I have been excited about this rather a lot these days: Bitcoin Layer 2 foundations want to start out holding bitcoin of their treasuries. It makes an excessive amount of sense for them to not.
And apparently I’m not the only one.
As somebody who’s watched this house evolve, let me clarify why Bitcoin Layer 2 foundations ought to hearken to Molly and I.
For years, bitcoin was often known as “digital rock”—a stable retailer of worth however not a lot else. However now with the explosion of Bitcoin Layer 2s, bitcoin is turning into a “programmable rock.” These layers are including functionalities like good contracts and scaling options, making bitcoin extra versatile than ever.
However this is the factor: these initiatives increase hundreds of thousands of {dollars} from VCs and buyers, and most of that cash finally ends up sitting in fiat currencies like USD. That is an enormous mistake.
Why? As a result of fiat is a melting ice dice. Yearly, it loses 5-10% of its worth as a result of inflation. The longer you maintain it, the much less it is price. Alternatively, bitcoin has a Compound Annual Progress Charge (CAGR) of around 70%. If these foundations held their treasury in bitcoin as a substitute of fiat, their runway would not simply keep the identical—it might develop.
Think about having 70% extra assets every year to fund builders, grants, and initiatives. That is the form of edge that would make or break a Layer 2 ecosystem.
Okay, okay, I get it — Bitcoin is risky, and these foundations want some stability. Due to this, maintaining 3 to 4 years of runway in fiat is smart. It might assist to cowl short-term wants. However the remainder? It needs to be in bitcoin. Over the long term, this technique might double and even triple the runway of those foundations, giving them the time and assets they should succeed.
There is a precedent for this too. Bear in mind EOS? They raised $4.2 billion in 2018 and reportedly purchased 164,000 bitcoin with it. At the moment, that bitcoin is price round $16 billion—although EOS itself fell off the map. Now, think about if Bitcoin Layer 2 foundations did the identical however really used their bitcoin to develop and maintain their ecosystem. The potential is very large.
On the finish of the day, these foundations are constructing on Bitcoin. They consider in its future, so why not maintain it of their treasuries? Bitcoin is the most effective retailer of worth on the market. Should you’re operating a Bitcoin Layer 2 basis, cease holding depreciating fiat, and begin holding bitcoin. It isn’t only a good transfer—it is the transfer.
This text is a Take. Opinions expressed are totally the creator’s and don’t essentially replicate these of BTC Inc or Bitcoin Journal.