Institutional investors are buying Bitcoin's future... How do we stop this?

[Kakmakr]

We have seen recent news that some large Institutional investors are buying large amounts of coins. Now, if you are a speculator and trader, this will be good news to you, but if you are into Bitcoin for the technology and the goal for Bitcoin to be a alternative currency, then you should sit up and take notice.

Currently it is estimated that only 3% of the total available coins are being owned by large Institutional corporations, like PayPal, Credit Card companies and Tesla. This is quickly becoming a trend with large Dubai companies also buying large amounts of coins.

Why is this a threat to Bitcoin's future?

Answer: These companies are buying the bitcoins to be hoarded in cold storage. They are planning to allow people to use Bitcoin as a payment option, but the transactions will not be done on the Blockchain. They will have some kind of internal ledger system that will keep track of the coins being bought from their "hoard" and the coins being sold. (or converted to fiat)  - Payment processors does the same thing and this makes Bitcoin commerce legal within most countries, because it is not perceived as a currency, but rather a payment system. (Also fully controlled and regulated)

Now, this is where the crucial problem starts, because Bitcoin need on-chain transactions to generate income for the miners in the form of Miners fees. We know the Halving will ultimately reduce the Block reward to almost nothing and the miners fee will have to replace the Block reward as a method of payment for their processing power.

What happens if transactions on-chain are replaced with off-chain transactions in ledgers? It reduces the available supply of coins and it also does not generate income for the miners. We know miners are not going to mine for free, so the on-chain transactions will not be able to confirm and the whole experiment will fail. 

How can we stop that from happening? ...... Let's discuss, because this will be interesting to see how we will be countering this unintended attack. 

[youdacapt]

I have little knowledge about how hoarding system or bitcoin mining works; but i think irrespective of where institutions keep their tokens whenever they issue it out as a payment system or confirm it for fiar, it definitely has to be on block because it would be sent out (and that forms a transaction).

Regarding buying the future; i think every trend in crypto currency market does not last a certain period, decentralization means no body can stop anyone from buying; the market itself will stop responding to the fomo caused by institutions, it would just take a while.

Is it a threat? i don't think so, i believe everyone will feel the bear and bulls of the crypto currency market; including the institutions.

[teosanru]

We have seen recent news that some large Institutional investors are buying large amounts of coins. Now, if you are a speculator and trader, this will be good news to you, but if you are into Bitcoin for the technology and the goal for Bitcoin to be a alternative currency, then you should sit up and take notice.

Currently it is estimated that only 3% of the total available coins are being owned by large Institutional corporations, like PayPal, Credit Card companies and Tesla. This is quickly becoming a trend with large Dubai companies also buying large amounts of coins.

Why is this a threat to Bitcoin's future?

Answer: These companies are buying the bitcoins to be hoarded in cold storage. They are planning to allow people to use Bitcoin as a payment option, but the transactions will not be done on the Blockchain. They will have some kind of internal ledger system that will keep track of the coins being bought from their "hoard" and the coins being sold. (or converted to fiat)  - Payment processors does the same thing and this makes Bitcoin commerce legal within most countries, because it is not perceived as a currency, but rather a payment system. (Also fully controlled and regulated)

Now, this is where the crucial problem starts, because Bitcoin need on-chain transactions to generate income for the miners in the form of Miners fees. We know the Halving will ultimately reduce the Block reward to almost nothing and the miners fee will have to replace the Block reward as a method of payment for their processing power.

What happens if transactions on-chain are replaced with off-chain transactions in ledgers? It reduces the available supply of coins and it also does not generate income for the miners. We know miners are not going to mine for free, so the on-chain transactions will not be able to confirm and the whole experiment will fail. 

How can we stop that from happening? ...... Let's discuss, because this will be interesting to see how we will be countering this unintended attack. 

