Great comment Rusty!

Just the basic idea of identifying that there are 3 groups of people (can afford; can sometimes afford; and cannot afford a UTXO whatsoever) is a huge upgrade over past conversations, which tend to jump straight into technical details and gloss over the actual user profiles and market demand.

Personally, I agree that more research is warranted. I’m not particularly optimistic on UTXO-sharing as a solution for people who can’t afford standalone UTXOs at all because of the group coordination cost, “Tragedy of the Commons”issue (LN counterparties are heavily incentivized to police their LN channel state, whereas in a Timeout Tree you can freeride others to do the policing for you, leading to no one doing it at all), “ghettorization” issue as you mentioned, and the inevitable complexity of any such solution. Secondly, did anyone bother to ask whether users like sharing at all? Why would they opt for a complex sharing solution when they can use something like gold for savings.

I’m slightly more bullish on locally-run ecash mints where people fall back to long-built relationships and hard-earned reputation to prevent cheating. Basically, use the social layer to address a technical limitation.

I like your quote here: “can’t engineer a solution if we can’t think about the problems.” That’s a great way to think about it. As someone else once said, the most common mistake engineers often make is to “optimize for something that shouldn’t really exist”. I’ve seen it happen way too many times, being an engineer myself. Just because UTXO-sharing with large N is possible, doesn’t mean it is ideal or will actually have a market.

In the spirit of thinking deeply about the problem (and not the solutions), it would be wise to also visit assumptions such as there will be 10 billion people who want sovereign UTXOs and the responsibilities that come with it. I think that assumption is highly unrealistic. IMO the actual demand will remain well below 500 million people, realistically more in the range of 100-200 million people. Being your own bank, as it turns out, is quite a heavy burden.

So if you believe in these numbers, Bitcoin does not have a scaling problem. At the very least, it’s not urgent at all. The math might work out by just making current things as efficient as possible.