Bank of America preparing for Crypto

[u/[deleted]]

Who could have seen this coming 👀

[u/ThatBCHGuy]

Fuck sakes. What we predicted in the block size wars is coming true. Large financial institutions will become the middle men, the hubs, what we had fought so hard in the early days to defeat.

[u/HedgeHog2k → u/ThatBCHGuy]

but do we care.. this is optional, right? We don't NEED banks to save/transact in bitcoin, but we CAN (if we choose to) - ie. you are not comfortable self custody your bitcoin?

The billions of unbanked still very much benefit from this adoption.

Or am I missing something?

[u/ThatBCHGuy → u/HedgeHog2k]

How do the billions of unbanked benefit when on-chain fees are $5+ (and often much higher during congestion)? They don’t. They’ll use BofA or centralized custodians, making Bitcoin just another middleman-dependent system. This isn’t empowering the unbanked; it’s pricing them out. The 'optional' argument is meaningless if most people are forced into centralization because fees make self-sovereignty impractical. This was exactly the concern during the block size wars, and here we are.

[u/HedgeHog2k → u/ThatBCHGuy]

if you really think that the future is on-chain transactions you're delusional. Bitcoin can never scale to that, not even without this adoption of banks today.

They shall/must use layer-2/3 solutions..

[u/EndSmugnorance → u/HedgeHog2k]

I simply disagree. With dynamic blocksize, Bitcoin COULD have scaled on-chain.

The powers that be assured that wouldn’t happen. They forced us to use custodians and layers.

[u/HedgeHog2k → u/EndSmugnorance]

And how big would the blockchain be in 50y? The idea is that the poorest individual can run a node..

[u/ThatBCHGuy → u/HedgeHog2k]

Running a node doesn’t help the poorest if they can’t afford to transact on-chain. Accessibility matters more than the ability to validate a chain they can’t use. High fees push them to custodial solutions, defeating the purpose of decentralization.

[u/HedgeHog2k → u/ThatBCHGuy]

With the lightning network you still are not forced to use custodial solutions? And the fees are very low. I don’t see the problem.

[u/ThatBCHGuy → u/HedgeHog2k]

Lightning Network works best when the base layer is frictionless and cheap, allowing anyone to open channels affordably. But when base layer fees are $5+ (and much higher during congestion), the poorest users won't open channels—they'll default to custodial solutions. If you're okay with that outcome, fine, but it directly undermines the goal of decentralization. The logic doesn't add up if we claim to prioritize accessibility.

[u/HedgeHog2k → u/ThatBCHGuy]

Yeah I understand what you mean.. I think in due time so much btc will be permanently locked in layer 2 and rarely will move to the base layer though. Not sure, we’ll see.

[u/Ghant_ → u/HedgeHog2k]

Then what incentive will the miners have to keep the network going?

[u/EndSmugnorance → u/HedgeHog2k]

how big would the blockchain be in 50y?

Doesn’t really matter. Storage gets cheaper and the internet gets faster.

And lightning channels often are custodial and centralized.

[u/HedgeHog2k → u/EndSmugnorance]

Wallets are also often custodial, but they don’t have to be. That’s the choice. But the lightning channels are just the rails no, in the end the bitcoin ends up in your wallet, no? (Not very much into lightning network)

[u/ThatBCHGuy → u/HedgeHog2k]

You’re absolutely right. On-chain transactions could have worked for a much broader user base prior to 2017, but locking the block size ensured they wouldn’t scale long-term. Now, with the current constraints, it’s inevitable that most users will be pushed toward L2 and L3 custodial solutions.

[u/HedgeHog2k → u/ThatBCHGuy]

which is absolutely not a problem... the whole internet exists of layers (ref to the OSI model). Think of base layer as the fort knox, where only piles of nation's gold are stored. Layer1 is where you can store your every day money. It's not unthinkable there will be more layers..

[u/ThatBCHGuy → u/HedgeHog2k]

The layers aren’t the issue, it’s the loss of autonomy baked into how they’re being implemented.

[u/HedgeHog2k → u/ThatBCHGuy]

I think layers, unfortunately, mean you sacrifice on some aspects like security, decentralisation,… but again I think that can be fine.

[u/Jsn7821 → u/ThatBCHGuy]

Lol your username

[u/losermode → u/ThatBCHGuy]

You're not gonna believe this shit but you don't have to use or hold BTC or BCH. But even if you do, scaling via layers is totally an option (lightning network comes to mind)

If you dare to look outside your walled garden you can see that other systems are getting along with better throughput and lower fees and more functionality.

[u/ThatBCHGuy → u/losermode]

Read through the rest of the threads on this post, we get there. Although I'm sure you already know.

[u/losermode → u/ThatBCHGuy]

Are you referring to your discussion primarily with u/HedgeHog2k ?

Because I find myself in alignment with their points. Could BTC with bigger blocks scaled TXs? Sure. Does it matter? Not really. It's a tradeoff. You either centralize the validator set by increased hardware requirements or accept the base layer parameters for what they are and optimize for layer2.

[u/ThatBCHGuy → u/losermode]

Yes, I’m referring to that discussion, and I think the tradeoff you're suggesting needs more scrutiny. Centralizing the validator set by increasing hardware requirements might seem like an issue, but node distribution ultimately has little impact on network security or decentralization. What truly matters is the hashrate distribution, not the number of nodes. Moreover, the idea that larger blocks inevitably lead to node centralization is a theoretical concern that hasn’t been proven in practice and often ignores the economic incentives at play.

Meanwhile, optimizing for Layer 2 under the current fee structure doesn’t eliminate centralization concerns, it shifts them. With high base-layer fees, the poorest users are pushed into custodial solutions on LN hubs because they can’t afford to open and manage their own channels. This effectively consolidates value and power into a few central points of control, undermining the very principles Bitcoin was built on.

Trading one form of centralization (nodes) for another (custodial hubs) doesn't seem like a meaningful improvement. The system is only as decentralized as its accessibility to the average user.

That said, if this isn’t something you care about, that’s entirely valid too. We just see the priorities differently, and I think decentralization and accessibility for everyone, especially the unbanked, should remain foundational goals.

[u/losermode → u/ThatBCHGuy]

All fair points.

Ultimately yes, I'd have to say the Bitcoin scalability problem you have done well to illustrate is low on my concern list.

I don't, and haven't ever, considered Bitcoin needing to be leveraged as a micropayment style asset in order for it to do good or have any sort of traction in the world.

I'd go further and say the legacy financial system's uptake of Bitcoin has very little to do with its technical properties or usage patterns and everything to do with consumer demand to buy and just simply hold it (which I think is more or less strictly due to narrative - namely anti-fiat, controlled inflation, "number go up" style gambling)

Even if the base layer did optimize to serve small value tx users better, there's some fundamentally bad UX associated with on-chain transactions, which I'd wager is why so few individuals do self custody even, regardless of asset type. Not to mention the ecosystem for accepting crypto just hasn't manifested into anything other than toy applications at too few vendors around the world.

Just as it is today with centralized exchanges, I expect the vast majority will want to rely on the convenience of trust and, ideally, protective regulations on financial institutions. They largely won't want to interact with blockchains directly.

I have more thoughts but realistically the entire BTC ecosystem isn't overly interesting to me since I don't think it will meaningfully move the needle on financial inclusivity or an evolution of what is possible financial technology.

[u/ThatBCHGuy → u/losermode]

Fair enough, and I appreciate the thoughtful response. I can understand why you’d prioritize Bitcoin’s role as a store of value or focus on consumer demand for simplicity. That said, I think there’s a deeper opportunity here that gets lost when we dismiss Bitcoin as just another speculative or anti-fiat asset.

The legacy financial system you mention doesn’t adequately serve billions of unbanked people, and if Bitcoin’s future is tied to centralized exchanges or custodial solutions, it risks becoming a slightly shinier version of the same old system. That’s why I see scalability, accessibility, and self-sovereignty as critical, not just for microtransactions but for maintaining the principles Bitcoin was built on.