See practically this shouldn't create an issue. If you see the market cap of Bitcoin just surpassed Tencent gaming. Tesla with a whopping 1.5 Billion dollars could just acquire less than 0.2% of total bitcoin supply and the price has further increased due to that and any new company would get even lesser amount of bitcoins. This definitely meant that you can easily say companies won't even be able to touch the 10% mark because the price would explode exponentially. Therefore it's pretty much sure that a lot of bitcoin will still remain in circulation. Second thing is the fees. Now believe it or not fees is a game of demand and supply. Currrently the fees are as exorbitant as $20 for a few transactions and with lack of transactions this would ultimately become lower and then a lot of people will start transacting until it becomes high again. Fees are perfectly controlled by market forces themselves and miners generally end up in profits due this. I don't think we need to worry about them. Moreover rationally speaking no one would want to transact in a currency which can increase 20% in value the very next day.

[hugeblack]

This is quickly becoming a trend with large Dubai companies also buying large amounts of coins.

AFAIK, No entity affiliated with the government of the United Arab Emirates or the government of Dubai has purchased Bitcoin. Some authorities have accepted it as a payment method for licenses to facilitate businesses.

Now, this is where the crucial problem starts, because Bitcoin need on-chain transactions to generate income for the miners in the form of Miners fees. We

Do not be optimistic to this extent, governments will not hodling bitcoin but some companies may hedge against dollar fluctuations.
There are over 3 million unknown Bitcoins and a lot of coins were mined in the early days.

[Ucy]

I think there can be other sources of sustainable incentive/income for miners. One of my preferred alternatives would be to get things redesigned to make Bitcoin handle way more transaction per second, to be faster and vey efficient. It should be possible to develop fullnodes-sidechains that can even run on small mobile devices and  can be easily run by almost all Network participants. You can have the Bitcoin Network Chains/Nodes exist in this order/manner > *Super-Chains/Super-Nodes (collection of all chains),
*Big-Chain/Big-Node, 
* Medium-Chain/Medium-Node,  
*Small-Chain/Small-Node
Micro-Chain/Micro-Node
etc
This model would make my fee idea possible and sustainable. And it should be possible to upgrade Bitcoin to that without making big changes to the main Bitcoin Chain.

[orions.belt19]

I'm not sure that there's a way to stop this. It looks to be inevitable for institutional investors to be flocking in. I've even heard of the trading app 'Robinhood' (the one infamous for stopping the wallstreetbet traders from further buying doge and GME stocks) will soon adopt crypto as well. For sure more users will be able to buy crypto with the use of Robinhood as it will be easier but then this will be regulated by them. But honestly even with wide institutional adoption from payment merchants such as paypal, visa and mastercard, and bitcoin was used as a payment option, it wouldn't dominate the blockchain transactions. I doubt that a large percentage of the population would utilize this as only about 1% is said to own crypto. For now, institutional investors will be in favor for the crypto space as this exposes to more adoption. I think Litecoin has better chances of being adopted as a payment rather than BTC. People look at it more of as a store of value now.

[amishmanish]

Is there a need to stop this? If institutions keep Bitcoin as a form of cold-storage and sell IOU's to customers as proof of their ownership, they cannot stop anybody from demanding the keys. As more and more people come into the fold, they'll either want keys or they will realize the fallacy of such products. For a significant portion of population, such products may well be acceptable as long as it gives them returns on their positions.

Yet, usage in this way will mean that the hundreds or probably thousands of early adopters and small businesses that have some way of earning and using bitcoin will also become powerful and significant. It would represent the shift of wealth generating asset to a new diversified class of people rather than just the old elites. While this may not be perfect, it sure is an improvement.

As far as the concern regarding BTC going into cold-storage and never needing on-chain transactions is concerned, that situation is not so horrifying as long as there is block reward until a few decades. Post that, I think enough people would come to be enlightened about having their own keys. As individuals, we can do our part by keeping our own keys.

[Febo]

Institutional investors are buying Bitcoin's future... How do we stop this?

