Galaxy Digital issues a warning about the risks for Bitcoin, which may become merely a settlement layer due to declining transactional activity.
Issue of Decreasing Bitcoin Activity
Galaxy Digital has announced that Bitcoin risks becoming a mere settlement layer with insufficient activity due to declining fees. This follows the migration of a portion of Bitcoin transaction volume to ETFs and alternative blockchains.
Implementation of ETFs and Alternative Blockchains
According to Alex Thorn, Head of Research at Galaxy Digital, the movement of Bitcoin volume to other platforms increases risks. This affects long-term miner incentives and network security for Bitcoin.
Impact on Bitcoin Network Security
The decrease in transaction fees due to the growth of ETFs and alternative blockchains could negatively impact miners' revenues. Currently, spot Bitcoin ETFs hold approximately 1.3 million BTC, which does not generate on-chain fees, putting Bitcoin’s economic model and its security at risk.
Considering the current trends, future changes may transform mining economics, regulations, and the role of blockchain. If more Bitcoin volume continues to migrate to ETFs and fast alternative layers, the core network risks becoming a settlement layer with minimal activity.
