Bitcoin financial institutions are on the horizon. We already have a handful in existence. More are on the way. Established traditional banks will begin providing associated services. New financial entities will emerge centered around Bitcoin. At this juncture, this is completely inevitable. Bitcoin struggles to scale. Even aside from that, individuals appreciate other services that fundamentally necessitate the involvement of third parties. Debt being the primary example.
This is an undeniable truth.
Even if we could instantly implement every well-defined opcode and covenant proposal simultaneously, it would still require considerable time to start constructing self-custodial frameworks capable of rivaling services like credit unions and banks offering Bitcoin accounts at a larger scale. This is not a challenge that can be easily resolved overnight.
So what actions can we take? We must adopt a localist mindset in ensuring user-friendly interaction with your Bitcoin. This demands a dual approach, one focused on technical advancements and the other involving, though I dislike the term, lobbying.
There are already software solutions such as LNDHub or LNBits that enable individuals to provide custodial accounts for Lightning. We need a significantly greater number of applications like this, and they must be substantially improved. It should not require fiddling with command line interfaces or integrating independent software, or searching GitHub for manual installation procedures, or struggling to resolve dependency conflicts.
It should simply function.
Click, connect to the network, done. It needs to be a system that power users who may not be highly tech-savvy can operate securely, and not lose other people’s funds. It should facilitate more than just basic accounts for Lightning. Ecash provides privacy, which is crucial for small groups who are familiar with one another. You wouldn’t want your friend to observe your expenditure. It also needs to accommodate options like Unchained or Nunchuck style on-chain self custody. People may not wish to manage all their loved ones’ savings, but holding a recovery key to protect them from their own errors is a different consideration.
We require software that genuinely scales user interaction beyond a network of activist enthusiasts online.
Furthermore, a regulatory exemption is essential. There must be a clear understanding that operating such software for friends and family with nominal amounts of money, say thousands of dollars, and without any fees, constitutes an unregulated activity. Aiding friends and family in engaging with Bitcoin safely and conveniently, and free of charge, does not classify you as a bank. The notion that a few thousand dollars should adhere to the regulations imposed on banks managing billions is, quite frankly, ludicrous.
This is the way forward considering Bitcoin’s current limitations, and the reality of expanding and accelerating adoption, which steers us away from a system that is ultimately completely taken over and rendered ineffective by traditional financial entities.
Rather than relying on them to navigate the current scalability challenges of Bitcoin, we rely on one another.
This article is a Take. The views expressed are solely those of the author and do not necessarily represent those of BTC Inc or Bitcoin Magazine.
