Permissionless technology ≠ permissionless adoption (implications for Bitcoin)

Adoption is gated at the perimeter (distribution, custody, payments, identity, policy), not the cryptographic center.

Photo by Jan Canty on Unsplash

The Perimeter Capture Rule (PCR)

Statement: Permissionless technology ≠ permissionless adoption.
Adoption is gated at the perimeter (distribution, custody, payments, identity, policy), not the cryptographic center.

Perimeter actors (the “choke-points”):

• Cloud (AUPs, endpoint/hosting controls)

• App stores (iOS/Android distribution + default wallets)

• Payments (banks, card networks, stablecoin issuers, exchanges)

• Identity (KYC/AML providers, SIM/eID attestation)

• Policy (regulators, standards bodies; e.g., Travel Rule, provenance mandates)

• Mining/pools & ISPs (templates, filtering, bandwidth)

Core claim: If perimeter actors can rate-limit, delist, or de-prioritize the user’s path, then the “center” (Bitcoin’s base protocol) should be priced like a tenant, not a sovereign landlord.

Mental model: Adoption Funnel vs. Control Surface

• Center (protocol): censorship-resistant in theory.

• Funnel steps (where people actually touch the system):

  1. Discover (app stores, search)

  2. Onboard (exchanges, banks, KYC)

  3. Custody (mobile wallets, cloud backends)

  4. Transact (merchant rails, stablecoin corridors)

  5. Exit/Tax (reporting, withholding)

• Control surface: any step with defaults + terms of service.

Heuristic: Defaults beat ideals.
When defaults/live UX conflict with ideology, defaults win 95%+ of the time.

Five Rules of the Perimeter Capture Rule (PCR)

1. Distribution beats design.
   If the dominant app stores/browsers/wallet catalogs de-rank or require KYC-by-default, mass adoption reroutes to supervised rails — even if the base chain is open.

2. Identity beats anonymity at scale.
   As systems move to ID-bound money (stablecoins → CBDCs), merchants and employers follow the refunds, rebates, and charge-back guarantees. Opt-outs become costly exceptions.

3. Convenience compels compliance.
   Humans buy convenience first. If compliant rails are faster/cheaper/refundable and self-custody is slower/“risky”, the herd picks the path of least regret.

4. Paperization precedes pacification.
   When exposure is wrapped (ETFs, futures, custodial accounts), price discovery migrates to paper venues; volatility compresses; upside is managed; base-layer usage stalls.

5. Perimeter ratchets are one-way.
   Emergency settings (AUP tightening, reporting thresholds, provenance toggles) rarely sunset. Once habit + tooling conform, the perimeter stays tight.

Quick Tests (run these before believing a “permissionless” claim)

• App-store test: Can a non-KYC mobile wallet ship/passive-update at scale? If not, MoE (Medium of Exchange) adoption will be perimeter-bound.

• Bank rails test: Are on/off-ramps cheap and reliable for self-custody users (no enhanced due diligence, no random freezes)? If not, people default to custodians.

• Merchant acceptance test: Are refunds/charge-backs, instant settlement, and tax split easier on stablecoins/CBDC than BTC L2? If yes, merchants migrate away from BTC-as-MoE.

• Cloud survivability test: Could major wallet/node infrastructure be offboarded overnight by AUP (Acceptable Use Policy) changes? If yes, resilience hinges on a small self-hosted minority → not mass.

• Pool/template test: Do top pools run any policy templates (OFAC lists, inscription filtering, “child-pays-for-parents only” rules)? If yes, settlement is steerable under pressure.

If ≥3 of these fail, treat mass MoE (Medium of Exchange) as capped and SoV (Store of Value) as paperized.

Observable “Perimeter Tightening” Tells

• App-store policy diffs: new categories flagged as “financial services”, extra attestations, TestFlight rejections, silent de-ranks.

• Bank/exchange pattern changes: higher withdrawal frictions, address whitelists, default custody, PoR (Proof of Reserves) silence.

• Stablecoin perks: Merchant Discount Rate (MDR) discounts, payroll integration, rebates → MoE gravity moves to stablecoins.

• Identity/provenance mandates: “attest”, “trace”, “revoke”, “rollback”, “record retention” in standards/RFPs (Request for Proposals).

• Paper share rising: ETFs/futures volume outgrowing spot; realized vol grinding down.

Counter-Moves (what actually helps, not slogans)

A. Default Inversion

• Ship defaults that favor self-custody (auto-address refresh, BIP-85 seed splits, inheritance kits), not power-user toggles buried in settings.

• Make merchants whole: instant-discount/return flows, escrow primitives, reputation scores → reduce perceived regret vs card rails.

B. Perimeter Diversification

• Multi-home wallets: web, sideload, desktop, F-Droid; not just iOS/Play.

• Self-hosted infra kits: one-click node + L2 + watchtower with sane UX; bundled Tor/bridge rotation.

C. Proof Pressure

• Mandate PoR (Proof of Reserves) by culture: exchanges/treasuries must publish cryptographic liabilities & assets at cadence; push market to penalize opacity.

• Custody labeling: wallets should flag custodial vs self-custody balances in UI (social pressure).

D. Fee & Throughput Realism

• L2 SLA mindset: public dashboards on median confirmation times, stuck-payment rescue flows, “make-good” policies.

E. Merchant On-Ramps

• Local money service providers that do Bitcoin payouts/receipts under clear rules where possible; where not, use stablecoin front doors with BTC settlement behind the scenes (reduce friction while preserving base demand).

These are hard, unglamorous product and distribution problems, not cryptography problems.

Common Fallacies to Avoid (and what to replace them with)

• “Best tech wins” → “Best defaults win”.
  Ship defaults that minimize regret and maximize compliance-without-thinking.

• “If it’s permissionless, it will spread” → “If distribution is gated, it will stall”.
  Monitor gatekeepers, not GitHub stars.

• “Users will learn” → “Users won’t; tools must learn for them”.
  Build opinionated UX that enforces safe patterns invisibly.

• “We can disintermediate banks” → “Banks can disintermediate users”.
  Price in gatekeeping and design around it.

Short, brutal version

• Incentives > ideals. Control > fairness. Stability > truth.

• Defaults decide behavior.

• Perimeter actors set defaults.

• Therefore permissionless ≠ permissionlessly adopted.

Ask only:

1. Who controls distribution today?

2. What is on by default?

3. What gets cheaper/faster/refundable on supervised rails?

4. What becomes legally risky off them?

If your answers point to the perimeter, you’ve already predicted the adoption curve.

Bottom line

“Is the tech good enough to compensate for user-base psychology?”
Answer: Not at mass scale, unless defaults and distribution are re-engineered. Cryptography secures the center; perimeter economics decides adoption. Treat Bitcoin’s center as anti-fragile and the adoption funnel as fragile — then build, trade, and allocate accordingly.

None of this should be considered investment advice.

Other articles I’ve written on Bitcoin:

• What most Bitcoiners are wrong about

• Controlled Opposition Assets (to Bitcoin as MoE)

• How governments and institutions are domesticating Bitcoin

• How the Bitcoin cycle changes in the post-ETF era

• Why governments won’t attempt to ban Bitcoin

• My Bitcoin 5-Year Price Model (Containment Regime)

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