How to free (decentralize) Bitcoin and what the consequences would be
A coordinated pleb push can win real ground—PoR as table stakes, more neutral mining templates, some mempool hygiene, and resilient self-custody UX.
I’ve already written about how:
In this article, I’ll explore what happens in the scenario that Bitcoin becomes more decentralized.
Assume a materially higher Bitcoin Community Vigilance & Coordination score (CVC): client diversity rises, mempool policy hardens, mining/pool governance decentralizes, anti-paperization/Proof-of-Reserves norms spread, and the community routes around choke points.
Just because of how entrenched Bitcoin is into the financial system, it is unlikely for it to get the full Monero treatment.
Here’s the game tree and what would likely happen if the plebs try to “un-capture” Bitcoin.
1) What “Operation Un-Capture” Looks Like in Practice
Community Actions (First 3–9 Months)
Client diversity.
Shift meaningfully away from a single Bitcoin Core policy stack toward a plural ecosystem — including hardened Core builds, Bitcoin Knots, and alternative policy clients.
Publish public mempool policy bundles that:
De-prioritize inscriptions/garbage,
Reinstate conservative anti-bloat defaults,
Resist the centralization of policy templates.
Pool governance.
Encourage miners and pools to adopt template neutrality.
They should expose coinbase commitments proving no OFAC or policy filters, and publish simplified payment verification (SPV)-style inclusion proofs for Replace-by-Fee (RBF) or Child-Pays-for-Parent (CFB) transactions.
Anti-paperization.
Push exchanges, ETFs, and treasuries toward Proof-of-Reserves (PoR) — on-chain address disclosure and periodic Merkle proofs.
Establish community “do-not-use” lists for custodians that refuse transparency.
Censorship resistance.
Expand relay networks that obfuscate producer identity, promote Stratum V2/DATUM, and enable transaction broadcast through privacy networks such as mix-nets or onion relays.
Routing around perimeters.
Distribute free and open-source wallets (FOSS) outside of app stores.
Promote local-first nodes (Raspberry Pi, ARM) and mesh/LoRa last-mile relays, with clearnet/Tor/I2P dual-stack defaults to maintain access redundancy.
2) Expected State and Industry Response (6–18 Months)
A. Soft Power First — Make Capture Feel Good
Sweetened alternatives.
Launch compliant stablecoin rails with tax perks, cashback, zero-gas user experiences, and “reg-friendly” Bitcoin wallets that integrate KYC, automatic Travel-Rule fields, and merchant charge-back options.
Paperization 2.0.
Roll out ETFs and structured notes offering yield overlays, retirement wrappers, and “insured custody”.
Flows migrate away from self-custody toward convenience and coverage.
B. Perimeter Hardening — Without New Laws
App-store policy nudges.
Require KYC for wallet distribution, deny updates to side-loaded apps, and scan codebases for “illicit content” libraries.
Device attestation may become mandatory for wallet network access.
Banking and payment-service throttling.
Payment processors tighten Travel-Rule thresholds, cut fiat rails to exchanges refusing Proof-of-Reserves, and flag non-custodial flows through ACH or SEPA networks.
Cloud and ISP pressure.
Cloud providers favor “policy clients” and ban non-compliant infrastructure through terms of service.
ISPs rate-limit Tor/I2P traffic under the guise of “abuse control”.
Energy levers on miners.
Introduce differential tariffs, emissions audits, and “grid-stability” curtailments to cluster hash rate in compliant jurisdictions.
Legal framing.
Amplify “unlicensed money-transmission” risk for relay operators and “illegal content carriage” risk for node hosts — especially if on-chain data continues to grow — deterring corporate operators.
C. Standards War
International bodies such as FATF and GFSC lower reporting thresholds and extend metadata requirements (“wallet-signature identity”).
Exchanges and pools begin ranking coins by provenance confidence, integrating “clean coin” scoring into merchant gateways and Layer-2 payment channels.
Wallet interfaces quietly steer users toward “verified” UTXO flows.
D. Information Operations
Media narratives link self-custody with scams and tax evasion.
Running a node becomes portrayed as a civil-liability risk.
Regulated KYC wallets are branded as “community-safe”.