You cant do anything about it. Bitcoin is permissionless money. No one, even if he is a banker dont need a permission from you or me or anyone else if he can buy or use Bitcoin. It is that simple. At the end Bitcoin will be mostly in hands of the bankers. They simply print USD and EUR and CNY and buy BTC.

[hatshepsut93]

Your fallacy lies in the idea that transactions will move to centralized IOU systems. Any person who is into Bitcoin for the technology would never use such system, so they won't be taking Bitcoin's users, they will have brand new users, who would probably not use self-custody Bitcoin due to lack of knowledge. You are also forgetting about Lightning Network, which will also offer cheaper and faster transactions, but without giving up your control of the coins.

[Kakmakr]

I get the feeling that most of the people do not understand the gravity of this situation ...and what the difference is between "on-chain" and "off-chain" transactions.

Effectively, if you take bitcoins and you place it in cold storage and you only keep it there as proof that your own token is backed by it, then those bitcoins never move. The in-house ledger system and/or database that was developed will keep track of the tokens you created to represent the real bitcoins in your cold storage.

Now the benefit for those companies is this... The actual bitcoins never move, so it increase the security of those coins. (The negative side is this, their own tokens are centralized and thus more vulnerable)

Now, if those coins stay in cold storage and they just add more and more coins as people buy their own in-house token, then the supply of available bitcoins decline. Also, if the coins never move or if less coins move.... less miners fees are paid ..and we know the future of the Blockchain's success is in the reward for the people doing the mining.

A possible scenario would be that too little coins become available for people to buy and the public might then have to switch to a new Alt coin to f#$k with these large companies. (effectively killing Bitcoin)  

[dothebeats]

I'm afraid that there aren't any means to stop this if you don't own an exchange or you do not have the $$$ to move bitcoins for yourself towards another market wherein institutional investors are barred from participating. This is one of the boon of a free market, literally anyone can join and buy whatever amount they want and no one will restrict them into doing so. Whatever happens to the amount they bought is none of every one's business.

A possible scenario would be that too little coins become available for people to buy and the public might then have to switch to a new Alt coin to f#$k with these large companies. (effectively killing Bitcoin) 

At that point, the world is already too deep of bitcoin that they will not really care much about the 'new' iteration of it that combats the corporations. It would take a new Satoshi Nakamoto in order to sway everyone's minds off of bitcoin that has succumbed to the power of the corporations.

[Lucius]

The answer is simple - we can’t stop anyone who has the money and intent to buy BTC to buy as much and when they want. Ordinary people have had the opportunity for more than 10 years to invest in Bitcoin at ridiculously low prices compared to these today. If for the first 5-6 years there was doubt whether the whole thing would come to life or fail, after that a lot of things became clearer - so I'll ask a counter-question - why didn't the average Joe ask this question you're asking now 5-6 years ago? Well, probably because most of them are not here because of technology, but only because of profit - and such people do not mind that big investors invest money in BTC.

I hope that some new solutions will be found so that miners remain interested, and at the same time that the fees are such that the average user does not give up on-chain transactions. The next 10 years may be crucial - even Satoshi once wrote something in the style that in 20 years there will be a lot of transactions, or none at all.

[Smartprofit]

We have seen recent news that some large Institutional investors are buying large amounts of coins. Now, if you are a speculator and trader, this will be good news to you, but if you are into Bitcoin for the technology and the goal for Bitcoin to be a alternative currency, then you should sit up and take notice.

* * * * *

How can we stop that from happening? ...... Let's discuss, because this will be interesting to see how we will be countering this unintended attack.  

In my opinion, the world is objective.  

Currently, we see that bitcoin is not a common means of payment.  On this I absolutely agree with Nassim Taleb (the author of the concepts of the black swan and antifragility).  

At the same time, Bitcoin is in great demand as the world's reserve currency.  This is reality.  

If countries and large corporations use it in this capacity, they will bear the cost of maintaining the network.  