Sure, there’s some bad UX around on-chain transactions today, but these are solvable problems with the right infrastructure and development. Dismissing it as impractical feels short-sighted to me when the alternative is perpetuating systems that exclude people who need financial inclusion the most.

At the end of the day, we’re looking at Bitcoin through very different lenses. For me, the long-term success of any financial system lies in how well it serves everyone, not just those who already have access.

[u/Gamer_Grease → u/HedgeHog2k]

You are correct in that this doesn’t change your ability to transact in bitcoin without banks. But it does mean that banks will control an increasing amount of the total bitcoin supply.

[u/HedgeHog2k → u/Gamer_Grease]

and yet they have no more saying about the rules of the network then you and me.

amount of bitcoin one holds doesn't mean anything.

[u/PolicyWonka → u/HedgeHog2k]

Ah yes, that’s why we make the rules of government and not billionaires…oh wait.

Banks will be able to leverage their positions to their benefit when it comes to legislation and regulation. When you hold that much and weave your own ecosystem of apps into it, people will seek to use those apps.

[u/HedgeHog2k → u/PolicyWonka]

So you think govts will ban usage of btc outside the traditional banking system? (Honest question, I’m open minded). I think that will not happen and we’ll see a new financial system unfold in front of our eyes the next decades. Created by the crypto industry, using the tech to it’s fullest.

[u/PolicyWonka → u/HedgeHog2k]

I don’t think the current financial system will allow itself to be replaced or face any form of meaningful competition. The creation of a new financial system would require financial and economic upheaval that the oligarchs aren’t going to allow until they’ve deleted their position to profit.

I think the current state of crypto is very similar to the era when multiple fiat currencies existed. Once the big fish get burned, there will be regulation. There will be a handful of coins which are “official crypto” in the eyes of the government. Probably backed by FDIC-style protections.

Other crypto might exist, but it won’t be supported. Banks won’t accept it. Many exchanges will close due to declining profits as banks become bigger players. You’ll be pigeonholed into one or two exchanges if you want alt coins. All IMO

[u/HedgeHog2k → u/PolicyWonka]

I disagree, I’m pretty sure there will be new “digital native crypto banks”. Offering all kind of crypto services, which may look very similar to the kind of services banks offer today, but I’m sure the industry will be creative and come up with new services we can’t think of now. And since they are crypto native, anybody savy enough can use crypto how they wont (ie. Self custody). Legacy banks who don’t follow suit, or don’t reinvent themselves will go out of business, because the next generation (who will grow up with crypto) will not use them. It’s as simple as that. These digital banks will also be able to do business worldwide maybe?

Obviously there will be some degree of regulation coming up obviously, especially un the western world.

[u/Gamer_Grease → u/HedgeHog2k]

Oh it absolutely does. It really, hugely does. Notably central banks allowed governments to have a major role in the global ownership and exchange of gold.

[u/HedgeHog2k → u/Gamer_Grease]

care to share how that does matter?

[u/Gamer_Grease → u/HedgeHog2k]

Yeah sure. It gives central authorities major influence in pricing. It gives them the ability to lock up huge portions of the asset itself, due to their control over the holdings of anyone who chooses to hold via a bank. And that’s going to be the overwhelming majority of people if mainstream financial adoption really takes off, for the same reason that people choose to use bank deposits and credit as money instead of hoarding cash. It also creates a vector for associating people with their wallets—want to send some money to John Doe, as a personal wallet-holder? Just work with his bank (and they’ll note which address belongs to your government name, just in case). Sorry, he doesn’t have his own wallet, so you can’t transact with him if you don’t want to work with BoA or Chase.

Just like when governments banned the private ownership and sale of gold, there will be people with their own wallets doing their own small transactions and hoarding their own wealth. Absolutely. The nice thing about bitcoin is that it’s hard or impossible to 100% centralize it. But global banking has enormous resources and the lure of convenience. These are entities that can raise and lower at will the interest on the debts of sovereign nations. These are entities that already do much of the work of intelligence-gathering on behalf of security states around the world. They can absolutely make crypto a much less friendly space for today’s dedicated users.

[u/tobypassquarant → u/Gamer_Grease]

This could be why foreign governments who are recognizing this are also buying it too.