A Security Layer Without Liquidity Benefits Is A Bad Investment | The Bitcoin Monopoly
How ironic is it that the one chain that is supposedly resistant to the “51% attack” controls market dominance exceeding 56%, essentially being positioned as a threat to market stability across the cryptocurrency ecosystem?
What's more comical about the situation is that the network is gunning for far more influence.
Most long-term traders are familiar with the effects of bitcoin price movements on the rest of the ecosystem. It's common knowledge the slight price dumps could nuke billions off altcoins.
Bitcoin maxis couldn't care less about your shitbags trending down your PC screen.
Without looking at any chart, I can assume that developments on the Bitcoin network are at an all time high.
Being the world's strongest blockchain community with a leading asset in market capitalization and liquidity, it's only expected that Bitcoin-related projects attract good fundings from VCs and angel investors.
A specific project caught my eye recently and my analytic ass only needed a 5 minutes read to conclude on a growing monopolization of the cryptocurrency ecosystem by Bitcoin.
First off, I'd like to point out that business developers generally care about one thing and this is usually to profit.
Given this fact, a great deal of attention will always be paid to the best performing market segments when drafting areas of focus for the development of new products or services.
A couple of years back, Ethereum was the favored chain for new business developers due to the growing narrative of “Turing complete blockchains,” otherwise referred to smart contracts compatible chains.
Today, there's numerous options for smart contract compatibility, with emerging networks achieving strong communities built around unique cultural values, essentially causing alternative strong rivalry to Ethereum.
The Bitcoin community, not very happy about Ethereum's past glories, needed a fix that would of course not include becoming Ethereum. Bitcoin had to stay as Bitcoin, old, rigid, expensive and non-expansive, at least at the base layer.
So, marketing for scalability of bitcoin has focused on layer 2 networks and protocols like the lightning network. Luckily for them, this worked out pretty well and attracted a wave of users and developers to the chain, and today, Bitcoin has a variety of so-called bitcoin layer 2s for scalability and many more bitcoin-based products and services.
Hell, the biggest asset manager in the world is now invested in Bitcoin, and one of the most valuable companies in the world, Microsoft, could soon be invested, too.
So yeah, things have worked out pretty well for Bitcoin, but this growing dominance is not all green and frankly isn't aligned with the concept of decentralized finance, the very same concept bitcoin was built on.
The Babylon Project Is A Monopoly
How should you feel when a community that frankly hates you now wants to “protect you?”
The Babylon project is one of bitcoin-based projects that have recently caught my attention, majorly because it seems to play in the tune of related projects like Eigen Layer on Ethereum, which I've talked about recently, calling it out as a monopoly, too.
But what's Babylon?
Babylon is a suite of security-sharing protocols that bring Bitcoin’s unparalleled security to the decentralized world. The latest protocol, Bitcoin Staking, enables Bitcoin holders to stake their Bitcoin to provide crypto-economic security to PoS (proof-of-stake) systems in a trustless and self-custodial way. - The Babylon Website
It's funny that the term “economic” is found in its definition even though that's essentially the tradeoff of this process for all underlying PoS chains.
Proof-of-Stake chains are generally more economical to Proof-of-Work chains. This is because costs associated with liabilities are generally low. That said, entry cost often contributes value to the economy of the underlying network as though the process of tapping into the network's generated value involves first injecting liquidity into the native asset of said chain.
As such, when you out-source the security of a Proof-of-Stake chain to a network of bitcoin stakeholders, you essentially forfeit the liquidity that should come from the expansion of validator interest and at the same time steal from your ecosystem's token emission to reward a network of stakeholders contributing zero liquidity to your network.
All for what? Security?
Not a very good investment when you consider that there's numerous alternative ways to attain network security without selling out a chunk of your native asset to people who are not committed to the long-term growth of your chain.
To make matters worse, bitcoin stakes through Babylon can simultaneously secure numerous chains and get paid for it. This is monopolization of the name “Bitcoin” and the underlying tech to suck liquidity from third-party ecosystems without contributing any liquidity to said ecosystems.
Trading security for centralization of liquidity is not exactly what crypto is about.