MARA CEO Halving narrative is a fantasy Bitcoin is the best Layer 1

MARA CEO dismisses halving narrative, declares Bitcoin as the top Layer 1.

Author: ZT; Source: LayerTwo Labs

Marathon Digital Holdings, one of the largest Bitcoin mining companies, 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 companies in North America, founded in February 2010.

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Bitcoin Halving and the Retention of Miners

On September 6th, Marathon Digital Holdings CEO Fred Thiel participated in an online interview program hosted by Brave New Coin. When asked how miners should navigate the halving, Fred Thiel said, “We cannot control the price of Bitcoin or global mining power, so we can only focus on our own mining efficiency and revenue. We hold about 39,000 Bitcoins and $1 million in cash. If the price does not improve significantly after the halving, we will continue to sell the Bitcoins we acquire until 2026. If the price rises as it did in the previous two halvings, it would be advantageous for us miners. However, I don’t think that will happen. The relationship between Bitcoin’s trading price and its liquidity cycle is more closely related than the halving. Perhaps the collapse of the US dollar will save us, otherwise we will sell our Bitcoin reserves for a period of time.”

Fred Thiel gave an example, saying, “The reduction of block rewards from 9 to 4 will not have a significant impact on the trading market. But it is foreseeable that if the price does not rise, many miners will exit mining due to imbalanced revenue and expenses, resulting in a decline in mining power. At that time, mining efficiency will be the most important factor. In the next 10 years, Bitcoin will experience 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 revenue.”

Fred Thiel’s statements largely represent the views 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 profitable 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 as Ethereum.

What level of returns 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 coin-based return rate can reach 5% to 20%. On the other hand, the decrease in validator costs also contributes to the decentralization of the network.

The US exchange Coinbase utilizes the Ethereum Layer2 Optimisitc’s 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 profits of the Ethereum ecosystem are much higher than those of Bitcoin.

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

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

Bitcoin is the best Layer 1

Bitcoin does have a way out. In this interview, Fred Thiel also expressed the opinion that “I think Bitcoin is the best Layer 1, and various interesting applications can be built on top of it.”

This is also a common idea among other 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, and there should be a premise here that it must be the most secure network in order to become the ultimate settlement. 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 profits – more miners joining – improved network security – increase in users – increase in miner profits

Just like ensuring network security, the scaling roadmap cannot be a horizontal scaling method similar to Web 2.0, such as continuously adding servers to increase block size, as this will significantly increase the cost of running Bitcoin software and therefore affect the security of Bitcoin.

Where there is Layer 1, there will be Layer 2. Vertical and layered scaling is an effective way to solve the blockchain trilemma: Layer 1 ensures security and decentralization, while Layer 2 provides high scalability and strong performance, providing 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 the merged mining design is recognition of the existence of sidechains.

Bitcoin is the best Layer 1, and it scales through layering and sidechains, creating a symbiotic ecosystem.

DriveChain Unleashes the Value of Bitcoin

DriveChain enables layered scaling of Bitcoin in a secure and simple way, meeting the needs of all parties.

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

For Bitcoin holders, DriveChain can bring more utility and value-added opportunities, allowing Bitcoin to fully function as a currency and asset.

Bitcoin miners can earn substantial and sustainable income in the 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 but also blinded some people. Under the long-term influence of the powerful network effect, holders seem to have a sense of superiority, disregarding everything and believing that Bitcoin is flawless.

Compared to miners who check the usage data of Bitcoin every day, their perception is outdated. They believe that everything will remain unchanged and will be insignificant in the face of the network effect. They lack the sense of urgency and motivation to make changes, and they are afraid of making mistakes that could affect the network’s reputation.

When innovation meets the network effect, its impact and value will rapidly expand. This is like suppressed desires finding a space for release, and the energy bursts out. The value of networks like Bitcoin should be used correctly.

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