Original author: Duo Nine
Compiled by Odaily Planet Daily (@OdailyChina)
Translator: Azuma (@azuma_eth)
Editor’s note: The price of BTC broke the $70,000 mark again this morning, and everything seems to be improving. However, YCC founder Duo Nine pointed out a concern about the Bitcoin network, believing that as the fee structure of the Bitcoin network transforms, various ecosystems' wrapped xBTC and ETFs and other derivative investment products are actually extracting value from the Bitcoin network, conducting a 'vampire attack' on the Bitcoin network.
Duo Nine believes this concern may not seem serious at the moment, but it has a trend of gradually worsening and may become a 'cancer cell' that accompanies the development of the Bitcoin network and must be taken seriously at this stage.
Although Duo Nine has a somewhat extreme bitcoin maxis-like attitude towards other ecosystem wrapped tokens, the issues raised still have significant thought-provoking value.
The following is the original content by Duo Nine, compiled by Odaily Planet Daily.
Bitcoin is in trouble.
If changes are not made quickly, the situation may worsen.
I'm not talking about halving times or block rewards; the issues are much more serious than that.
As the Bitcoin network gradually develops, transaction fees will gradually replace block rewards as the primary component of the network's costs.
This will be a gradual process that will take decades.
However, a new problem is emerging. This problem is relatively difficult to predict, but some signs have already appeared.
This issue relates to people no longer truly using Bitcoin.
Whenever BTC is wrapped into wBTC, cbBTC, tBTC, kBTC, or solvBTC, it means that the native BTC will be placed in a wallet above the network and will no longer execute any operations.
If it no longer moves, it means there are no more fees.
This value has been transferred to Ethereum or other networks. However, this is just the tip of the iceberg.
With the development of DeFi, more and more BTC will be staked on the native network, and this value will flow out in the form of wrapped tokens.
BitGo has wBTC, Coinbase has cbBTC, Kraken has kBTC, Threshold has tBTC... Clearly, this situation won't stop easily.
Ten years from now, wrapped tokens will only increase.
Since the beginning of this year, 11 Bitcoin spot ETFs have been approved, and as of now, they have collectively purchased $20 billion worth of BTC.
Where are these BTC? The answer is in the wallets of some custodial service providers, where they are also being staked.
Investors are actively trading Bitcoin investment products on Nasdaq, but they are trading ETFs, not native BTC.
This is similar to the situation with wrapped tokens, where the value of native BTC has been abstracted out and flowed elsewhere.
Problems are starting to emerge. If value continues to flow out, who will pay for the security of the Bitcoin network?
Ethereum? Nasdaq? They certainly won't.
Under normal assumptions, as the fee structure shifts, users should continue to transact on the native network, accumulating fees for miners.
However, the reality is that Bitcoin is being 'locked in a cabinet,' and its value is being transferred to other chains or abstracted into ETFs and other forms.
In cryptocurrency, we generally describe this situation as a 'vampire attack'!
The so-called 'vampire attack' refers to the siphoning of liquidity and value from one chain or protocol to another, along with its users.
Currently, Bitcoin's attackers are pocketing this value. Congratulations to BlackRock, congratulations to Coinbase, you are winning!
Custodial service providers like Coinbase currently hold over 2 million Bitcoins, and a large amount of BTC has been locked away and gradually forgotten.
Worse, this situation may lead to Bitcoin falling into the hands of third parties.
Satoshi Nakamoto warned us about this issue in the white paper: 'As long as there is a third party between you and your BTC, value will be lost.'
Whether it's BlackRock, Coinbase, wBTC, or cbBTC, what they provide is merely an IOU.
They hold the real BTC and give you a worthless certificate in exchange (if they choose to renege).
This poses a real danger to both yourself and the entire Bitcoin network. Because third parties may go back on their promises, and they may also steal value from the native chain of BTC, thus reducing the security of the Bitcoin network.
Fortunately, this issue is not yet 'imminent.' For the next twenty years, Bitcoin's block rewards will still be considerable.
Meanwhile, demand for Bitcoin will continue to rise, particularly from third parties—they are always ready to exploit Bitcoin for their own gain.
What should you do about this?
First, try not to have third parties hold your Bitcoin; relying on third parties goes against the original intention of Bitcoin and your purpose for buying Bitcoin.
The best custodian is always yourself. You should hold Bitcoin on the native network rather than relying on various third parties.
Secondly, you should truly use the Bitcoin network. With the development of ordinals and other emerging use cases, many people are capturing and protecting their value on the Bitcoin native network; in such a mode of operation, Bitcoin's value will never be abstracted out.
Continuing to use the Bitcoin network is the greatest investment in the future of Bitcoin. By using the native network, you can help maintain the security of Bitcoin, and the fees you pay will be used to incentivize miners to protect network security. As long as the usage scale is sufficient, the transition in fee structure can be seamlessly achieved.
