Bitget App
Trade smarter
Buy cryptoMarketsTradeFuturesCopyBotsEarn
Bitcoin Faces Quiet Crisis as Network Use Declines

Bitcoin Faces Quiet Crisis as Network Use Declines

DailycoinDailycoin2024/10/28 23:33
By:Dailycoin
  • Bitcoin is under a “vampire attack” by third parties.
  • Wrapped BTC and ETFs present a long-term threat.
  • Minersconfidence continues to grow.

Bitcoin advocates often tout its incentive system as a masterclass in game theory, designed to ensure longevity and seamless operation well into the future.

Sponsored

However, the rise of centralized third parties, including ETF providers and DeFi firms, introduces new uncertainties. As these entities aim to profit from Bitcoin, the long-term outlook becomes less predictable, raising concerns about the network’s future.

Bitcoin Under Attack 

As centralized third parties seek to profit from Bitcoin, its long-term outlook appears increasingly uncertain. Duo Nine, founder of Your Crypto Community, warned that the growing prevalence of ETFs and wrapped Bitcoin tokens could reduce network activity, ultimately hampering miner incentives.

Bitcoin is in trouble.

If nothing changes soon, things won’t be pretty.

I’m not talking about the halving schedule or block rewards, it’s much more serious than that.

A thread 1/17 🧵 pic.twitter.com/i1o9TZAlqX

— Duo Nine ⚡ YCC (@DU09BTC) October 27, 2024

Miners earn income by matching the target hash to secure block rewards and collecting fees from successful transactions. However, with the block reward halving every four years, the network will increasingly rely on transaction fees directly tied to network activity.

If fewer transactions occur due to more BTC being locked away, miners may struggle to cover their costs, forcing them to exit the network.

Duo Nine warned that this “ vampire attack ” is already underway, with liquidity and value being siphoned off the Bitcoin network through wrapped tokens and ETFs locking away vast amounts of BTC.

While this scenario hasn’t yet materialized and may not for another two decades, Duo Nine emphasized the need for the community to resist these external pressures. He urged Bitcoin users to avoid relying on third-party services and use the network .

Miners Pile In

Despite concerns that centralized third parties will stifle network activity in the long term, Bitcoin miners remain optimistic. On October 21, the Bitcoin hash rate reached an all-time high of 885 EH/s, marking a 67% increase from the beginning of 2024, when it stood at 530 EH/s.

Bitcoin Faces Quiet Crisis as Network Use Declines image 0 Bitcoin Faces Quiet Crisis as Network Use Declines image 1

Daily mining revenue is now at $36.2 million, significantly below the April 20 peak of $107.8 million. This suggests that miners are currently content with reduced earnings, likely due to confidence that future BTC price increases will sufficiently offset present risks.

On the Flipside

  • ETFs have acquired 4.5% of the BTC supply in nine months, or 1.1 million coins.
  • Kraken is the latest centralized third party to introduce a wrapped Bitcoin token (kBTC).

Why This Matters

While Bitcoin was designed to free money from centralized control, the success of institutional adoption may paradoxically undermine the network that gives it value.

Surging Bitcoin dominance continues to put pressure on alts.
Bitcoin Dominance Soars to 59.2%: Are Altcoins on the Decline?

The Hong Kong Stock Exchange is set to standardize crypto pricing.
Hong Kong Backs Crypto with New Virtual Asset Index

0

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

PoolX: Locked for new tokens.
APR up to 10%. Always on, always get airdrop.
Lock now!

You may also like

Congress’s top priorities this lame duck session

Here’s a look at what lawmakers are most focused on in these final weeks of the 118th Congress

Blockworks2024/11/26 18:33

BTC breaks through $94,000

Cointime2024/11/26 16:55