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Comment by ogogmad | Hacker News Reader

I'm wondering whether Bitcoin has a chance of being anything other than a store of value, or a means to settle accounts (if even that). Given the long list of problems with Lightning (e.g. [1]), and the many years it's been in development for, I'm growing increasingly skeptical. I'm wondering how that fits into people's economic analysis of Bitcoin.

P.S. I'm long Bitcoin, so I hope I'm wrong!

[1] - https://www.coindesk.com/bitcoin-lightning-network-vulnerabi...

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Even if Bitcoin only gets to be the reserve currency of all digital currencies in the future, the petrodollar that oils the defi machinery, that's enough of a use case to drive valuation.

People like to ask Bitcoin investors if they really think it will be the last and optimal digital currency. And no, that's not likely. But that reasoning must be applied to each and every other coin as well, including Ethereum, and that is doubly likely for them. One could easily imagine a future coin that does what they do, only better.

I’m starting to see Bitcoin and ETH/ other alt coins a kind of mutually dependent relationship. Bitcoin succeeding as a store of value allows that narrative to continue, drawing in institutional investment while other faster projects allow the narrative about changing all monetary transactions to continue. I don’t think maximalists on either side would like the price if the other side failed.

I completely agree with this

I predict more and more blockchains in the future won't have extraneous speculative tokens (like ETH) since BTC has remained dominant for more than a decade. There are simply less and less reasons to buy or hold ETH when sidechains like Rootstock replicate the technology used on Ethereum...but without needing to use another less dominant less liquid asset.

But BTC is only dominant in market cap, ETH is the most widely used blockchain. Sidechains on BTC have been a topic of discussion for awhile now, and frankly none have gotten a huge amount of traction. At some point the network effects that ETH has are too big to ignore.

But whether the most used blockchain should be the highest in market cap is a totally different discussion. It's possible ETH goes mainstream, but BTC is still valued higher as "digital gold." I have no idea what will be the outcome.

The network effects are on Ethereum, with virtually the entire DeFi space on it.

Moreover, Bitcoin doesn't have the necessary opcodes for secure/trustless bridges to sidechains.

Rootstock, for its part, is controlled by trusted third parties, so doesn't come close to providing the trustless-ness and permissionless-ness guarantees of Ethereum.

Unsurprisingly, Rootstock has insignificant adoption, with Ethereum having on the order of one thousand times more capital/users utilizing it.

Sure it is, on Ethereum: https://defipulse.com/btc

More tokenized Bitcoin is transacted on the Ethereum network every day than on the Lightning network, by orders of magnitude.

Most of the "tokenized Bitcoin" you're referring to is just an ERC20 promise of redemption from Bitgo's coffers. It's not at all comparable to Bitcoin's Lightning Network.

All I know is there's 148K Bitcoin locked in tokens, which is nearly 1% of all Bitcoin and that people are finding more utility in tokenizing it and providing it for liquidity and yield on various DeFi platforms than on Lightning network. Maybe that will change in the future, but right now, that's the case.

I think alternatives like Litecoin and Bitcoin Cash are more likely to be adopted as a transactional tool in that case.

Bitcoin - speculation on digital store of value and solutions to hedge against fiat currency risks. The valuation model is to try to determine what X% of the global demand for store of value assets might shift towards Bitcoin in the long run. Probably nowhere close to the level of a fiat currency market or the gold market, but perhaps much higher % than it is today.

Litecoin, Bitcoin Cash - attempting to make crypto transactions common. Higher capacity, faster transaction processing. The valuation model is X% of casual transactions. X is probably never going to be an appreciable percentage compared to big transaction platforms like Visa or Mastercard, but it may grow steadily and find niche areas where the ability to quickly transact in a cryptocurrency is highly valued. This is likely to remain correlated to cryptocurrencies that act as a store of value because one main area for demand of casual cryptocurrency transactions will be hedging risk of fiat currencies. Eg if I live in a region with government currency instability, I’ll want to decouple my cash asset values from that government risk, and look to a platform where I can still buy toilet paper or bread without hyperinflation.

Ethereum, Polkadot, Cosmos - network effects and ecosystems of smart contracts. The valuation model is like an app store mixed with a cloud vendor. Much harder to state a clear valuation model, likely very volatile due to perceptions of “killer apps” and how much staying power they would really have, as well as the interplay with regulators.

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