Layers are the only way to scale a networking system. Every previous monetary and networking structure in history has done this same thing.
There is no reason L2 or L-whatever has to be an IOU. Sure people will use them because trust is the foundation of society. There isn’t anything wrong with IOUs, the problem is **systemic, fraudulent IOUs** that are counterfeit into the market indistinguishable from the money itself.
Fractional reserve is a systemic structure of our money. Fractional reserve in a bitcoin world is explicitly external to the money. MtGox was fractional reserve. FTX was fractional reserve.
It’s not a matter of “we’re gonna get fractional reserve.” We’ve had it from the very beginning, and we have seen the results 100 times. They implode and go out of business. The systemic problem of fiat is that they do NOT impose, but grow like a cancer because the money itself is cheated to keep them alive.
In short, your concerns are not really relevant, because the base layer is always present to prove existence, validity, and ownership of bitcoins. That will make it behave like a global decentralized incorruptible court for who owns what.
Thus we will extremely likely (and are already doing) build 10,000 networks *on top* of #Bitcoin.
But there are a literally limitless number of way to extend the trust of the base layer, up to any and all other layers. Ark is a great example, all transactions off chain, every single user has unilateral exit ability.
Bitcoin will have no problem scaling because it’s an open, permissionless protocol. The base layer simply needs to be reliable, solid, and radically neutral, and there will be nothing that we cannot do with it.
Human ingenuity doesn’t have a hard cap.
>But there are a literally limitless number of way to extend the trust of the base layer, up to any and all other layers. Ark is a great example, all transactions off chain, every single user has unilateral exit ability.
Unilateral exit will be too expensive for most users to enforce. I don't think this is the framing that should be used.
There is simply no way to scale the trust assumptions of the base layer to every other layers.
Tradeoffs are necessary and desirable, anything else leaves us operating inefficiently and burdens individuals with undue costs.
Do you have to go to court and spend thousands of dollars to get security in your donut purchase?
The court is never for everyday, small interactions. Neither will the base layer be.
To suggest we cannot extend its trust because fees are too expensive, is to say we can’t have a sustainable society even if we have a just and incorruptible court system, because not everyone can afford to dispute every transaction in front of a judge.
It simply means the cost will be relative to how bad the conflict is, which seems natural to me.
And even that conclusion assumes there’s no better tools that we haven’t discovered yet on how to batch/combine “settlements” across separate networks. I don’t think such a wall exists. 🤷🏻♂️
All I’m saying is that extending trustlessness to every interaction is unecessary if not counterproductive but maybe we agree there.
I do agree on the second part though. There isn’t a problem with trade offs, but I think extending trust upward to other layers isn’t about extending it in totality (if that’s how I worded it), but with the specific trade offs that fits each users or institutions situation and environment.
I think those trade offs and trust assumptions will simply change a lot based on the amount of risk (and thus amount of value), which seems also to make obvious sense.
fractional reserve doesn't equal insolvency
If the so-called "layer 2" thing is not an IOU, then is it not simply just another asset or commodity?
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Not at all. Ark and Lightning as examples, both are completely valid and provably spendable bitcoin transactions that simply are exchanged and updated without ever needing to publish on the base layer. It is neither an IOU, nor a different asset. It’s just a security design where you can move bitcoin outside of the base layer and know that the rightful owner is the only one who can spend it without anyone else having the capacity to revoke.
There are cases of course where someone can just make a new token or an explicit IOU, like ecash does. But it’s still denominated in BTC.
Thanks for the intelligent, respectful reply. My next read: https://a.co/d/0aifb9u1
Oh man, you're gonna love that one! One of my favorite audiobooks I've done. (also recommend @LynAlden's Broken Money to follow. They are a good one-two punch for understanding money as a networking and record keeping system and how it all paints a much clearer picture of our history.
Also @jackspirko is a really awesome dude when he's not frustrated having to explain something that he's explained a bajillion times already, lol (i get that way too). You should give him some slack (and vice versa 😘 ). None of this is really intuitively obvious without a ton of exploration and errors.
I climbed through the Keynesian Economic Mountain Range, then the swampy valley of MMT, and finally through the dark, casino scam Tunnel of Shitcoins to get to where I am... so I can't really judge anyone else.
In another context you guys might get along really well. 😁
a good journey 4me/ 4U2 i hope/appreciate your POW/t-y Guy & plz keep it up! nopunintended
Appreciate the references. Have already read Saifedean Ammous and Jimmy Song's work. I'm 95% on board, but still have to work out the ethos how a decentralized, hard money will will scale on BTC and still adhere to the Nakamoto vision of freedom money. Trust but verify.
Understand the ideological battle going on here. We are still in the very early days, so expect a difficult path forward. The establishment will fight tooth-and-nail against a BTC world reserve currency. Power.
In regard to winning people over, half the battle is in the approach. @jackspirko
Yes I believe Bitcoin can certainly scale. But I think a lot of concepts and worries are disregarded here. So let’s say the next Mt. Gox or Celsius happens on a L2 of Bitcoin in the future. Yes the base money is solid so the funds of the customs will be for sure lost, essentially a rug pull will happen. Yes you will be able to scale but will the network be reliable ? You will have to
Have some element of trust but will I have ways of verifying said trust? Or is it just a ‘trust me bro’.
And if you are essentially building whatever on top of Bitcoin to scale how is it different than wrapping Bitcoin on Ethereum or any other project ?
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