Connect with us

Crypto News

Bitcoin: The Entropy Engine

Published

on

Introduction

Names can be both liberating and confining. When mankind gives something a name, we mark it with a label that helps us discuss our shared environment and experience. At the same time, a label can obscure something in preconceived notions. Labels can make it more difficult for us collectively to understand what something is.

In 2008, a pseudonymous inventor named Satoshi Nakamoto released a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”1. The paper outlines a novel distributed network system, called Bitcoin, that acts as an immutable digital ledger. There are many ways to describe what the fundamental innovation here really was. For the context of this article, perhaps it is best to describe the innovation as the creation of a computer system that controls a database, which can only be added to or modified depending on the quantity of physical energy (in the form of electricity) supplied to it. Unlike standard computer systems, where linguistic logic coded by a programmer dictates the state of 0s and 1s, this machine changes when it is fed energy from the Earth.

Integrating physical energy into the operations of the computer network was a pivotal moment for the possibility of creating digitally native money. Nick Szabo, in his work “Shelling Out: The Origins of Money,” provides an anthropological interpretation of how the use of money developed2. In trade, two potentially untrusting parties must find a way to trust one another. To do so, we can rely upon tokens of record that are governed by the laws of nature, which we all can trust. A commodity can be a helpful medium of exchange when it is scarce and hard to reproduce to the degree that people understand the extreme amount of energy and effort it would take to counterfeit one. Scarcity is how homo-sapiens detect the energy required to obtain a given object, giving it trust and validity as a unit of record. The greater the energy, the more desired and valuable it is in our endeavors to cooperate and trust one another. From this point of view, Bitcoin fits this description perfectly, it requires energy to produce and therefore is an immutable record that can be used as powerful money.

However, as this distributed system evolves, it has become evident that the Bitcoin network does more than simply produce a digital, yet scarce, asset called bitcoin that can be used as money. For this reason, it may be helpful to momentarily give Bitcoin another name to reanalyze the broader function of this machine. For now, let us call it an entropy engine instead.

Entropy

Entropy is a complicated word that can be articulated in many ways. To begin, consider the equation:

S = kB x lnΩ

S, meaning entropy, equals Boltzmann constant (k) times the natural log of the number of particles (Ω) contained within a system3. Entropy can be described as the quantity of available states a system can have. If there is a big container with many molecules, it will have many more possible configurations than a smaller container with fewer molecules. The more particles the container has, the more variations there are in how the molecules can be arranged. According to the second law of thermodynamics, total entropy in an isolated system cannot decrease, but can only increase. Therefore, because entropy always increases, all the molecules eventually find the most likely arrangement, which is them all being spread out equally. This is known as thermodynamic equilibrium, and the universe tends towards this. The continuous increase in entropy is a law of nature.

Due to entropy’s relationship with possible states, it is also related to randomness. Additionally, it is associated with heat loss. The second law of thermodynamics indicates that when one kind of energy is converted to another type of energy, there will inevitably be some heat loss. The conversion is never 100% efficient. Rub your hands together very quickly, and you will notice that the friction creates heat. This is you contributing to the increase in entropy of the universe.

This new computer system is an entropy engine because it produces both randomness and heat. To add new transactions to the blockchain, a computer running the software must make many guesses until it finds a hash value with a certain number of leading zeroes. The quicker the machine can produce more random guesses, the more likely the machine is to be rewarded with bitcoin. The more randomness the machine can create, the better it functions and the more heat it produces. This machine involves all things entropy.

The users of the machine also benefit from the entropy machine more if they can harness more entropy. The mathematics of entropy is foundational to the science of cryptography. Another way of interpreting the equation above, in terms of informational entropy, is that the more particles in a container represent the amount of information needed to understand the state of the system3. Put another way, the more possible states and complexity a system has, the more information one would need to gain an understanding of it. Consequently, more entropy represents more inherent uncertainty or surprise an event might have3. The entropy engine relies upon public-private key cryptography. A system user will have a public key where they receive bitcoin. At the same time, only they can send their bitcoin because they have the private key, which cannot be derived from the public key. The safe ownership of bitcoin relies upon an individual keeping their private key secret. Cryptographic schemes rely upon the assumption of highly random private keys3. In other words, the more randomness used to form a private key, the more secure one can protect their property on the network. Both the maintainers and users of the network utilize entropy for their benefit.

