Disclaimer: This article is for communication and sharing purposes only, strongly subjective, and does not constitute any investment advice.
1. A new understanding of the Bitcoin ecosystem
1. The unique appeal of the Bitcoin ecosystem
As a pioneer in decentralization, Bitcoin has unique technical characteristics and ecological architecture. From a technical perspective, Bitcoin uses a non-Turing complete script language, which leads to limitations in complex computations, resulting in relatively few projects in the ecosystem and slow development.
At the consensus level, Bitcoin has very Maxi-style characteristics. Observing the holding time ratio chart of Bitcoin holders, it can be divided into four parts: 16.6% of those who have held it for over 10 years, a large portion of which may lose Bitcoin permanently in 3 years; the five to ten year ratio is 30.4%, a small portion of which is Bitcoin lost permanently, the rest includes medium and long-term traders and Bitcoin Maxis held firmly without trading; 3 years 19.3% are medium traders; 34% hold shares for less than 1 year.
It can be seen that in the entire Bitcoin ecosystem market, Bitcoin truly provides liquidity that accounts for only about 35% of the total current token supply, which is a significant difference from other ecosystems. Moreover, due to the existence of Bitcoin Maxis, an important group that everyone considers Bitcoin as 'digital gold' and holds it as a safe-haven asset for a long time. For them, Bitcoin is the only faith.
2. The value code of Bitcoin
The high value of Bitcoin today largely stems from its consensus value, and this is even more true for Bitcoin Maxis. Looking back at the development history of Bitcoin, it did not receive much attention in the early years and the price was extremely flat. It was not until 2013 that there was a strong increase, gradually attracting more and more users. The OGs (original players) who insisted on preaching earlier have also become Bitcoin Maxis today.
With the emergence of Ethereum in 2015, coupled with the market explosion feature of smart contracts, people gradually recognized the limitations of Bitcoin and Bitcoin gradually transformed into a safe-haven asset. About 65% of Bitcoin has been held intact for a long time. This is not a coincidence. Personally, I believe that the reason why Bitcoin can maintain its current high value, in addition to its position as the first encrypted asset, is also related to the 'high cost and low usability' of the entire Bitcoin mainnet. The 'high cost and low usability' here refers to the relatively high transaction gas fees on Bitcoin, the low transaction throughput, and the slow progress in developing and building ecological infrastructure due to its incomplete Turing characteristics. However, it is precisely these 'problems' that have caused users to regard Bitcoin as a treasure and find it difficult to operate it easily. This is similar to shopping, either paying with cash that is simple and mobile, or paying by cutting a small piece off a complete gold bar. The relationship between Bitcoin and other networks is similar, its mobility and price reflect its unique value.
3. The core issues of the Bitcoin ecosystem
The current Bitcoin ecosystem can be roughly divided into the indigenous technology faction and the user-oriented faction. The indigenous technology group mainly explores the potential and develops projects based on UTXO (unspent transaction outputs) and Bitcoin's unique script language; the user-oriented group uses existing conditions when recognizing the current needs of users in the market. Rapidly developing new products to serve market users. Personally, I believe that the Bitcoin ecosystem should first create emerging protocols/projects through the improvement and expansion of indigenous technology to enhance Bitcoin's capital utilization. In each cycle, technological innovation is an indispensable link. For the Bitcoin ecosystem, technological innovation needs to be more reflected in overcoming its initial limitations. Therefore, in my opinion, directly transferring Ethereum's playbook to the Bitcoin ecosystem lacks innovative behavior and has a low developmental ceiling. Essentially, this approach uses a mature technical community, a wealthy developer team, and many years of ecological experience on Ethereum to quickly build projects and launch them online. However, once they are launched, their technological innovation capacity will be severely limited and they will not be able to attract Bitcoin Maxis and other new market users who only believe in Bitcoin.
In addition to technological innovation, liquidity is also a core factor. The completeness of liquidity determines the market's bullish and bearish state. Therefore, improving liquidity is an important direction for the Bitcoin ecosystem. Improving liquidity can be achieved in two ways: restoring local capital circulation and attracting new external capital sources to participate in the market. Regarding local capital, we need to think about how to improve people's willingness to trade assets.
In the Bitcoin ecosystem, about 65% of Bitcoin is held for a long time and not traded. How to attract them to participate through certain means is a key issue. Regarding OTC funds, a typical case is the Bitcoin ETF approved in the first half of this year, which brought a large number of traditional users into the market and provided significant liquidity to the Bitcoin ecosystem. However, there is also a problem with this liquidity, which is that the capital utilization rate is not high. The main reason is that many traditional users' understanding of the cryptocurrency world is limited to Bitcoin, and they know very little about infrastructure such as wallets and public chains. Therefore, their strategy is often similar to Bitcoin Maxis, buying Bitcoin and holding it long-term without participating in high-frequency trading.
Therefore, how to attract new funds to participate and enhance the utilization rate of both new and old funds is the first issue the Bitcoin ecosystem needs to solve.
2. High-quality ecological exploration methods for Bitcoin
Based on previous views, I personally believe that the target selection principles of the Bitcoin ecosystem mainly include the following four points which are interrelated if they can be combined:
1. Indigenous technology innovation: This is the main driving force for Bitcoin's development. Through breakthroughs and innovations at the technical level, it brings vitality and new development opportunities for the ecosystem.
2. Inheriting the security of the Bitcoin mainnet: In the entire cryptocurrency ecosystem, security is very important. Inheriting the security of the Bitcoin mainnet can provide a solid foundation for projects and enhance user trust.
3. Empowering Bitcoin itself: In the current ecosystem, the consensus of people on Bitcoin is core. Directly empowering Bitcoin can enhance people's consensus and attract more users to participate, including Bitcoin Maxis and new market users.
4. Lowering user thresholds: Improving the liquidity of the ecosystem requires lowering user thresholds. Allowing more users to easily participate in the Bitcoin ecosystem, improving user experience, and thereby promoting the development of the ecosystem.