Bitcoin mining will be a strategic industry like a military-industrial complex.

At the same time, Bitcoin will be decentralized, as there are more than 200 countries and tens of thousands of large corporations in the world.

[electronicash]

isn't this what Paypal is doing like no coins are going to be withdrawn from them but they can make transactions to the merchants they have. there may be users going to be using their own platform and transactions are just in their internal ledger system but with the warnings, people will in due course realize the coins are not theirs to own and will not use their centralized system.

[aoluain]

The answer is simple - we can’t stop anyone who has the money and intent to buy BTC to buy as much and when they want. Ordinary people have had the opportunity for more than 10 years to invest in Bitcoin at ridiculously low prices compared to these today. If for the first 5-6 years there was doubt whether the whole thing would come to life or fail, after that a lot of things became clearer - so I'll ask a counter-question - why didn't the average Joe ask this question you're asking now 5-6 years ago? Well, probably because most of them are not here because of technology, but only because of profit - and such people do not mind that big investors invest money in BTC.

I hope that some new solutions will be found so that miners remain interested, and at the same time that the fees are such that the average user does not give up on-chain transactions. The next 10 years may be crucial - even Satoshi once wrote something in the style that in 20 years there will be a lot of transactions, or none at all.

Good points Lucius but you also have to remember a large portion of people who are
in Bitcoin now didnt know about it 5-6 years ago.

I'm a little worried also about the vast amounts of Bitcoin being bought up which may
never be in circulation again for 10 or 20 years and when Bitcoin is available for sale
they too may be snapped up and added to the long term hold.

These actions have a "positive" effect on Bitcoins price and as ordinary people liquidate
to FIAT to buy their Lambo's the whales will buy to hold.

[Kakmakr]

The answer is simple - we can’t stop anyone who has the money and intent to buy BTC to buy as much and when they want. Ordinary people have had the opportunity for more than 10 years to invest in Bitcoin at ridiculously low prices compared to these today. If for the first 5-6 years there was doubt whether the whole thing would come to life or fail, after that a lot of things became clearer - so I'll ask a counter-question - why didn't the average Joe ask this question you're asking now 5-6 years ago? Well, probably because most of them are not here because of technology, but only because of profit - and such people do not mind that big investors invest money in BTC.

I hope that some new solutions will be found so that miners remain interested, and at the same time that the fees are such that the average user does not give up on-chain transactions. The next 10 years may be crucial - even Satoshi once wrote something in the style that in 20 years there will be a lot of transactions, or none at all.

Good points Lucius but you also have to remember a large portion of people who are
in Bitcoin now didnt know about it 5-6 years ago.

I'm a little worried also about the vast amounts of Bitcoin being bought up which may
never be in circulation again for 10 or 20 years and when Bitcoin is available for sale
they too may be snapped up and added to the long term hold.

These actions have a "positive" effect on Bitcoins price and as ordinary people liquidate
to FIAT to buy their Lambo's the whales will buy to hold.

#Lucius has got a point, but it is not about the average Joe not having the money to buy bitcoins, but rather large institutional organizations taking large amounts of coins out of circulation to make profits with it's own ledger or database. (They will charge fees for the service they render on their platform)

The fees that they will be charging , will not go towards miners fees... because this will happen within their software and not on the Blockchain. The miners get their payments from the fees paid when you do on-chain payments on the Blockchain. (Similar to what is happening with the Lightning network)

The miners will have to supplement their income by hosting Lightning Network hubs, but that will never be enough to cover their expenses.. because the Bitcoin difficulty is just too high. (It might go down..as miners are forced to exit the mining scene)  

[LogitechMouse]

How can we stop that from happening? ...... Let's discuss, because this will be interesting to see how we will be countering this unintended attack. 

NONE.
There is no way for us to stop those rich people or institutional investor with what they are doing.