Life is in Pursuit of Entropy

Not only is this system an entropy engine from a technical point of view, but it can also be viewed as a driver of entropy from a societal point of view. The flow of human civilization can be reconciled with the observation that biological life facilitates the increase of entropy. Imagine a bathtub drain: once the drain plug is pulled, the water within the tub wants to flow down into the drain. Think of this as the universe’s tendency towards higher entropy. An orderly and sustained vortex will form at the drain to facilitate this transition expediently. Order develops to absorb and dissipate the energy, speeding up the process of generating more entropy more efficiently. Order, life, and all the complexity on Earth form to expedite the increase of entropy further as the sun transfers energy to the Earth. Plants grow to absorb sunlight and store the energy within themselves, and animals eat those plants to process the energy further, etc. Now consider the tell-tale sign of someone alive: their body is warm. Our body processes energy and dissipates some continuously as heat. Life forms in pursuit of entropy.

Our society moves forward when we learn to find more efficient ways to harness and dissipate energy on Earth. A classic discovery we take pride in was our ability to release the energy stored in wood into fire, producing heat. We then learned to release stored energy within coal and then oil; eventually, we harnessed energy from wind and sunlight and finally upgraded to releasing the energy of atoms themselves. We absorb energy (in the form of wood, coal, oil, sunlight, wind, etc.) only to dissipate it for our gain. In the meantime, our society prospers and experiences excellent technological leaps forward as we learn to harness more advanced forms of energy. As we use the energy, heat loss occurs, and entropy increases. We act as the vortex: order that expedites the process.

Humanity’s fundamental drive is to find and release pockets of stored energy. Interestingly, the entropy engine seems to provide an extra nudge, pushing humanity in this direction to a greater degree. Consider an undeveloped village with no electric infrastructure but near a river where a dam could be built. An ambitious entrepreneur may be interested in making a dam, but the capital expense is high. Additionally, it is not as if the nearby village will immediately purchase all modern electrical luxuries once the dam is built. At most, perhaps each home will gladly buy a lightbulb so their child can study school work after sundown. Though life-changing for the community, the revenue from one lightbulb a night per home is not enough to justify the capital expenditure of the dam. Before the invention of an entropy engine, many areas of the world would be without electricity for similar kinds of reasons. Now, an entropy engine operator is willing to purchase all unused electricity from the dam because cheap electricity leads to profit. The new customer provides a constant and complete excess inventory purchase of electricity for the dam. Suddenly, building a dam becomes economically viable. Before Satoshi’s invention, there were energy sources on Earth that humans did not yet have the financial means to harness. Suddenly, the pockets of energy become viable by inventing an entropy engine, and our harnessing of them multiplies.

Not only does the business model of an entropy engine operator make previously unaffordable energy infrastructure affordable, but it also helps incentivize the development of renewable energy over the usage of less desirable fossil fuels. Energy grids require flexibility due to the electricity demand. The supply of electrons sent to a city needs to equal the demand for electricity at that time. Of course, a city’s demand for electricity will fluctuate throughout the day and year. An electrical grid needs to be able to dial up and down energy production in response. Currently, there are not enough batteries to store energy when it is not required. This challenges the development of renewable energy infrastructure, especially wind and solar, because nature decides when energy is produced, irrespective of the city’s electrical needs. If energy is not used, it is curtailed and wasted. If not enough is being produced, the city is without power. One reason fossil fuels are so helpful for grid stabilization is that production can be easily changed immediately depending on electricity demand. Of course, this problem could be mitigated if enough renewables were developed that could constantly produce more energy than peak demand. However, this would leave the energy providers without a customer for their excess electricity most of the time, making it financially unviable. Entropy engine operators can then incentivize renewable energy development by acting as a flexible load response that provides shock-absorbing services while increasing profitability in exchange for cheap electrical costs during times of excess supply4. Whatever electricity is not sent to the city is purchased by the entropy engine operators, making the capital investment in renewable infrastructure more economically viable. The same goes for nuclear energy, as these systems also struggle to conduct demand response on their own4. Therefore, research has shown that entropy engine operators provide additional revenue sources to incentivize renewable energy production and a greener grid4,5.

