Bitcoin banks—often referred to as “Binks”—are on the horizon. It’s not a matter of if, but when. Since 2020, Germany has authorized banks to manage Bitcoin and Bitcoin accounts for their customers. Who will secure the title of the first Bitcoin bank?
This development may cause quite a stir, and I understand the skepticism. However, it is somewhat naive to believe that banks wouldn’t adapt to include cryptocurrencies. Banks have a fundamental role beyond merely safeguarding your funds and processing transactions; they provide loans. This process is essential in an economy, as it incentivizes liquidity providers—despite the inherent risks—and enables entrepreneurs to pursue ventures they could not finance otherwise. This solidifies a bank’s relevance in our economy. Loans require trust and management, necessitating coordination through banks.
Moreover, I firmly believe banks will not only continue to exist but will flourish by offering Bitcoin custody services and processing transactions using their own proprietary layers. Many individuals prefer having a support system to turn to when issues arise rather than managing everything independently. People gravitate toward established platforms like Google or Facebook instead of running their own decentralized nodes or SMTP servers. While I do anticipate a shift toward more decentralized systems, this transition will likely occur over multiple generations and won’t happen instantaneously—or possibly even within our lifetimes. Perhaps we will witness a movement toward decentralization that might lose momentum before reaching its full potential. Regardless, the current landscape of finance will evolve to include Bitcoin banking—it’s inevitable.
But don’t despair—there’s still potential for innovation. Centralized, yet private, electronic cash has been viable since David Chaum introduced the original “Ecash” model in the 1980s. Extending those principles to encompass complex “smart contracts” with centralized enforcement is not impractical. It is entirely feasible to create Bitcoin-denominated accounts without invasive KYC (Know Your Customer) or AML (Anti-Money Laundering) measures. The barriers to these innovations are not technological but rather rooted in legal, regulatory, and societal challenges. These are obstacles we can influence and overcome. Removing such barriers on a significant scale will demand considerable effort, but it is by no means insurmountable.
There’s also motivation for global jurisdictions to adapt regulations concerning financial services. Given Bitcoin’s borderless nature, nations that ease regulations may attract revenue from all corners of the world.
The Political Landscape
Bitcoin stands at the forefront of the global political stage. Ignoring this reality could have serious consequences.
While it is true that Bitcoin the technology is devoid of politics—neutral by nature—all technology impacts the political environment. To argue that Bitcoin’s widespread adoption does not compel society toward a choice between individual freedom and authoritarianism is to overlook its profound implications. As an American, I will present the situation with a focus on the U.S. context:
The right: This reflects the leanings of the Republican party, not necessarily a representation of its complete essence but indicative of the trend.
The left: This mirrors the tendencies of the Democratic party, with the same caveats.
The existence of Bitcoin inevitably favors political frameworks that prioritize individual liberties. As Bitcoin continues to mature and grow, it will increasingly shape a political environment that favors these ideologies. The rise of Bitcoin means that politicians will soon begin to categorize it in terms of left and right, as this is the nature of political discourse, albeit fraught with exaggeration and untruths.
This ideological divide will likely center around two key issues:
- Wealth Inequality: Bitcoin will undoubtedly become a major topic concerning wealth distribution, redistributing vast amounts yet far from evenly.
- Environmental Concerns: The narrative that Bitcoin is detrimental to the environment is unlikely to dissipate anytime soon.
While I may not be entirely accurate, I perceive these dynamics as almost inevitable. This is how Bitcoin integrates into the broader global discussion on competing political philosophies. A significant struggle is unfolding globally, balancing localized governance against wider relinquishment of autonomy to powerful sovereign entities. Bitcoin inherently promotes localized autonomy and opposes large-scale control. As it expands, its interconnection with global politics will deepen, likely following this trajectory.
This struggle will manifest across national and state levels and, eventually, local jurisdictions. Over time, Bitcoin discussions will evolve beyond debates on international regulations, extending to alliances between countries with varying perspectives on Bitcoin. Once we reach that stage, the outcomes will be unpredictable.
Your choices are clear:
- Engage with your local political structure to advocate for greater autonomy.
- Withdraw from the political system where feasible, accepting outcomes you cannot change.
Choose wisely.
Major Players Joining the Arena
As markets expand, they attract increased liquidity, thereby enticing larger players into the space. This phenomenon has been evident for years, with the last bullish trend witnessing the introduction of cash-settled Bitcoin futures. We’ve observed the emergence and cessation of multiple Bitcoin financial products traded on established financial exchanges. Currently, we have options for physically settled Bitcoin futures on Bakkt, alongside cash-settled futures products. German banks are now authorized to handle cryptocurrency services, and Swiss regulatory bodies have fostered a welcoming environment for the industry for years.
