Game of Thrones: In the future, Bitcoin and Ethereum may have little to do with most ordinary people?

Author: Mu Mu, Plain Language Blockchain

More than a decade ago, almost no one anticipated that a mere 9-page document and a small 14MB software could create such a storm. The "rise" of Bitcoin seems almost magical, like "turning stone into gold" in the eyes of many, and some people still haven't come to terms with it, but it has indeed happened.

Today, Bitcoin has grown from an inconspicuous "air" to one of the major global financial assets, becoming something that seems out of reach. Perhaps in the future, most ordinary people will find themselves increasingly distanced from Bitcoin and its successor, Ethereum…

The Number of Large Institutions Holding Chips is Increasing, Future Supply and Demand Relationship is Tense

In a previous article by Plain Language Blockchain titled “What Happened to the Whales on Bitcoin's 'Rich List'?”, we saw that among the known Bitcoin whales, many giants from outside the crypto industry have emerged. Despite being in a bear market for crypto assets, the determination of traditional financial giants to position themselves has not wavered. In recent years, institutions like BlackRock, Fidelity, Vaneck, WisdomTree, and Invesco have submitted applications for Bitcoin and Ethereum spot ETFs to the SEC, indicating that these "behemoths" with assets exceeding trillions have recognized Bitcoin, Ethereum, and other crypto assets as "alternative assets" that global investors cannot ignore, making them an essential part of their global diversification strategies.

Of course, the applications for crypto asset spot ETFs in the U.S. stock market have also garnered significant attention within the crypto industry, and they hold great significance for the crypto market as well.

More and more institutions, including publicly traded companies, private enterprises, and asset management giants, are entering the market to hold chips. In summary, the interest of institutions and their large clients behind them in crypto assets is only increasing, while Bitcoin's total supply is limited and Ethereum's supply is entering deflation, making the future supply and demand relationship evident.

The rules of the game are changing, and market power is gradually shifting to the whales. As whales battle in the market, ordinary people appear increasingly insignificant.

The Threshold for Public Chain Nodes is Constantly Rising

As Bitcoin's overall network hash rate continues to reach new highs, the threshold for block producers is also becoming increasingly high. This is undeniable. Bitcoin mining has escalated into a fierce competition for chip technology, and the hash rate battle is, to some extent, continuously pushing the development of chip technology. Moreover, one of the most fiercely contested resources in human society is energy. Bitcoin's energy consumption has already rivaled that of a nation.

On the Ethereum side, although the consensus mechanism has been converted to the low-energy PoS mechanism, the threshold for its nodes has not actually decreased. Recently, Ethereum developers have been discussing a proposal to raise the validator staking cap to 2048 ETH, citing the reasons:

1) The expansion of the validator set negatively impacts the Ethereum network (in terms of finality efficiency);

2) Reducing the burden on large node operators (Lido, Coinbase… need to manage tens of thousands of nodes simultaneously). In short, Ethereum's PoS stakers can start to lower costs by increasing their staking amounts, while low-staking validators will seek to increase their staking amounts to improve their returns.

Just as the indirect competition for hash power among Bitcoin nodes and the continuous updates of chips lead to rising thresholds, Ethereum PoS validators are also directly increasing the threshold by raising the amount of funds invested, making it difficult for ordinary people to achieve complete returns.

On-chain Costs Soar, Users Shift to Layer 2, 3, 4…

With the future large-scale adoption of Web3, micro-payments, gaming, the metaverse, social interactions, and other high-frequency scenarios, the Bitcoin and Ethereum main chains may soon become "overcrowded." The on-chain transaction fees for ordinary users' small swaps, social interactions, gaming, and other activities have already become quite expensive.

At the same time, in the future, there will be increasingly fierce competition among Layer 2, 3, 4, and other upper-layer public chains. Ordinary users' daily interactions or most on-chain operations will likely have to enter lower-cost Layer 2 and higher layers without sacrificing too much security. Ultimately, these upper-layer public chains or some large Web3 applications will collectively batch process high transaction fees for expensive settlements on the Bitcoin and Ethereum main networks, indirectly sharing the on-chain costs with ordinary people.

Of course, Layer 2s and Web3 applications may not necessarily charge BTC or ETH as transaction fees; they could also accept their own tokens or USDT, or even directly charge fiat currency to provide services to ordinary users. Therefore, ordinary users may not need to hold BTC and ETH and do not have to bear the volatility risk.

Account Abstraction, Users May Not Even Need to Participate in the Interaction Process

For most ordinary people, in the era of large-scale adoption of Web3, high-threshold crypto wallets are not a necessity. To address the issue of user accessibility, the crypto community has proposed account abstraction in recent years. In the future, users will directly interact with Web3 and metaverse applications, which will handle the complexities of on-chain interactions through application protocols and cryptographic algorithms, allowing Web3 applications to "delegate" these tasks with a single click, while also ensuring that users' assets, privacy data, and other rights are protected through cryptographic technology.

As a result, most ordinary people may not even need to understand underlying blockchain technology; they just need to know that the service is guaranteed.

Conclusion

With the entry of more and more giants, the rules of the game in the crypto market are being changed. Public chains, especially those with large ecosystems like Bitcoin and Ethereum, are seeing their participation thresholds rise. Besides the node costs mentioned earlier, there are also on-chain usage costs, making it very challenging for developers to create ecosystem projects and compete.

As major foundational infrastructures of Web3, primary native crypto assets like Bitcoin and Ethereum will become special resources akin to gold and oil, fiercely contested by the "wealthy," making it difficult for most ordinary people to reach.