MARA CEO Bitcoin halving narrative is a fantasy, but Bitcoin is the best Layer 1.

MARA CEO Bitcoin halving is a fantasy, but it's the best Layer 1.

One of the largest Bitcoin mining companies, Marathon Digital Holdings, its CEO Fred Thiel recently stated in an interview that he does not believe in the existence of a Bitcoin halving bull market, calling it a “fantasy”.

https://twitter.com/fgthiel

Marathon Digital Holdings is one of the largest, most energy-efficient, and technologically advanced Bitcoin mining companies. It is also one of the largest Bitcoin holders among publicly traded North American companies, founded in February 2010.

Bitcoin Halving and the Departure of Miners

• MARA CEO Halving narrative is a fantasy Bitcoin is the best Layer 1
• Interpreting the Current Situation of Cryptocurrency Markets Outside the United States
• Block space is a scarce commodity, how to objectively evaluate it?

On September 6, Marathon Digital Holdings CEO Fred Thiel participated in an online interview program hosted by Brave New Coin. When asked how miners should get through the halving, Fred Thiel said, “We have no control over the price of Bitcoin or the global mining hash rate. We can only focus on our own mining efficiency and income and expenditure situation. We hold about 39,000 Bitcoins and $1 million in cash. If the price does not significantly improve after the halving, we will continue to sell the Bitcoins we obtain until 2026. If the price rises like the previous two halvings, it will be beneficial for us miners. But I don’t think that will happen. The relationship between Bitcoin’s trading price and the liquidity cycle is closer than the halving. Perhaps the USD will collapse and save us, otherwise we will sell our Bitcoin reserves for a period of time.”

Fred Thiel gave an example, saying, “Reducing the block reward from 9 to 4 will not have a significant impact on the trading market. However, it can be foreseen that if the price does not rise, many miners will exit mining due to imbalanced income and expenditure, which will lead to a decline in hash rate. At that time, mining efficiency will be the most important factor. In the next 10 years, Bitcoin will undergo two halvings, and mining rewards will decrease to less than 2 BTC per block. I hope that Bitcoin will be adopted by more people during this period, thereby increasing Bitcoin’s transaction fee income.”

Fred Thiel’s statement largely represents the viewpoint of miners: if there is no profit, miners will be forced to sell and leave Bitcoin.

This also implies another situation that will be faced. If there are more lucrative opportunities, miners will also leave the Bitcoin network and go to places with higher returns, such as Ethereum.

Bitcoin, which appeared nearly 8 years earlier than Ethereum, has less than half the number of on-chain transactions.

What level of profit are we talking about?

Running an Ethereum validator requires staking 32 ETH. With the help of various staking applications such as Lido, the cost for validator operators can be reduced to 1 ETH. Adding the hardware cost for running the software, the return on investment can reach 5% to 20% in terms of coin-based yield. On the other hand, the decrease in validator costs also contributes to the decentralization of the network.

US exchange Coinbase utilizes Ethereum Layer2 Optimistic OP Stack technology to build the Base chain. The transaction fees generated by the social application Friend tech on the chain are greater than the transaction fees of the entire Bitcoin network.

More comparisons can be seen at https://cryptofees.info/. The returns of the Ethereum ecosystem are much higher than those of Bitcoin.

Based on Bitcoin, there are too few transactions, and a large portion of them are taken by CEX and the Lightning Network. On the other hand, the Ethereum ecosystem is flourishing, while Bitcoin miners are about to face halving of their incomes. On one side, there is low investment and high returns, while on the other side, there is high investment accompanied by continuously decreasing returns. It is difficult to prevent miners from being shaken after seeing such a data comparison.

While users in the crypto world are looking forward to the halving of Bitcoin, miners can only hope for the collapse of the US dollar to save them. This is ironic. Decentralized cryptocurrencies do not choose to become better themselves, but wait for their enemies to weaken.

Bitcoin is the best Layer 1

Bitcoin is not without a way out. In this interview, Fred Thiel also expressed the opinion: “I think Bitcoin is the best Layer 1, on which various interesting applications can be built.”

This is also a common idea among miners: as the number of transactions based on Bitcoin increases, what miners themselves need to do remains mining and verifying transactions.

Bitcoin is the best Layer 1, which should have a premise that it must be the most secure network to become the ultimate settlement entity. The security of the Bitcoin network is directly proportional to its network hash rate and the income it can bring to miners. Expanding the capacity of Bitcoin is the only solution to this problem.

Network expansion – increase in miner income – more miners joining – improved network security – increase in users – increase in miner income

Just as network security must be ensured, the expansion route cannot be similar to Web 2’s continuous increase in servers through methods such as large blocks. They will significantly increase the cost of running Bitcoin software, thereby affecting the security of Bitcoin.

Where there is Layer 1, there will be Layer 2. Vertical, layered scaling is an effective way to solve the blockchain’s impossible triangle: Layer 1 ensures security and decentralization, while Layer 2 provides high scalability and strong performance, offering economic incentives to maintain network security.

Based on BIP-300/301, DriveChain can mine the value of Bitcoin as the best Layer 1. Satoshi Nakamoto also designed such functionality in 2010, and merged mining design acknowledges the existence of sidechains.

Bitcoin is the best Layer 1, and scaling through layering and sidechains creates a mutually beneficial ecosystem.

DriveChain unlocks the value of Bitcoin

DriveChain provides developers with the opportunity to leverage the powerful value and effects of Bitcoin, achieving their goals at a very low cost and with complete design autonomy.

For Bitcoin holders, DriveChain can bring more utility value and appreciation opportunities, allowing Bitcoin to fully play its role as currency and asset.

Bitcoin miners can earn substantial and sustainable income in a thriving Bitcoin sidechain ecosystem, ensuring the continuous and healthy operation of the Bitcoin network.

We must recognize that the network effect of Bitcoin is a double-edged sword. After Bitcoin’s success, Maximalists are known for their religious-like devotion and fanaticism, which has created a strong network effect and blinded some people: under the long-term influence of the powerful network effect, holders seem to have a sense of disdain for everything and believe that Bitcoin is impeccable.

Compared to miners who check Bitcoin usage data every day, their perception is lagging behind. They believe that everything will remain unchanged and any problems will be trivialized under the influence of the network effect. They lack a sense of urgency and motivation for change, and they are afraid of making mistakes that could affect the network’s reputation.

When innovation encounters the network effect, its impact and value will rapidly expand. It is like the release of suppressed desires, with energy bursting forth. The value of the Bitcoin network should be used correctly.

References

[1] Marathon Digital Holdings, CEO Fred Thiel: https://twitter.com/fgthiel

[2] Interview: https://www.youtube.com/watch?v=TA0v5xqMOlE

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