which miners can still process.
Without these added puzzle pieces, Bitcoin will never achieve the intended vision of being electronic cash. it is then just a synthetic commodity (digital energy).
