I’ve been contemplating this quite a bit recently: Bitcoin Layer 2 organizations ought to begin accumulating bitcoin in their reserves. It’s too logical for them not to.
As an observer of this sector’s progression, let me clarify why Bitcoin Layer 2 organizations ought to heed the advice of Molly and myself.
For an extended period, bitcoin was referred to as “digital rock”—a reliable store of value but not much beyond that. However, with the surge of Bitcoin Layer 2s, bitcoin is transforming into a “programmable rock.” These layers are introducing features such as smart contracts and scaling solutions, enhancing bitcoin’s adaptability like never before.
However, here’s the catch: these initiatives collect millions from VCs and backers, and a large portion of that funding remains in fiat currencies like USD. That’s a significant oversight.
Why? Because fiat is akin to a melting ice cube. Every year, it depreciates by 5-10% due to inflation. The longer it’s retained, the lesser its value becomes. Conversely, bitcoin boasts a Compound Annual Growth Rate (CAGR) of approximately 70%. If these organizations invested their treasury in bitcoin rather than fiat, their runway wouldn’t merely remain steady—it would expand.
Picture having 70% additional assets annually to support developers, grants, and initiatives. That’s the type of advantage that could determine the success of a Layer 2 ecosystem.
Alright, alright, I understand — Bitcoin is unpredictable, and these organizations require some level of stability. Consequently, retaining 3 to 4 years of runway in fiat is reasonable. It would assist in meeting immediate requirements. But the remainder? It ought to be in bitcoin. In the long term, this approach could potentially double or even triple the runway for these foundations, providing them with the necessary time and resources to thrive.
There’s a precedent for this too. Recall EOS? They gathered $4.2 billion in 2018 and reportedly purchased 164,000 bitcoin with it. Currently, that bitcoin is valued at around $16 billion—even though EOS itself has faded into obscurity. Now, consider if Bitcoin Layer 2 organizations undertook the same yet utilized their bitcoin to enhance and maintain their ecosystem. The possibilities are immense.
Ultimately, these organizations are constructing on Bitcoin. They have faith in its future, so why not retain it in their reserves? Bitcoin is the premier store of value available. If you’re managing a Bitcoin Layer 2 organization, discontinue holding depreciating fiat, and commence holding bitcoin. It’s not merely a prudent choice—it’s the choice.
This article is a Take. The perspectives expressed are solely those of the author and do not necessarily mirror those of BTC Inc or Bitcoin Magazine.
