Does Bitcoin fail if it's used only as a Store-of-Value (and not MoE)
Bitcoin “fails” (from a freedom perspective) if it is corralled into a store-of-value only lane. Why? Because the threat to the system is sovereign medium-of-exchange (MoE).
Core thesis
Bitcoin “fails” (from a freedom perspective) if it is corralled into a store-of-value only lane.
Why? Because the threat to the system is sovereign medium-of-exchange (MoE) — peer payments that bypass policy switches. A passive Store-of-Value that mostly sits in custodians or ETFs is not threatening: it can be taxed, surveilled, rehypothecated, paperized, and used as a volatility-managed asset. In that state, control is preserved and stability beats truth.
Controller objective
Preserve programmable control of everyday flows (wages, bills, taxes, remittances).
Keep BTC as a supervised asset where price can be guided, not a parallel payments rail.
Exploit human defaults (convenience, safety, legal risk aversion) rather than overt bans.
How to corral BTC into SoV (step-by-step)
1) Make MoE costly; make SoV easy
Friction asymmetry: Self-custody payments face KYC hurdles, enhanced reporting (travel rule on-chain, 1099-style drip filings), and high audit risk; paper BTC gets one-click in retirement accounts, zero paperwork.
Tax engineering: Treat every non-custodial spend as a taxable event with no de minimis; raise audit probabilities algorithmically. Meanwhile, reduce cap-gains rates for custodied long-term holdings or allow them in tax-advantaged wrappers.
Merchant choke points: Payment processors and POS providers must support stablecoin/CBDC rails by default; BTC acceptance loses interchange rebates and fraud insurance. Merchants follow the money.
2) Paperize exposure; capture price discovery
Scale the wrappers: ETFs, ETPs, futures, structured notes, annuities. Make paper exposure the default for pensions, RIAs, treasurers.
Collateralize via custodians: Concentrate real coin at a handful of supervised custodians. Basis/arbitrage desks then mediate volatility, soft-capping blow-offs and accelerating drawdowns when needed.
Derivatives plumbing: Encourage cash-settled derivatives as the primary institutional on-ramp. The more price is discovered off-chain, the less Medium-of-Exchange matters.
3) Policy perimeter, not prohibition
App-store & wallet policy: Non-KYC wallets get distribution friction (age/ID checks, geofencing, device attestation). Hardware wallet vendors face “secure element” certification tied to revocation keys.
Bank Acceptable Use Policies: Banks and processors silently de-risk non-custodial flows; compliant exchanges survive, P2P ramps wither.
Pool & template pressure: Mining pools adopt policy clients (OFAC/gov-list filtering, template sets), sold as “risk management”. Settlement becomes politically steerable without touching base-layer code.
4) Narrative shaping (identity > facts)
Rebrand use-cases: “Bitcoin is digital gold — don’t risk spending your nest egg”. Medium-of-Exchange = reckless; Store-of-Value = prudent.
Stigma + scare: Repeated headlines: ransomware, sanctions, CSAM on-chain. The message to normies: holding is harmless; transacting is suspicious.
Moral cover: “Protect consumers; stop scams; climate duty”. The public wants safety; the Controller sells safety.
5) Technical pressure on the noisy edges
Spam vectors tolerated (selectively): Let inscriptions/large witnesses crowd blocks during “inconvenient” adoption surges; fees spike → users abandon Medium-of-Exchange.
Mempool policy nudges: Default relay/policy changes that favor bigger packages, Child Pays for Parent (CPFP) rules tuned to raise fee floors for small spends.
Standardization choke: Funding core maintenance through compliant channels; push “safety” roadmaps prioritizing auditing & provenance over MoE ergonomics.
6) Economic levers for volatility management
Futures basis control: Encourage carry trades (borrow spot → short futures); as basis compresses, volatility dampens.
Liquidity yank switches: Periodic collateral policy shifts, margin changes, or T+* settlement tweaks in fiat rails that force de-grossing during blow-offs (weekend cascades, holidays).
Stablecoin subsidies: Quietly improve stablecoin rails (bank support, regulatory clarity) so MoE demand migrates there, not to BTC.
End-state the Controllers want
BTC widely owned but rarely used for payments.
Price set at the margin by supervised venues (ETFs, futures, large custodians).
MoE captured by stablecoins/CBDCs with ID-binding, tax split, and programmable compliance.
Self-custody marginalized: legally burdensome, reputationally risky, UX-inferior for payments.
Why this “succeeds” (incentives > ideals)
Users: prefer convenience, refundability, and fraud protections; choose CBDC/stablecoin rails.
Merchants: prefer interchange rebates, instant settlement, chargeback frameworks.
Institutions: prefer auditors, wrappers, and mark-to-market simplicity.
Politicians: prefer knobs (spend limits, sanctions, emergency powers) to sermons.
Regulators: prefer provable compliance + revocation paths.
That’s revealed preference. Ideals don’t beat defaults.
What would actually make BTC “fail” as freedom tech
Fees structurally too high for small MoE because of tolerated spam + mempool policy. If Core defaults (v30+) normalize large OP_RETURN/inscription payloads, a state actor can spam-raise fee floors to crowd out MoE.
Custodial share >50–60% of circulating supply (paperization ratio rises).
Merchants paid (rebates, tax breaks) to accept only ID-bound rails; BTC payments no longer qualify for government programs.
Non-KYC wallets stigmatized (Acceptable Use Policies, insurers, cloud providers); distribution throttled.
Pool centralization + policy templates normalize censored settlement.
What would stop the corral (what Controllers fear)
Exploding Lightning-style adoption in real commerce with robust Point-of-Sale UX (no cognitive overhead, near-zero fees).
App-store/workplace “shadow UX”: wallet functionality embedded in everyday apps that platforms can’t easily police.
Self-custody proofs as a social norm for treasuries and funds (transparent Proof-of-Reserves expectations), reducing paper share.
Parallel liquidity (non-bank stable on/off ramps) that can’t be easily Acceptable-Use-Policy-throttled.
Mass merchant tools that provide fraud insurance/refunds on non-custodial BTC (erase the last big MoE advantage of cards).
How you’d detect the corral in real time (field signals)
Paperization ratio rising (ETFs/custodial balances climbing faster than total supply growth).
Declining payments share: Lightning public capacity stagnates while ETF AUM grows.
App-store policy diffs: non-KYC wallets removed/age-gated; device attestation required.
Pool announcements: template/OFAC policy standardization marketed as “best practice”.
Merchant policy changes: big Payment Service Providers remove BTC, add stablecoin rails with promos.
News flow: “Illegal content on-chain” → compliance bills targeting node runners/routers.
Tax guidance: no de minimis, higher scrutiny for self-custody spends, leniency for custodied SoV.
Non-investment implications (operational sovereignty)
Treat self-custody MoE as a perishable window: set up now or expect rising friction.
Segregate SoV vs MoE stacks (keys, devices, jurisdictions).
Build off-ramps that don’t touch vulnerable perimeters (peer liquidity, physical settlement networks).
Expect defaults (not laws) to shape realities: app-store, bank AUPs, device attestation, pool policy. Watch those first.
Bottom line
Bitcoin “fails” the way gold did: it survives, accrues a narrative premium, even appreciates — but outside the cockpit. The everyday medium-of-exchange is captured by rails with knobs. The Controllers don’t need to ban BTC; they only need to nudge humans into the easier path and own price discovery. Incentives beat ideals, defaults beat debates, and paper beats steel — unless the MoE surface scales faster than the perimeter tightens.
More context: