How Layer 2 Solutions Give Take Even More Power From The Average User and Give It To Whales

2019-02-07T05:40:10.000Z Honest Cash

Something that occurred to me today. If you have coins that are locked up in a layer 2 like LN or Liquid then you are giving up your ability to control your finances. BTC has a limited supply. Anyone owning a pice of that supply has a say on what the price of the coin is. You "say" by buying and selling those coins. Of course the more fiat or crypto you have the bigger the weight of your "say" in the price. Now if you lock up your coins in a layer 2 then you give up your ability to have a "say" with those coins until they can be unlocked. Most people in the world don't have money to save or HODL as they like to call it. If they have coins and the price is falling they can quickly sell to avoid loss. If those coins are locked up then they can't do this. Imagine if you opened a LN channel and had your coins locked for a week when any of these historical price drops happened:

Source: [bitcoinexchangeguide.com

](https://bitcoinexchangeguide.com/biggest-bitcoin-crashes-ranked/)

All of a sudden you lost up to 83% of your money. Not your savings but the money you need to buy groceries or pay rent that week. You can't get the coins out in time to prevent big losses.

Now what's even worse is whales already have the ability to move the market with their share of the 17m coins in circulation. Subtract lost coins from than and well it's probably closer to 14m. Now every coin locked in layer 2 makes the coins not locked up have even more ability to move the market in one direction or the other. If your money is locked in BTC then you don't have the fiat to buy. If your BTC is locked in layer 2 then you don't have the ability to sell. This means it's even easier for those that do have the unlocked BTC and money to manipulate the markets. Imagine if even 100 million people had .1 BTC each locked in a LN channel. There would only be 4 million BTC left in the hands of a few very wealth individuals who could pump and dump at will.

Your probably thinking this could never happen. Well you are most likely right. With that kind of volatility the coin would become useless as both a store of value and as cash. Want to destroy bitcoin? Easiest way is to destroy faith in it. This would destroy that faith.

Think and don't give up your ability to have a "say" in the value of your currency. Don't lock up your coins. On chain is the only way to go without giving up control.

Responses


RE: How Layer 2 Solutions Give Take Even More Power From The Average User and Give It To Whales

by @lubokkanev

You are making some wild assumptions (or at least you're not explaining them) and it makes your article look naive.

What do you mean by Locking up your coins? Don't you always have a way to unlock them? Why "have your coins locked for a week"?

"100 million people had .1 BTC each". Where are you coming up with these numbers? What about 100m people having 1BTC, or 1b people having 0.1BTC? See how easy it looks? But that's already more than all the BTC there will ever be.

I think your conclusion is correct, but the way you arrive at it is dubious.


RE: RE: How Layer 2 Solutions Give Take Even More Power From The Average User and Give It To Whales

by @FUBAR165

In order to use LN you have to lock your coins in a channel. Those channels take time to close. As for the 100m people that was an example not hard number. It just shows that adoption would make more and more BTC become locked up.