jakiro
Author: Web3 Ecosystem Elastos Global Growth Head, Jonathan Hargreaves, CoinTelegraph; Compiled by: Deng Tong, Bitchain Vision
BTC’s transition to Layer 2 solutions benefit every user.From supporting higher transaction speeds and volumes to enhancing security and enabling smart contracts directly within Bitcoin, L2’s technological advantages make it a major development in the Bitcoin ecosystem.
However, the impact of Bitcoin L2 is likely to go far beyond the scope of technological improvements.So far, the emergence of Bitcoin staking is impossible, but its emergence is an important step in the legalization and mainstreaming of cryptocurrency staking.In addition to creating value for currency holders, pledge creates a new interest rate defined by users rather than determined by central bank and government policies.This “mass interest rate” provides an alternative to a flawed traditional interest rate system, and the ability to mortgage trusted and highly recognized assets enhances the feasibility and credibility of this vision.
Essentially,The introduction of Bitcoin L2 means that Bitcoin transactions can now be transmitted through Layer 2 (or the data link layer), rather than relying on the public Internet to transmit data, Regardless of the transaction volume, the correlation between data speed and packet transmission can be ensured.
From the end user perspective,Complex smart contracts can now be developed and implemented directly in Bitcoin, including all the necessary conditions, dependencies and obligations – making Bitcoin not only a means of transaction, but also a means of compliance, ensuring the integrity of the contract.
Another benefit Bitcoin L2 offers is staking, or the opportunity to earn interest or return from the Bitcoin tokens you manage.
Flawed basic rate system
It is easy to understand why Bitcoin staking is a big news for the Bitcoin “maxi” community – perhaps less obvious is the impact of Bitcoin staking on the broader economic landscape.
What mainstream fund managers, investors and central banks do to fiat currencies is to make Bitcoin work through pledges.The basic interest rate of a country—the interest rate of loans collected by central banks from commercial banks—is nominally a representative of the opportunity cost of depositing funds into a savings account rather than investing elsewhere.Supporting this view is that interest returns can offset inflation, which itself is affected by the productivity and efficiency levels of economies.
The European Central Bank (ECB) implemented fixed interest rates during 2008-23.Source: Statista and the European Central Bank.
As the economy develops, innovation enables companies to produce more products with the same or less resources, resulting in a decline in the value of resources, including labor.The decline in valuation is reflected in inflation, which reduces the real wage level.
In theory, interest rates and inflation should offset each other, reflecting the increase in productivity in economies.In this way, depositors are rewarded for borrowing money to fund innovations that can increase productivity.
In fact, however, interest rates did not play such a role.The real interest rates in major economies in the world have remained at zero for the past decade.Between 2010 and 2020, the European benchmark interest rate remained below 1%, and was virtually zero since 2016.Interest rates in the U.S. have followed a similar trajectory until 2018 when they broke through 1%.
This is good news for homeowners with mortgage loans, meaning mortgage interest payments are lower and more affordable.However, the continued low or zero real interest rates have had a complex impact on different groups of people and the wider economy, and it is difficult to see that the rewards of rejecting those who are cautious enough to put money in the bank can be considered a good thing,Or fair policies.
The independence of central banks depends on the extent to which the government allows, and since central bank governors themselves are appointed by the government, they are ultimately the enforcers of the policy – and false base interest rates are one of the consequences.
When considering the broader basic interest rate pattern, it is obvious that it is detached from the basic concepts that support its basic utility.There is no correlation between interest rates and investment opportunity costs.Instead, basic interest rates have the potential to become a political tool that officials can use for expediency and opportunism.
“Public interest rate”
Bitcoin staking offers another option.Just as fiat currencies can generate income in savings accounts, unused Bitcoin can earn rewards for participants.However,Unlike the traditional financial system, the interest rate of Bitcoin pledged is determined by the user itself, not by the central bank, and is not affected by the political agenda.
The more useful bitcoin is (measured by transaction volume and frequency, use cases of smart contracts, and broader confidence in the currency), the higher the bitcoin interest rate will climb.Vice versa – a decline in confidence or a sudden appearance of more attractive alternatives will lead to a drop in Bitcoin interest rates.In this sense, the exchange rate performs more like the exchange rate that is popular overall economies generate premiums over other economies.
This possibility is already implicit in more general staking, but Bitcoin’s position in the mainstream understanding of cryptocurrencies improves the image, importance and accessibility of staking.The impact of Bitcoin L2 is far beyond the scope of technological improvements, and the new structure brought about by Bitcoin staking should attract everyone’s interest, not just those in the deep-rooted ecosystem.
Bitcoin staking is a fresh, decentralized alternative that can replace the imperfect systems that exist currently—making new interest rates defined by participants rather than lobbyists and government interests possible, becoming more of our economic system.Part of a bright future.