Entropy: The Cause of War, and Now Peace

Human civilization’s relationship with entropy and the entropy engine does not simply confine itself to how we are driven to harness, release, and use energy from a societal standpoint. It can also be looked at from a socio-political point of view. In a thesis titled Softwar: A Novel Theory of Power Projection and the National Strategic Significance of Bitcoin by Major Jason P. Lowery of the United States Space Force, a description of how energy organizes around the laws of entropy is used to explain the pattern of human behavior around warfare6. Power projection theory describes how life formed, per the second law of thermodynamics, by using energy (referred to as power) to sequester other energy (referred to as resources) away from the environment to be used for more personal gain. It is another way of describing how order was formed to facilitate the increase in entropy. This can be observed not only in the first prokaryotic cells that formed in the hydrothermal vents that exist in the fissures of the seafloor but also in the way animals behave in the wild. Major Lowry uses the illustration of wolves snarling their fangs at a would-be thief of their recently acquired game to broadcast that the cost of stealing the resources would be higher than the benefit gained from the food. Here, the wolf is projecting power to keep its resources. Following such reasoning, pack animals such as wolves must create power hierarchies within their communities so that the most powerful wolf, most capable of efficient power projection, is fed and allowed to reproduce so that the pack can have the most power projection capabilities possible to protect their resources. To do so, wolves must physically fight amongst themselves in a competition of dominance. This is an unfortunate requirement, as two wolves will fight until one wolf has their fangs on the jugular of the other to prove superiority6. Therefore, the physicality required to create power hierarchies can prove dangerous and fratricidal. Other animals, such as deer, solve this issue with the development of antlers which allows them to use their antlers as power projection weapons against other species but leads to safe competition within their species as the antlers simply tangle as they butt heads without the risk of mortal wounds. In this way, the deer developed a biological method of managing internal power hierarchies using physical power with a decreased risk of fratricide.

Major Lowry puts forth the idea that human beings, through language and storytelling, developed a form of abstract power projection in an attempt to organize resources without physical violence6. However, the universe tends toward increasing entropy, and physical energy is used to manage resource energy. Nature does not recognize the management of resources through any other means aside from physical energy. Therefore, human beings are stuck in a problematic cycle where we attempt to organize our societies and resources through abstract power projection, only to have them collapse under the weight of their hollow foundation through physical power projection. To our understandable discontent and frustration, war, civil war, and revolutions are constantly occurring as nature’s only proper mechanism of organizing resources. Though a bleak outlook on how humans must manage themselves, Major Lowry provides hope that the technological innovation of an entropy engine solves this crucial flaw in how our societies organize. The entropy engine is a means of managing resources using physical power. In other words, it acts as a technological antler allowing human beings to organize themselves following the laws of nature without the need for kinetic violence and fratricide. Rather than mutually assured destruction through nuclear warfare, the entropy engine promotes mutually assured protection as we all use the machine to protect our resources and each other simultaneously.

Conclusion

The operation of this distributed entropy engine relies upon the competitive production of entropy. Its users can secure their property most when using machines that produce the most entropy. It economically incentivizes, subsidizes, and makes possible the harnessing of previously untapped energy resources of the Earth. It also potentially reduces our need to fight wars in pursuit of resource acquisition because it allows us to compete over resources via other, more peaceful means. This entropy engine, Bitcoin, is accelerating human beings in fulfilling their cosmic purpose of facilitating energy flow in the universe. All while making society more resource-abundant, peaceful, and cooperative. If the second law of thermodynamics is inevitable, what does that make Bitcoin?

References

1. Nakamoto S. Bitcoin: A Peer-to-Peer Electronic Cash System. Accessed November 16, 2021. www.bitcoin.org

2. Szabo N. Shelling Out: The Origins of Money. Satoshi Nakamoto Institute. Published 2002. Accessed April 19, 2023. https://nakamotoinstitute.org/shelling-out/

3. Zolfaghari B, Bibak K, Koshiba T. The Odyssey of Entropy: Cryptography. Entropy. 2022;24(2). doi:10.3390/e24020266

4. Prescott S, Rudd MA, Ignacio Ibañez J, Freier A. Bitcoin’sBitcoin’s Carbon Footprint Revisited: Proof of Work Mining for Renewable Energy Expansion. Challenges 2023, Vol 14, Page 35. 2023;14(3):35. doi:10.3390/CHALLE14030035

5. Rhodes JD, Deetjen T, Smith C. Impacts of Large, Flexible Data Center Operations on the Future of ERCOT. Published online 2021.

6. Lowry J. Softwar: A Novel Theory on Power Projection and the National Strategic Significance of Bitcoin: Lowery, Jason Paul: 9798371524188: Amazon.Com: Books. Massachusetts Institute of Technology; 2023.

This is a guest post by Sydney Bright. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

​ Bitcoin as a system is inherently secured by and built around the concept of entropy, increasing randomness. This is what actually anchors Bitcoin to the physical laws of nature. 

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Crypto News

Bitcoin Banks: We Should Build Them Ourselves

Published

on

By

Bitcoin banks are going to happen. We already have a few of them. We’re going to have more of them. Existing legacy banks are going to start offering services. New banks are going to be founded around Bitcoin. This is completely unavoidable at this point. Bitcoin doesn’t scale. Even absent that, people value other services that inherently require other parties. Debt being the chief one.

This is an inescapable reality.

Even if we could snap our fingers and roll out every well specified opcode and covenant proposal at once, it would still take a lot of time to begin building out self-custodial layers that could compete with something like credit unions and banks offering bitcoin accounts at scale. That is not a problem that can be trivially solved overnight.

So what can we do? We need to embrace a localist attitude around making interaction with your bitcoin easy. This requires a two pronged approach, one involving technical development and the other involving, I hate to say it, lobbying.

There already exist pieces of software like LNDHub or LNBits that allow people to offer custodial accounts for Lightning. We need a lot more software like this, and we need it to be miles better. It needs to not involve tinkering around on the command line and hooking up independent software, or perusing Github to follow manual installation instructions, or fumbling around trying to fix dependencies mismatches.

It needs to just work.

Click, sync to the network, done. It needs to be something that power users who are still not very tech savvy can run safely, and not lose other people’s money. It needs to support more than basic accounts for Lightning. Ecash offers privacy, which would be something important when it comes to small groups of people who know each other. You don’t want your friend seeing what you spend your money on. It needs to support things like Unchained or Nunchuck style on-chain self custody. People aren’t going to want to hold all their friends and family’s life savings, but holding a recovery key to safeguard them from their own mistakes is another matter.

We need the software that will actually scale this type of user interaction beyond a bunch of activist nerds online.

We also need a regulatory carve out. There needs to be a clear acknowledgement that running this type of software for friends and family with trivial amounts of money, say thousands of dollars, and without charging anything for it, is an unregulated activity. Helping friends and family interact with Bitcoin safely and easily, and for free, does not make you a bank. The idea of a few thousand dollars needing to comply with the regulations banks managing billions of dollars do is frankly absurd.

This is the path forward given the current constraints of Bitcoin, and the reality of growing and accelerating adoption, that leads us away from a system that eventually becomes completely captured and neutered by legacy financial institutions.

Instead of depending on them to deal with the current scaling limitations of Bitcoin, we depend on each other. 

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

 Bitcoiners shouldn’t sit around and wait for fiat banks and financial companies to offer services built on Bitcoin, we should do it ourselves. 

Continue Reading

Crypto News

Galoy Launches Bitcoin-Backed Loan Software, Sets Groundwork For Open-Source Banking

Published

on

By

Founder: Nicolas Burtey

Date Founded: September 2019

Location of Headquarters: United States

Number of Employees: 11

Website: https://www.galoy.io/

Public or Private? Private

Last week, Galoy launched Lana, software that enables banks to accept bitcoin as collateral for loans.

Lana helps community and challenger banks (the banks with which Galoy is looking to work) to offer bitcoin-backed loans to various types of customers.

“Some banks might want to use it to sell to retail, and some might want to use it to sell commercial customers or high-net-worth individuals,” Burtey told Bitcoin Magazine.

In offering such loans to a wide array of customers, Burtey believes that the high cost of borrowing currently associated with such products will come down.

“Today’s interest rates are 12% to 15% if you want to get a loan using your bitcoin as collateral,” said Burtey.

“The rates are high because there are so few financial institutions offering this type of product. We see an opportunity now that the regulations are allowing banks to do things with bitcoin,” he added.

“We think a lot of banks will want to enter this market.”

If Burtey is correct in his prediction that banks are keen to offer bitcoin-backed loans, this will not only lower rates for such loans, but it will also introduce open-source Bitcoin software into the world of banking, which could initiate a new trend in the industry.

But more on that in just a minute. First, some background on Galoy.

Galoy’s History: From Blink Wallet To Lana

Founded in September 2019, Galoy had intentions to enable banks to use bitcoin from the start, but it had to hold off on doing so due to an unfriendly regulatory environment.

So, instead, it focused its efforts on creating and supporting Blink wallet (which was originally called the Bitcoin Beach wallet and which Galoy recently sold), a custodial Bitcoin and Lightning wallet predominantly used at first in El Salvador and then in Bitcoin circular economies globally.

“Galoy’s mission was to onboard banks to Bitcoin five years ago,” said Burtey.

“But the regulatory environment was so bad during the last five years that we decided to create Blink. The reason we are now focusing on our original mission is because with the end of Choke Point 2.0 and the repeal of SAB 121, we think now is the perfect time to help banks adopt Bitcoin.”

Burtey spoke about his work in creating and growing Blink fondly and shared that he had to stop working on the project only because it would be too difficult to continue managing it while also aiming to serve a new type of clientele.

“Blink is a B2C (Business-To-Customer) play, and it’s hard as an early-stage startup to focus on too many things,” explained Burtey.

“Galoy is a B2B (Business-To-Business)-driven business, and we want to work with banks and financial institutions,” he added.

“It’s good to be focused on just one thing.”

And, as mentioned, that one thing will now be Lana.

How Lana Works

Lana is software that Galoy helps banks integrate and manage for a subscription fee. With this software, banks can issue bitcoin-backed loans under the terms they create.

“We’re not the ones deciding how much interest will be charged or anything like that,” explained Burtey.

“We give banks the platform to do this, and then they can figure out their cost of capital, the duration of the loan, the liquidation price for the bitcoin in the loan and the rate at which they want to lend,” he added.

“We’re giving you software, and helping you run and automate that software.”

Something else that Galoy doesn’t do for banks is custody the bitcoin provided as collateral for the loans they issue. Each of the banks with whom the company works is responsible for selecting their own custodian.

“You can go to BitGo or Fireblocks or each loan can have its own multisig,” said Burtey. “We’re agnostic on custody.”

With that said, Lana helps banks monitor the bitcoin in custody so that banks can be aware of whether or not collateral is nearing liquidation levels.

“A key piece of this product is risk management,” said Burtey.

“Bitcoin is volatile, and the bank will need a tool to show that it’s taking calculated risk. So, we’ll provide banks with a dashboard to monitor this risk,” he added.

An example of the risk-monitoring dashboard for bitcoin-backed loans that Galoy has created

Who Will Use Lana?

Galoy is targeting community banks and other smaller financial institutions with this new product mostly because they think these smaller players will benefit most from it — and because the big banks likely won’t need such a product.

“We don’t think JP Morgan will really want to work with us,” said Burtey. “They’re probably building something like this themselves, whereas a smaller bank, a credit union or small company probably isn’t.”

Burtey also understands that smaller lenders’ incorporating Lana as opposed to building something comparable themselves can save these financial institutions a significant amount of time and effort.

“Our goal is to say, ‘Look, you can develop this internally, and it will take you six months, a year or longer depending on how much you know about Bitcoin,’” said Burtey. “‘Or we have a lending product as a service for you, and you can launch it much more quickly.’”

And as Burtey and his team onboard their first round of smaller banks, they’ll not only be making history in enabling more banks to accept bitcoin as collateral for loans, but they’ll potentially be altering the trajectory of banking in general by introducing open-source software to it.

Open-Source Bitcoin Banking

Burtey’s long-term vision for Galoy is to do much more than just help banks issue bitcoin-backed loans. He’s looking to introduce open-source software into banking as more banks begin to embrace Bitcoin.

However, it’s important to note that Lana isn’t open-source just yet. It’s fair-source software, and, under such a license, code becomes open-source after two years.

“It’s a delayed open-source system, but it’s all available on GitHub,” said Burtey. “You can go and try it, test it, and play with it on your own.

Under the fair-source license, no company other than Galoy can sell the product to a bank right now, allowing Galoy to profit while still building with auditable code.

“We sell the deployment, and we help banks to plug in to their custodian,” explained Burtey. “We’re building in the open — but we also want to generate revenue.”

Beyond helping banks implement Lana, Burtey’s wants to develop open-source “core banking software,” as he’s looking to disrupt the “core ledger” oligopoly.

“The core ledger is where banks store the account data, customer information and transaction details,” said Burtey. “It’s the source of truth for banks.”

