In my opinion, creating a new financial system based on Bitcoin requires technical improvements to the original cryptocurrency. At the same time, the current Bitcoin Core developers are very conservative. They are against any innovation. 🙋
On the one hand, this is good... A system like Bitcoin should operate reliably. And a healthy conservatism here is entirely justified.
But on the other hand, without technical improvements and innovations, creating a new financial system based on Bitcoin is, in my opinion, impossible. For example, Bitcoin Core developers have been rejecting the idea of drivechains for 10 years. Meanwhile, creating a full-fledged L2 layer would help miners generate additional income. And this, in turn, would motivate them to maintain the network's security. However, this innovation is not being implemented.
And at the same time, Bitcoin mining is currently unprofitable for miners. So how can we even talk about creating a new financial system (when the floor beneath our feet is on fire)?
Like you say I think it's actually good to be conservative on the base layer (and the developers are actually a lot less conservative than node runners I would argue, just look at what's happening with knots), because additional complexity necessarily comes with additional vulnerabilities. Simplicity is reliable and strong, which is what's required of a base layer. Any additional functionalities should strictly be relegated to layer 2s. I don't see any issues here.
Also what's the evidence for miners being unprofitable? Why has the hashrate only gone up and dramatically so? Difficulty adjustment solves unprofitability
You can see from the slow uptake on this thread that people don't really understand the economics behind Bitcoin and whether it can even handle the volume of transactions required in even a small size country. Also, even if it could handle that volume (it can't in the current form including all the microtransactions taking place in a country every day) then does it do it more efficiently than the current banking or payment processor networks? Again, the answer is no. Does it offer the same instant speed or guaranteed fee rate as current payment options? No, it does not. All these things make it simply infeasible to use as the base trading currency of any country. Other crypto could potentially work, but not BTC in the current form and that's fine. Bitcoin as the original crypto can absolutely prosper and serve another role, acting more like a rare commodity or being used for settling larger payments.
Bro don't complain about other people not understanding economics when you yourself don't understand the difference between a layer 1 and 2. Layer 1, on chain BTC, is not desgined to handle the full volume of microtransactions like bank deposits do. That is what layer 2 is for 1. Layer 1 is for netted payments between banks, like fedwire, as I said in the post. I don't see why a layer 2, whether it be something like lighting, a bitcoinOS style integration with chains like cardano or XRP, or just bank ledger money like current deposits, or some combination of those. Please look into the difference between m0 (federal reserve accounts, outside money) and inside money.
The community lending is really astonishing. Loans to small business from their friends. By the way, that's one of the things that Islamic finance is supposed to do with musharakah partnerships. Skin in the game lending. It is a correct idea and so it has been repeated throughout history in various forms.
2026 DAOs are proving this model is not exactly working well btw. Voter apathy everywhere. Governance token concentration. Half of them turning into bureaucratic maul or dying out. The technology is not the problem here. People are.
The real disease of the current system is unbounded expansion. Not fractional reserve itself. The ability to keep going, keep printing, keep inflating asset prices while wages do nothing. Maybe, maybe that's okay with the tradeoffs if Bitcoin's hard cap would add some discipline to L2 growth.
BTC is at 60k, institutional money is pouring in on AI, and fear index is at 12, along with huge liquidations . And here you are commenting on the new fedwire. I don't know if that's visionary or delusional.
Interesting I'm not aware of any DAOs making loans to small businesses though. I've looked into Sovryn for example, they were the closest thing I could find to this model, but they just make loans to ppl who are speculating or just need cash and don't want to sell their BTC. It's unsurprising that ppl dont give a damn and are apatheic to these kinds of loans, there's no connection to community or sense of contributing to innovation.
I think a hard cap definitely prevents unbounded growth bc at some point banks will just not be able to make payments and will fail. The threat of that, and examples of other failures will keep expansion in check and it should stay bounded.
yes ppl are asleep rn and it will take a long time for the system to adapt but delusion is required for substantial change which we need. A paradigm shift always seems delusional at first
I predicted this a long time ago (probably during the high network fee spikes) and don't remember saying exactly what it was on this forum, something like: bitcoin is increasingly not ideal for retail transactions, cannot be applied to small scale businesses, in the future it will only be exclusive to institutional transactions.
Edit: Found some that are relevant.
bta.lk/thread/5479762.msg63417478#msg63417478 bta.lk/thread/5578361.msg66552052#msg66552052Yeah lots of people talk about this not tryna come across as a brand new idea, moreso the combination of ideas ive heard elsewhere
This is likely the case in the long term. Supposing Bitcoin becomes a mainstream financial system, it's likely functioning underneath separate layers. Bitcoin would serve as the base layer where final settlements happen. Bitcoin itself can't function as everyday money. Your cup of coffee gets cold before your payment is confirmed.
As to fractional reserve, I wonder why this appears almost a natural tendency when it comes to banking. Even the gold standard eventually ended up adopting this. If Bitcoin were to be adopted as a mainstream financial system in the future, would it also follow the same route? It might be the convenient path in the name of liquidity, but this is so susceptible to irresponsibility, abuse, incompetence, negligence, and whatnot that for me it's a bane rather than a boon to a new order.
yeah fractional reserve is inevitable because it provides a genuinely extremely useful function. It's what allows safe and liquid savings, ie deposits, of ordinary people to be leveraged as investment for productive purposes, without requiring those savers to lock up their funds and be directly liable for losses, as they can spend their funds at any time. This works because in aggregate, people only actively spend a smallish portion of their savings, yet still want to retain safety and liquidity at a moments notice. It all breaks when there is a panic however, which is the downside. There ways to deal with this, but government insurance is not the answer as it just encourages irresponsibility, privatizing gains and publicizing losses. That's why you need DAO structures where the depositors are liable, but can still have liquidity while also getting all of the lending yield. I have some ideas for how to implement rules that punish panicking vs holding in a crisis which would limit bank run risk.
I mean how do you solve the underbanking issue without relying on getting ppl access to smartphones or computers? What alternative do you propose? I'm not saying we should get rid of physical cash, that can be redeemable for a digital BTC bitcoin issued by the government or even a private entity.