The arrival of institutional entities and their considerable liquidity will fundamentally reshape this market’s structure. However, with these players come government regulations, restrictions, and mandates characteristic of the traditional finance sector. The level of liquidity attracted by the platforms established by these players will influence the extent to which legacy governmental regulations affect pricing behaviors within this ecosystem. Increased liquidity among regulated platforms might lead to indirect control over Bitcoin’s pricing mechanisms, and potentially affect the resolution of future consensus disputes. This is a critical factor to monitor.
Current trends suggest that the entry of these substantial liquidity providers could overshadow the existing no-KYC, fly-by-night exchanges that represent a sizable portion of the market. Consequently, this climate might lead to a more regulated environment, complicating efforts to navigate while steering clear of government oversight and potentially obfuscating consensus on protocol enhancements if taken to extremes.
This landscape may eventually result in a more distinct separation between black market and regulated platforms for Bitcoin trading, which may even extend to treated Bitcoins themselves if we do not successfully push for privacy-enhancing upgrades. Alternatively, we risk becoming complacent in defending our privacy within jurisdictions where such rights are acknowledged. The landscape is evolving, and adaptation is essential.
Decentralizing Infrastructure
We’re currently witnessing widespread censorship across various platforms, including Twitter, Facebook, YouTube, and even internet infrastructure like DNS and VPS services. Although this isn’t a consistent experience everywhere, it is undeniably a burgeoning concern.
A concerted effort is needed on both social and technological fronts to confront this trend—cautiously and strategically. The Fediverse offers a promising experiment in merging protocols and services within a federated framework that allows anyone to operate a Mastodon instance among other services. Furthermore, Bluesky, an initiative by former Twitter CEO Jack Dorsey, seeks to explore how to transform Twitter from a proprietary service into an open protocol, contingent on its feasibility. Additionally, initiatives like goTenna are actively developing consumer products aimed at decentralizing data transmission infrastructure. Despite bandwidth limitations, these projects represent crucial initial steps. Numerous DIY mesh networking projects also emerge in response.
This leads us directly to Bitcoin-related projects. For instance, goTenna has collaborated with Samourai Wallet to create txTenna, enabling users to broadcast their Bitcoin transactions via a mesh network, obscuring their identity while routing data until it can be sent to the Bitcoin network. The LochaMesh initiative emerged in Venezuela during times of electricity and internet instability, integrating communication tools alongside Bitcoin and Lightning functionalities, with aspirations of commercializing their DIY model for broader access.
It would be neglectful to omit the significance of the Blockstream Satellite Feed. While it is not a comprehensive decentralization of infrastructure, it represents a significant shift worthy of acknowledgment. Firstly, the service is centralized; reliant on satellites operated by specific companies that could terminate the service at will. Secondly, it is offered free of charge and guarantees user privacy: the one-way broadcast simply requires users to set up receiving equipment, allowing them to access the Bitcoin blockchain without generating identifiable network activity, while facilitating extensive data delivery at no cost.
Projects like these will continue to resonate on the periphery of Bitcoin and the broader internet landscape in the coming decade. There are countless possibilities for integration in these domains. Blockstream has entered a partnership with txTenna to link their respective satellite feeds, paving the way for further collaborations. While mesh and radio technology alone may not suffice to scale Bitcoin’s global network, they can effectively bridge gaps or create sub-networks focused on transaction propagation and block validation. A node might receive blocks from a satellite feed and subsequently transmit them across shorter-range mesh networks capable of higher throughput. Such collaborative approaches could even be beneficial for mining; employing Compact Blocks allows miners to send just the block header alongside essential data to construct the actual block from their mempool. Given a favorable latency trade-off, miners might leverage these mesh networks to obscure their geographical locations while simultaneously receiving real-time block data from an anonymous satellite connection.
There are also promising prospects for collaboration between the Lightning Network and mesh networking technology. Global Mesh Labs is currently developing the Lot49 Protocol, which aims to incentivize mesh network nodes by using the Lightning Network for data relay payments. This intriguing intersection could enhance the synergy between Bitcoin and mesh networking, though its success remains to be seen. Regardless of the level of integration, mesh networking can significantly enhance Bitcoin’s functionality. I envision a future where localized Lightning sub-networks emerge, where users connect over mesh networks and predominantly interact with local peers, while leveraging blockchain feeds for security. Bridge nodes can facilitate the flow of funds in and out of these localized networks as necessary. Such structural designs make intuitive sense on a global scale and seem destined to naturally evolve.
While this technology may not achieve mainstream acceptance in the next decade, anticipate swift advancements as dedicated enthusiasts and innovators experiment at the fringes.
This is only Part 3 of a 4-part series; look for the final installment tomorrow.
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