There is a famous quote that says "If you can't beat them, join them". What we can do right now is to just ride the waves, set a target sell price and wait after selling. Crypto market is a decentralized market where anybody can buy anything and there is no way for us to stop them. They are a group of rich people and they have a lot of money obviously. We Average Joes can't stop them from buying Bitcoin.

I know that these institutions are buying huge chunks of Bitcoin everyday and the chances of it being manipulated is going higher but there is nothing we can do with it but to be ready if in case the worst case scenario will happen.

[Lucius]

Good points Lucius but you also have to remember a large portion of people who are
in Bitcoin now didnt know about it 5-6 years ago.

It is true that many first heard of BTC only at the end of 2017 when the media made an amazing FOMO effect and news about BTC was everywhere. I remember witnessing for the first time that my national television covered the topic of BTC and cryptocurrencies in a daily political show - but also that few of the interlocutors present said anything meaningful on the subject - because honestly they had no idea what they are actually talking. Of course, they were all stunned by the price of something that only a year ago was worth as much as 20 times less.

I first heard of BTC sometime in late 2011, but it wasn’t until 2014 that I became seriously interested in the whole thing - although it took me a while to figure out what Bitcoin really is. Yet all this does not change the fact that BTC has existed all these years, that knowledge of it has been publicly available online, and that anyone has been able to invest throughout that time. I believe many knew, but did not believe, that Bitcoin would achieve this kind of success - we cannot blame anyone but ourselves for this.

#Lucius has got a point, but it is not about the average Joe not having the money to buy bitcoins, but rather large institutional organizations taking large amounts of coins out of circulation to make profits with it's own ledger or database. (They will charge fees for the service they render on their platform)

I've already written what I think about the opportunities the average Joe had, and that we can't point the finger at companies and rich people who today do exactly what was predicted for years. Satoshi dealt the cards, but apart from the technical stuff, he didn’t close the BTC under the glass bell and set up an invitation system by which we could tell who could participate in the party and who couldn’t.

As for the fact that large investors will destroy the miners, I would not agree with that assumption - because they are not the ones who invented the Lightning Network, nor will they be able to manipulate BTC in a way that will create their ledger databases. Anyone who tries to manipulate the basics on which BTC works today will go through the same thing as everyone else who has tried to make their own version of BTC.

[Xavofat]

What happens if transactions on-chain are replaced with off-chain transactions in ledgers? It reduces the available supply of coins and it also does not generate income for the miners. We know miners are not going to mine for free, so the on-chain transactions will not be able to confirm and the whole experiment will fail. 

This seems a hugely exaggerated claim.  Firstly, whenever I have paid for something in Bitcoin it has been through Bitpay, and this 'internal ledger' thing you're talking about seems to be made up.  All I did was send Bitcoin to the address Bitpay gave me and Bitpay then has the option for the company of whether they want to keep the Bitcoin or convert it to its fiat value, providing stability for accepting Bitcoin payments.

Also, even in a scenario where what you're talking about became a reality, there wouldn't be a problem since most transactions are P2P or to and from exchanges rather than with merchants.  That would create demand for space on the network and thus transaction fees.

Right now, the transaction fees being paid make up approximately 1/6th of the block reward - even in the very unlikely scenario that the sum of transaction fees paid to miners decreases over time, there would still be some transaction fees and miners would not be 'mining for free'.  The amount of hashrate directed to the network would decrease and the difficulty adjustment within 2016 blocks would keep the reward appropriate.

[wxxyrqa]

I believe that on-net transactions will not be replaced by off-net transactions in registers. To do this, users must trust only numbers on the screen or on paper, while not making any transactions at all. This is simply not possible, In addition, it all depends on the user of the cryptocurrency, but we will not agree to this, and there are many of us😉. In addition, the fact that large capital acquires bitcoins for storage already has a positive effect on pricing, since a significant amount of bitcoin leaves the supply on the market. as a result of this process, the shortage of Bitcoin will lead to an increase in the price of the coin.