3) Likely Outcomes (Branching Scenarios)
Outcome A: Two-Tier Bitcoin (Most Likely — 55–65%)
Tier 1: Compliant Bitcoin.
ETF and custodial flows, regulated Layer-2 systems, and “clean” UTXO sets that earn a small premium for speed and compliance, fast merchant acceptance, low frictions — but under full surveillance.Tier 2: Sovereign Bitcoin.
Self-custody, privacy-hardened clients, and peer-to-peer channels with rising on/off-ramp friction and wider spreads — but genuine censorship resistance.
Implications:
Volatility declines for Tier-1 (paper share up, managed pricing).
Fee markets bifurcate — private relay premiums emerge alongside base-chain fees.
Bitcoin endures but becomes managed at scale, with sovereignty surviving as a subculture.
Outcome B: Governance Split Threat / Soft-Fork Cold War (20–25%)
Competing pool templates trigger inclusion wars between compliance-oriented and neutrality-oriented clients.
Orphan rates rise and a “soft-fork cold war” emerges between opposing policies.
Implications:
Hash relocates, volatility spikes, ETFs restrict collateral windows, and institutional liquidity consolidates around one rule set while the other chain trades at a discount.
Outcome C: Quiet Capitulation (15–20%)
After sustained pressure, the community retains some Proof-of-Reserves wins and limited client diversity, but pool neutrality erodes.
Anti-paperization norms fade as ETF incentives dominate.
Implications:
Status quo with extra guardrails: rising paper share, declining self-custody, and stability through managed containment.
4) Price, Volatility, and Adoption Dynamics
Near Term (0–6 Months After Community Surge):
Expect volatility spikes, fee surges, and wider spreads on KYC venues.
ETF net-asset-value premiums/discounts wobble.
Basis trades proliferate as paper instruments dampen upside momentum.
Mid Term (6–24 Months):
If the two-tier system stabilizes, headline volatility drops — “paper corridors” cap rallies — while shadow volatility persists in sovereign markets (OTC, private channels).
Value accrues to liquidity islands and clean-coin routing businesses.
5) What Works for the Plebs — and What Backfires
Effective Community Levers
Make Proof-of-Reserves a status symbol.
Listings and liquidity contingent on on-chain proof; public leader-boards; social slashing of non-PoR (opaque custodians).Normalize template neutrality.
Pools publicly commit to inclusion; Stratum V2/DATUM adoption grants miners end-user inclusion power.Lightweight civil defenses.
One-click private relays, easy mini-nodes, simple inheritance and key-loss insurance to make sovereignty user-friendly.Economic pressure.
Drive volume toward non-custodial Layer-2 rails with fiat on-ramps that minimize identity leakage.
Self-Defeating Moves
Protocol churn that breaks wallets or exchanges — it destroys distribution.
On-chain spam “protests” that justify further policy crackdowns.
Purity tests that exile 90% of users to custodians by making sovereignty a full-time job.
6) Canary metrics
% supply in custodians/ETFs (paper share), Proof-of-Reserves adoption rates, pool template disclosures, client diversity share (Core vs alternatives), app-store Acceptable Use Policy changes, energy/power policy for miners, and FATF threshold updates.
7) The Deepest Incentive Read
The Controllers want Bitcoin as a supervised asset, not dead. Dead Bitcoin creates martyrs and pushes value off-grid; contained Bitcoin creates data and taxable flows.
If the plebs strengthen coordination and vigilance, the system’s first response is soft containment — convenience, perks, and friction defaults.
If that fails, policy templates and regulatory perimeters tighten, since they’re cheaper than bans in a low-consent, stability-first world.
8) Bottom Line
A coordinated community push can win real ground — Proof-of-Reserves as baseline transparency, more neutral mining templates, cleaner mempools, and resilient self-custody tools.
The counter-move will not be prohibition but tiering:
wider paper corridors for the compliant majority, and a narrower but survivable sovereign lane for the rest.
Price likely settles under a managed-volatility ceiling, while true convexity remains in the sovereign tail (for Great Taking type scenarios).
The key is to watch the knobs — perimeters, standards, app-store policies — not the speeches.
More context: