Now is a good time to reflect — how did we get here? How did we get to the point where the Bitcoin community cannot widely agree on what Bitcoin is — is it money, is it arbitrary data storage, a combination, something else.
If the Bitcoin community cannot agree on what Bitcoin is, then any change to the protocol is not an attack. You are just optimizing for the "arbitrary data storage" community instead of the Bitcoin as money community.
As I wrote, in my last article: "I am not particularly bullish on any community, but I’d be more bullish on a community that has a single goal and some courage than a community that is pulling in ten different directions."
How did incentives align for the arbitrary data storage crowd to be so successful?
What is the incentive map? Who are the real winners of "Bitcoin as random data substrate"?
You might've been shocked by just how many people in the Bitcoin space are in favor of turning Bitcoin into arbitrary data storage, but if you map out the incentives, it all makes sense.
To understand the Bitcoin ecosystem, you first have to understand the Coordination tax (
https://controlplanecapital.com/p/what-made-me-sell-most-of-my-bitcoin ).
The Coordination Tax — Three Stacked Systems
- S₀ Protocol: consensus rules, Proof-of-Work, 21M.
- S₁ Policy: relay/mempool defaults, mining templates, wallet behaviors.
- S₂ Perimeter: banks, clouds, app stores, ISPs, payment networks, tax law, PR.
Security: S₀ is math; S₁/S₂ are sociotechnical.
Tax: recurring human + legal + distribution cost to keep S₁/S₂ aligned with S₀'s ideals.
Attacker asymmetry: One cheap perimeter tweak (Acceptable Use Policy line, relay/mempool policy, bank heuristic, pool template) can shift millions. Defenders must hold all fronts, all the time.
1) Who really wins from "Bitcoin as arbitrary data storage"
1.1. Direct economic / career winners
(a) Miners (short-term fee maximizers)
They get:
- Higher average feerates when inscriptions/ordinals spam appear
- A "fee market maturing" narrative to backfill halvings
They do not price in:
- Long-term node attrition
- Legal attack surface (CSAM, malware blobs, etc.)
- MoE utility loss (not their P&L line item)
So miners are structurally biased toward:
- "If it pays the fee, it's good."
Even if that trades long-run decentralization and legal safety for short-run revenue.
(b) Exchanges, custodians, and structured-product shops
Ordinals, tokens-on-BTC, inscriptions = new casino SKUs:
- More trading pairs
- Higher churn, higher spreads, higher fee income
They also love:
- Arbitrary data narrative → ETF / custodian "clean, non-tainted BTC" premium ("let us deal with the messy chain, you just buy exposure")
They win when:
- Running a full node gets more complex / risky
- Self-custody looks scary / legally exposed
- People are nudged to use custodial wallets and ETFs instead
(c) VC-funded protocol / infra companies
Ordinals/NFT infra, L2s, indexing services, inscription explorers, marketplace APIs, "data on Bitcoin" startups:
- Need sustained demand for non-monetary blockspace
- Need the narrative that Bitcoin is not just money, but a base for rich "use cases"
Many Core-adjacent devs:
- Work for, or receive grants from, these entities
- Build tools that assume arbitrary-data use is legitimate and permanent
So dev + VC + product is one economic cluster, not separate.
(d) Core / Core-adjacent devs (funded & entangled)
They sit at the S₀/S₁ hinge:
Funding:
- Salaries from companies with economic exposure to fee markets, ordinals/L2s, infra monetization
- Grants from corporate/VC-aligned foundations
Career capital:
- Future jobs at L1/L2 startups, exchanges, "Bitcoin infra" companies
- Social capital in conferences / standards bodies
Incentives push toward:
- Making Bitcoin look more programmable, more general, less "boring cash chain"
- Avoiding any stance that looks like "censorship" or "limitation" → which could threaten future roles in broader crypto/tech
So the line:
- "If you pay the fee, there is no spam"
...is not a purely moral principle. It protects them from:
- Being accused of gatekeeping
- Legal responsibility for content
- Alienating VC/infra employers who want maximal "optionality" on future use cases
1.2. Status / narrative winners (who win by redefining Bitcoin's "purpose")
(a) Thought-leader devs (“protocol neutrality priests”)
Psychological incentive:
- Be the arbiter of purity: "we don't judge content; we only judge consensus validity"
- This role is high status, especially among non-technical Bitcoiners who can't audit the code but trust the persona
Social incentive:
- You get to ostracize critics as "toxic maxis", "backward", or "anti-innovation"
- You create a culture where questioning arbitrary-data policy = taboo
This keeps the Overton window narrowed around:
- "Free market + neutrality = good. Any resistance is censorship and centralization."
Which conveniently sidelines the "Bitcoin is money first" crowd.
(b) Influencers, educators, podcast grifters
They live on:
- New narratives → more engagement
- New casino features → more sponsorship deals (exchanges, NFT platforms, L2s)
They are rarely:
- Running full nodes
- Taking the legal risk of infrastructure
- Thinking through S₁/S₂ attack surfaces
So they amplify:
- "Bitcoin NFTs"
- "Taproot unleashed innovation"
- "If people want to inscribe anime, that's just demand"
Even if that makes Bitcoin-as-money weaker, they're making bank on the current hype wave.
1.3. Perimeter winners (S₂ – the real apex predators)
Here's where it gets sharp.
Once you normalize large arbitrary payloads on-chain, you:
Increase the probability that:
- CSAM appears
- Malware payloads appear
- Copyrighted / secret / classified material appears
Decrease the plausibility that:
- Node operators are "just neutral auditors"
- ISPs and clouds can host nodes without legal questions
- Politicians can ignore "illegal content on immutable chains" rhetoric
That gives S₂ actors:
(a) Regulators / law enforcement
Narrative ammunition:
- "Running a node = distributing illegal material"
- "Relaying unlicensed money transmission + contraband data"
Policy levers:
- Licensing for node operators
- Mandatory filters / whitelists / content scanning
- Heavy penalties for infra providers who host "non-compliant" nodes
(b) Cloud / infra providers
Acceptable-Use-Policy leverage:
- "No illegal content stored or relayed on our infra" becomes the clause that justifies mass deplatforming
Business pivot:
- Host only "licensed" nodes (custodians, ETFs, banks)
- Cut off hobby / adversarial self-hosted nodes
(c) Custodians / ETFs / KYC rails
Sales pitch:
- "Self-custody = legal and operational minefield. Let us handle the dirty chain; you just buy clean exposure through us."
Outcome:
- Paperization accelerates
- Price discovery moves further off-chain
- Self-custody shrinks to a niche "problem segment" that's easy to demonize
So S₁ ideological "neutrality" plus S₀ permissionless blockspace becomes, in practice, the perfect S₂ excuse for containment.
2) How can this be so coordinated without a smoking gun?
I already told you how: it's the coordination tax vs attacker asymmetry.
Defenders (money-first, MoE crowd) need:
- Clear doctrine ("Bitcoin is money, not a blob store")
- Strong social cohesion
- Constant vigilance over every S₁/S₂ tweak
Attackers / exploiters / misaligned winners need:
- A compelling neutral-sounding narrative ("market will decide")
- A handful of influential devs and influencers
- A governance culture that treats inaction as "neutrality"
Then:
- Miners see higher fees → "good"
- VC/infra see new products → "good"
- Devs see ideology shield + employer satisfaction → "good"
- Influencers see new content/sponsorship streams → "good"
- Perimeter sees expanding legal surface → "good"
No one has to say "let's sabotage Bitcoin's monetary function."
They just never prioritize it when it conflicts with:
- Revenue
- Career capital
- Ideological comfort
- Regulatory leverage
That's emergent capture.
3) Why Core v30-type changes are particularly dangerous
I've already written about this here (
https://controlplanecapital.com/p/how-bitcoins-developers-are-attacking-2a5 ) but I'll give you a TL;DR.
Mechanically, with looser OP_RETURN policy and witness patterns:
- The cost (in dev time + sophistication) to embed problematic payloads falls
- The bandwidth and storage footprint for that garbage rises
- The plausible deniability of node operators and infra shrinks
Resulting effects:
1. Node centralization
- More resource requirements (disk, bandwidth, RAM)
- Cloud hosting becomes the default → easier to regulate
- Fewer hobby / adversarial nodes → surveillance easier
2. Legal wedge
- The probability that multiple jurisdictions challenge node legality goes up
- Precedent gets set in one place, exported everywhere via "global best practice"
3. Narrative inversion
- Before: "Killing Bitcoin would be politically costly."
- After: "Regulating unlicensed content distributors & unlicensed transmitters is public safety."
That is exactly how you turn a pure S₀ protocol into a S₂-governed commodity plumbing with minimal blowback.
4) Does this mean Bitcoin "fails as money"?
Yes, directionally, not instantly.
Path looks more like:
1. MoE path is gradually taxed and harassed
- Fees volatile and often high
- Self-custody more legally risky and UX-hostile
- On/off ramps heavily surveilled
2. SoV path is narrowed and paperized
- ETFs, trusts, notes, custodians = majority of flows
- Self-custody share stagnates or declines
- Regulatory capture of "good actors" (KYC wrappers) is complete
3. Monetary identity fragments
- No shared mission ("is it money / settlement / blobstore / NFT chain?")
- Any attempt at refocusing is framed as "censorship" or "maxi extremism"
Bitcoin continues to exist, may even appreciate a lot in fiat terms, but not as a serious mass MoE competitor to CBDCs/stables. It becomes:
- High-beta, tightly supervised, partially neutered digital gold with an ETF umbilical cord.
That's exactly the scenario I've been writing about: upside in fiat terms, but structurally contained as money.
Sadly, many devs are economically and career-wise entwined with the very interests that benefit from making Bitcoin weirder and more attackable.
You don't need to assume every Core dev is "captured". You only need to notice: their ideological purity on S₀/S₁ creates perfect leverage for S₂.
The coordination tax + incentive asymmetry I described is not paranoia; it's the correct model.
S₀ can stay mathematically pristine while S₁/S₂ steer Bitcoin away from being money and into being a tolerated, contained asset class.
5) Fragmented identity = attack surface, not strength
As I previously told you:
- If the Bitcoin community cannot agree on what Bitcoin is, then any change to the protocol is not an attack. You are just optimizing for the "arbitrary data storage" community instead of the Bitcoin-as-money community.
This is key.
Hard money needs a simple charter. For money to be robust, it benefits from:
- A simple shared story: "This is sound money, optimized to be cheap, robust, self-custodiable cash / reserve asset."
- Clear red lines: "We don't turn this into a generic compute/data substrate if it harms monetary function."
Instead, Bitcoin today has at least 4 overlapping tribes:
1. Sound money / MoE maximalists
2. Digital gold SoV-only crowd
3. Timechain / ordinals / data canvas crowd
4. Pure decentralization aesthetes ("if it pays the fee, it's fine")
When these tribes share the same S₀ but have different objectives, then:
Any proposed change is always:
- "an optimization for some group"
- and never clearly an "attack" agreed by all
So the argument becomes:
- "You don't own Bitcoin's purpose. If some people want to use it as a media store and pay more, that's just the market."
At S₀ this sounds "neutral". At S₁/S₂ it's a huge coordination failure:
- Node cost goes up.
- Legal risk goes up.
- Monetary utility goes down.
- Social energy is spent fighting about "what Bitcoin is" instead of defending S₁/S₂.
As I wrote in my last article (
https://controlplanecapital.com/p/what-made-me-sell-most-of-my-bitcoin ):
- Bitcoin's survival and adoption depend on whether its most committed users can detect, coordinate, and counter inevitable policy, market, and social attacks.
This is what I called the coordination tax:
- you spend scarce social/organizational bandwidth on internal civil war while the perimeter moves in.
No one needs to say "let's all wreck Bitcoin as money".
They just each follow their own incentive gradient, and the aggregate effect is:
- 'Bitcoin is increasingly a supervised, high-friction asset with ambiguous purpose, best consumed as paper exposure."
That's the S₀ vs S₁/S₂ mismatch.
Recall:
- S₀ Protocol = math, PoW, 21M, consensus rules.
- S₁ Policy = mempool defaults, relay policies, miner templates, wallet UX.
- S₂ Perimeter = banks, clouds, app stores, ISPs, payment networks, tax law, PR.
Right now, you roughly have:
- S₀: still robust, sound, conservative.
- S₁: being "opened" in ways that:
* prefer arbitrary data (witness discount, OP_RETURN policy changes, tolerant relay)
* emphasize "market neutrality" over monetary function
- S₂: slowly moving toward:
* treating nodes/wallets as regulated endpoints
* pushing users toward custodial/KYC interfaces
* framing self-hosted infrastructure as risk vectors
Coordination tax shows up as:
- Defenders needing unanimity and constant vigilance to say "no" at S₁.
- Attackers (or just misaligned incentives) needing only a simple majority + a narrative like "we're just letting markets decide".
S₀ can be perfectly sound while S₁ and S₂ gently steer the whole thing into a neutered, supervised role.
The coordination tax + incentive asymmetry make it very hard for Bitcoin to remain a credible, mass medium of exchange in the face of CBDCs + regulated stables.
The direction of travel is:
- MoE suppressed,
- SoV tolerated (especially via paper),
- self-custody increasingly path-of-most-resistance.
Bitcoin's ceiling as a civilizational MoE is being capped, not because S₀ is broken, but because S₁/S₂ are being steered.
Bitcoin's MoE path is being quietly taxed to death, while its SoV path is being slowly paperized and supervised. S₀ remains mathematically pure; S₁/S₂ do the containment.
Am I too pessimistic? I don't think I am.
I am just applying incentives > ideals to S₁/S₂ while most of the space stares only at S₀ and quotes the whitepaper.
More context on the Coordination Tax:
https://controlplanecapital.com/p/what-made-me-sell-most-of-my-bitcoin
Short-term will be volatile with December being a prime tax-loss harvesting month and MSTR being one of the biggest losers this year, but I like the risk/reward here. There are also a couple of MSTR-specific factors that will add volatility.
If it gets fudded some more and dumps without a break in fundamentals, I might buy more.
I'm basically betting that:
The system still wants a public BTC casino node, and this one is already built, so they won't nuke it — and the market has overshot to the downside.
Could Peter Schiff have predicted the bottom? Only time will tell.
Onwards and upwards to getting delisted.
David Bailey's company $NAKA now has 770.7 BTC in self custody and the remaining 4159 BTC are in custody for their latest loan.
It's a secured, over-collateralized BTC loan.
If Bitcoin drops enough for loan-to-value to breach the Liquidation Level and is not cured within 18 hours, that's a Liquidation Event and the lender can liquidate the pledged BTC.
The lender (Antalpha Digital) also has a rehypothecation right. They may rehypothecate or re-pledge the posted BTC while the loan is outstanding.
So the lender can use (rehypothecate) the BTC during the loan and sell it on a default or uncured margin call.
"Don't use leverage."
- Someone smart
"Don't bet on David Bailey for a turnaround."
- Someone smarter
Don't get PIPE'd by David Bailey, the other suitcoiners, or their promoters.