#asknostr
Someone smart I know was arguing against #Bitcoin and said this. Not sure how to respond. Seems like a credible threat. Help me out..
"Lol...I'll tell you how bailouts will eventually happen even on a bitcoin standard.
It'll start with tx fees gng through the roof as banks, govts and big businesses start settling onchain.
All normies will have to deposit their btc in the banks, as all small utxo (ie. 99% of population's stash will become dust utxo, and self custody on L1 will become a luxury only top 0.0001% could afford)
All normies now transact on L2's where banks provide their IoU's. Initially banks will happily provide proof of reserves to lure to in and make you trust them, but eventually they'll stop doing so, as they start inflating the IoU's.
At one point, the IoU's floating around will be too much and ppl will start questioning the banks, but even then what could you do, since you can't self custody on L1 due to high tx fees.
Even if ppl start withdrawing from banks somehow, the banks will stop withdrawals pretty quickly and central banks / govts instead of taking action on the banks for inflating the IoU's, will simply make fractional reserve legal for BTC too.
So now for each 1 BTC, banks would be allowed to issue 10 BTC IoU's on L2, that too legally (which they would already be doing for a long time, and even after getting caught it will just become a legal practice instead)
Welcome back to Gold 2.0 system, where Fiat was the L2 for gold, and we all know how. that turned out.
But you do you I guess, and continue to believe there'll be no bailouts, censorship, draconian level surveillance and taxation on L2."
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Replies (24)
That's not how L2 works.
Thats fake L2, Lightning for example is real L2.
But yeah, it's a credible threat, and we should build tools, educational resources and things that help to reduce the chance of that future.
But just because you can think up a scenario, doesn't mean that's the fate.
It is not a threat, it is by design.
Do you really think Satoshi didn't know a few transactions per second are not enough to service all transactions done WW ?
Scaling things is not a technological wonder.
Especially in the digital domain.
LN is a first solution and if needed others will be made.
FUD will always exist, get used to it, beter counter them or help making solutions.
Using Bitcoin on LN is factually a solution teach by example.
Once you use it you will experience it is working fine not better way to explain.
What are they basing their assumption on that base layer TX’s will be that cost prohibitive? Fees will have to increase pretty significantly to compare to theft through debasement and current banking fee structures
1. They should naturally go high with more and more use as an international settlement layer and decreasing block rewards should be compensated too.
2. Nefarious state actors can nationalise mining and make bogus transactions just to keep the fees from falling. All the extra transaction fee goes to the miner but that is state controlled.
LN too must be used in a self custodial manner right?
Non custodial LN is also an IOU I assume?
LN too must be used in a self custodial manner right?
Non custodial LN is also an IOU I assume?
Its not possible to use self custodial LN for most people.
I think the argument is lightning as it is will not be enough. Well maybe with sidechains indunno. Its the l3 cashu thats supposed to be the better banking layer.
the franctional banking attack wouldn't work since other banks and countries would just bankrun you
I'm not that hard core left or right, black or white.
Onchain are my life savings, in cold storage own keys.
LN is my wallet, I have a few months of expenses in it, mostly due to value increase while it was on LN.....
For daily expenses I wouldn't mind too much if it was self custodial or not, but I use a self custodial one since I put some value in it.
Can you expand on that?
I dont understand.
You won't be able to be a bank if you cant afford an onchain tx.
Can you tell me how tx fees won't rise when banks will be settling 10k or more btc, and all plebs will barely have 0.5 in their entire stash?
No Im saying the you’re right about the tx fees going up. Full sovereignty on the base layer the way it is now is probably not gonna be available to most in 20 years. Also on chain isn’t going to be 10k bitcoin at a time. It’ll be closer to 1 bitcoin worth a few 10-100 million each.
What I’m saying is that the fractional reserves being legally protected is not going to a stable solution (not that it is in fiat but even more so) basically any actor who tries will get bank run. Remember it’s note enough to have a nation or even large groups of nations to agree to your fractional bitcoin. A moderately large player could cause a run on your bank by just converting it down to the base layer and make a lot of bitcoin for it.
2 is not certain at all. That leaves the very real risk of a competing miner taking your transaction fees unless you think a nation can control the vast majority of hash power. Even then there’s a statistically certain loss of funds in relation to the percentage of hash power they don’t control. Are you sure they can actually afford this loss?
