People tend to celebrate periods of low fever. It's time to clean your home, integrate the necessary UTXO, open and close the lightning channels you've been waiting for, or engrave stupid 8-bit JPEG on the blockchain. They are perceived as positive times.
They aren't. We saw an explosive price rise over the last few months and have finally reached the 100k USD benchmark that everyone took for granted that it was pre-defined during their last market cycle. That's not normal.
The photo on the left shows the average daily fieriate since 2017. The photo on the right shows the average daily prices since 2017. Historically, when prices were very unstable, we've seen Fearate spikes accordingly. Generally, it matches growth and peak when prices go. Those who actually bought and sold people traded in chains got custody of their coins when they bought them.
This last leg over 100k does not seem to have the same proportional effect even early in this cycle. Now, if you actually saw both of those charts, I'm sure many people will go “What if this cycle was the end?” That's possible, but let's say it's not for a moment.
What else does this show? The changing number of participants driving the market. A group of people once dominated by self-controlled individuals manages the risk of counterparties by removing profits from exchanges, while a group of people who generated time-sensitive on-chain activities have transformed into a group of people who simply pass through ETF stocks that don't have to solve anything in the chain.
That's not a good thing. The very nature of Bitcoin is defined by the user who interacts directly with the protocol. A person who has a private key to approve a transaction that generates revenue for the miner. Funds are sent and used software to verify transactions against consensus rules.
Both have been removed from the user's hands and placed behind the veil of custodians puts the extremely stable nature of Bitcoin at risk.
This is a serious existential problem that needs to be solved. The overall stability of consensus on a particular set of rules assumes that there are sufficient independent actors with separate diverging benefits, but are consistent with the values obtained from using that set of rules. The smaller the group of independent actors (and the more groups of people who “use” Bitcoin as intermediaries through those actors, the more practical it is for them to adjust for radical change, and their interests as a group are more likely to diverge in sync from the interests of large groups of secondary users.
When things are tilting in that direction, Bitcoin doesn't work very well, and it doesn't materialize anything we hope to be able to do here today. This issue is both a technical issue in terms of scaling Bitcoin in a way that allows funds in the worst Kane to be independently controlled, but it is also an incentive and risk management issue, even through the worst case scenarios.
The system should not only be able to scale, but also provide a way to reduce the risk of self-detention to the extent that people are used to from the traditional financial world. Many of them actually need it.
This is not a situation where “I do the same thing as me because it's the only correct way” but it affects the basic characteristics of Bitcoin itself in the long run.
This article is a take. The opinions expressed are entirely the authors and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
