The following is not my opinion. I try to think out loud and get your guys opinion on this.

Motivation

One of the main problems with Lightning is that we need onchain transactions to open channels. When the whole world decided to go on Lightning right now and Bitcoin does 7 transactions per second (oversimplified, not everyone can queue up orderly and wait with all blocks filled perfectly and no other transactions than channel openings). A day has 86400 seconds -> 604800 openings per day. 215 million channel openings per year. We cannot wait years to onboard the worlds 8 billion people.

So how do Onchain maximalists solve this with an even slower transaction method?

I think most of them romanticize the gold standard.

So the logic is that everything is backed by Bitcoin. And people have custodial accounts and paper money Bitcoin. What guarantees that their Bitcoin are actually backed by real Bitcoin? Nothing. What does this has to do with Bitcoin? As long as it is exchangeable for real Bitcoin in theory it slows Inflation. Nevermind if people actually do this.

Why? What's the purpose?

Money fulfills 2 main functionalities:

Means of transaction
Store of value

On the plus side this scales amazingly, nothing solves means of transaction and scales as good as centralized money. The Inflation is limited as long as people believe that they can exchange 1 for 1 in 21 million. And everyone who wants to can hold real Bitcoin in a cold wallet. I think an argument could be made that the store of value is not what we want but "good enough". Solve store of value by buying real Bitcoin, solve means of transaction by doing your everyday transaction by theoretically backed Bitcoin that won't inflate 9% yoy but have no decentralized security either.

Conclusion

I mean, this is not the self sovereignty that I want. But it seems much more realistic considering the gold standard was actually quite recently. Also, history does not repeat itself but it rhymes: Fractional banking of paper money backed by fractional Bitcoin, stretched to thin, bank runs and reinventing fiat. Over and over and over again. A major difference of course, would be that illegal holdings of Bitcoin are more stealthy than transporting physical gold into your house.

This could also be a jumping off point to launch Lightning Maximalism from.

So what do you think? Possible solution? Future of Bitcoin? Bearcase? Bullcase? Or the nightmare scenario, literally the worst and most dystopian of all outcomes?

116 sats \ 0 replies \ @TheBTCManual 18 Jul 2022

I am still trying to get my brain around it, LN I atleast theirs an enforced tether to the chain through channel closing, what I am more concerned about is all the paper claims going on in bitcoin with these CEFI services and shitcoin casinos. You know for damn sure they're rehypothicating because normies are not taking their coins off exchanges.

If banks offer bitcoin and don't do it the way Custodia is pitching then we're going to see a massive inflation through paper bitcoin, which I already think is a problem

Until we move to a model exchanges are built on LN, Liquid or lets say space chains where you can force it back to the basechain, we have limited control over the "backed" by bitcoin

It has to be default that you can call bullshit on a service, and at the moment we dont have that

13 sats \ 0 replies \ @aljaz 20 Jul 2022

i think this argument is overused, we are light years away from every person on earth having his/her own utxo, and we'll probably never come to that point. people will want to use variety of solutions and have different trust models, or using fedimints or some other solution we haven't yet came up with. Everyone being responsible for their own life savings on a usb stick (hw wallet) is not the most successful way to convince people that this is the future