No I understand that.
I was referring to the enforcement of actual supply of BTC on L2 being possible only if everyone is using self custodial.
Otherwise there could be rehypothecation on L2 by banks.
To be honest I thought also Lightning does not enable to create 'new' or additional Bitcoin ?
Even non custodial, some party had to make all #Bitcoins on LN available by temporary lock them onchain.
Again as far as my research went...
Man I’d love to see a chart that maps the dollar fee for sending 500k sats in fee environments from 1 to 1000 sats/vbyte
Yes, you're right. LN itself does not allow it, But the only way to verify whether your LN Sats are real - is to run a LN node/channel yourself right?
Man I’m out of my depth. It’d be cool to know in advance what the dollar denominated and % of TX value cost of a single sig TX is for X amount of sats.
I know block space is going to rise in value, but for an onchain TX for $1000 USD it’d be cool to know at what point the fee exceeds 5%, which is about the point where I believe it’d be prohibitive for a lot of users.
Can’t exist. Or must make assumptions to make this chart.
Why? Need to accoun for number of inputs and outputs. A typical transaction size is roughly 250 bytes. At bitcoin price of $100k, at 1 sat per vbyte that’s 25¢. A thousand fold fee rate would be $250. At $1M bitcoin and 1000 sat/vbyte fee rate, it’s $2500 per typical transaction.
Yes the number of assumptions breaks it. Thats why it defies prediction
How do you think we prepare aside from consolidating to what we are comfortable with sending in a single TX?
Security will eventually only be paid for by transaction fees in the decades to come. Will need new technology to more efficiently use block space. Especially in post quantum era, where signatures are 10x larger and signature aggregation might not be possible.
There will always be tension between security and fees and block space.
I will have a video about this. It’s a complete inversion of the reality of why gold failed and we ended up on a fiat standard.
Everyone makes the very big error of thinking that it was no self custody of small transactions that led to issuing endless paper gold and debt backed by nothing. This is false. It was because gold sucks at BIG transactions and banks, merchants, businesses, land purchasers, international political entities, and everyone else who controlled the capital structures of the world, stopped taking settlement of gold and lost all monetary assurances.
Also, this section:
“It'll start with tx fees gng through the roof as banks, govts and big businesses start settling onchain.
All normies will have to deposit their btc in the banks, as all small utxo (ie. 99% of population's stash will become dust utxo, and self custody on L1 will become a luxury only top 0.0001% could afford)”
- is an absurd exaggeration of even the worst case scenario when it comes to fees. There would be a hierarchy based on how much value you were protecting, and even at $500 fees per standard TX most middle class would be able to secure their savings and/retirement very easily if risk was rising. Normal people have spent literally all last week losing or closing with multi thousand dollar losses or fees to exit positions or move their retirements to safety. Bitcoin in the worst case would give them such an unbelievably greater degree of security and sovereignty in that scenario that there’s virtually no way the extended effects of its attributes could create the same conditions as gold.
What it really means is that on chain ends up largely for retirements and savings protection, channels or pooled transaction L2s are for wage and important payments and provenance, L3 and custodians are for fun features and low value daily payments. And this explicitly means that all of the largest and most important value is easy to protect, and the stuff at risk is explicitly low value.
Bitcoin and gold scale in completely opposite ways. Gold and precious metals work great in small transactions and is complete trash for huge transactions. Bitcoin on-chain is uneconomical for small transactions but incomparable for large transactions and settlement.
This is not the threat it’s made out to be. And I think it’s because of how few people understand gold and why it failed.
nostr:note1h8vwenm6qatm2vcv6zrdh8qd6zkfq8syqhfk8rx267spuc05c2ns75ajxm
the banks had monopoly over printing “money” and this gave them an edge to offer services other institutions couldn’t
in bitcoins case, people can reject any fake money that’s been created by the banks or any other entities
i don’t see what the banks are offering unique that a small co-ops or communities can’t offer, like fedi has an app that can take care of the payment rails and keep the funds within a village or a family, so they can grab the rug puller, i’m not saying fedi is the one, but for now there is an option for people with smaller or no utxos
there will newer l2 options that will replace the current ones and offer better options and we’re ok for now as there’s plenty of room on base and l2’s