Bitcoin’s Low Fees Are A Symptom Of Deeper Problems
Many in the crypto community celebrate low feerates as a positive sign, but it may actually be a cause for concern. The recent explosive price appreciation, with Bitcoin hitting the 100k USD mark, is not a normal occurrence. Historically, feerates have spiked during times of price volatility, but this time, the feerates have not seen a proportional increase despite the price surge.
The charts showing the average feerates and prices since 2017 reveal an interesting trend. In the past, feerates have matched the growth and volatility of the price, but this time, the feerates have not followed the same pattern. This could indicate a shift in the market participants. Instead of individual users transacting on-chain and self-custodying their assets, we are seeing a rise in ETF trading and off-chain transactions.
This shift poses a serious existential threat to Bitcoin’s core principles. The decentralization and user-driven nature of the protocol are what define Bitcoin. When users delegate custody and transaction validation to third parties, the stability of the network is compromised. Bitcoin’s consensus rules rely on a diverse group of independent actors with varying interests to maintain the network’s integrity.
If the trend continues towards centralized custody and off-chain transactions, Bitcoin risks losing its fundamental properties. Scaling solutions must prioritize user control and security to prevent the network from becoming too centralized. The traditional financial world offers risk mitigation strategies that Bitcoin users may require, and the crypto space must adapt to meet these needs.
This is not just a technical challenge; it is also a question of incentives and risk management. Bitcoin’s long-term viability depends on preserving its decentralized nature and empowering users to control their assets. As the landscape evolves, it is crucial to prioritize these principles to ensure Bitcoin remains true to its original vision.
In conclusion, the current trend of low feerates may indicate a deeper problem in the crypto ecosystem. It is essential to address these issues to safeguard the integrity and decentralization of Bitcoin for future generations.