And only three companies — FIS, Fiserv and Jack Henry — have the core ledger market cornered.

“These are all like hundred billion dollar companies that you’ve probably never heard about because all they do is focus on selling software to banks,” said Burtey.

“Our long-term goal is to disrupt this industry by making something that is open source,” said Burtey. “Today, there is no company that does core banking with the idea of open source, and so we’re working towards this.”

Burtey envisions a world in which open-source software can make it much easier for someone to start a Bitcoin bank. (For those who wince at the words “Bitcoin” and “bank” being used in tandem, might I remind you that it was the legendary Hal Finney himself who wrote that bitcoin-backed banks would serve as a scaling solution.)

“To start a bank today is a very expensive and complicated process,” said Burtey. “You have to pay $100,000 plus just to purchase the core ledger technology.”

Burtey then referenced his own experience in starting Blink wallet, essentially a bitcoin bank run on open-source code, before continuing.

“I just went to El Salvador and started what was effectively my own bank because I wanted to,” said Burtey.

“We need to reinvent how core banking software is being made in the world of Bitcoin, and I think this is where open-source becomes relevant,” he added.

“This is really why I think the world of banking and Bitcoin will be very different from the world of banking with fiat, and I think we’re one of the companies at the forefront of this.”

 Galoy founder and CEO Nicolas Burtey wants to help more borrowers use bitcoin as collateral for loans while introducing open-source software into the traditional banking stack. 

Continue Reading

Crypto News

The Future of Bitcoin: Scaling, Institutional Adoption, and Strategic Reserves with Rich Rines

Published

on

By

Bitcoin’s evolution from an obscure digital currency to a global financial force has been nothing short of extraordinary. As Bitcoin enters a new era, institutions, governments, and developers are working to unlock its full potential. Matt Crosby, Bitcoin Magazine Pro’s lead market analyst, sat down with Rich Rines, contributor at Core DAO, to discuss Bitcoin’s next phase of growth, the rise of Bitcoin DeFi, and its potential as a global reserve asset. Watch the full interview here: The Future Of Bitcoin – Featuring Rich Rines

Bitcoin’s Evolution & Institutional Adoption

Rich Rines has been in the Bitcoin space since 2013, having witnessed firsthand its transformation from an experimental technology to a globally recognized financial instrument.

“By the 2017 cycle, I was pretty determined that this is what I was going to spend the rest of my career on.”

The conversation delves into Bitcoin’s growing role in institutional portfolios, with spot Bitcoin ETFs already surpassing $41 billion in inflows. Rines believes the institutionalization of Bitcoin will continue to reshape global finance, particularly with the rise of yield-generating products that appeal to Wall Street investors.

“Every asset manager in the world can now buy Bitcoin with ETFs, and that fundamentally changes the market.”

What is Core DAO?

Core DAO is an innovative blockchain ecosystem designed to enhance Bitcoin’s functionality through a proof-of-stake (PoS) mechanism. Unlike traditional Bitcoin scaling solutions, Core DAO leverages a decentralized PoS structure to improve scalability, programmability, and interoperability while maintaining Bitcoin’s security and decentralization.

At its core, Core DAO acts as a Bitcoin-aligned Layer-1 blockchain, meaning it extends Bitcoin’s capabilities without altering its base layer. This enables a range of DeFi applications, smart contracts, and staking opportunities for Bitcoin holders.

“Core is the leading Bitcoin scaling solution, and the way to think about it is really the proof-of-stake layer for Bitcoin.”

By securing 75% of the Bitcoin hash rate, Core DAO ensures that Bitcoin’s security principles remain intact while offering greater functionality for developers and users. With a growing ecosystem of over 150+ projects, Core DAO is paving the way for the next phase of Bitcoin’s financial expansion.

Core: Bitcoin’s Proof-of-Stake Layer & DeFi Expansion

One of the biggest challenges facing Bitcoin is scalability. The Bitcoin network’s high fees and slow transaction speeds make it a powerful settlement layer but limit its utility for day-to-day transactions. This is where Core DAO comes in.

“Bitcoin lacks scalability, programmability. It’s too expensive. All these things that make it a great settlement layer is exactly the reason that we need a solution like Core to extend those capabilities.”

Core DAO functions as a proof-of-stake layer for Bitcoin, allowing users to generate yield without third-party risk. It provides an ecosystem where Bitcoin holders can participate in DeFi applications without compromising on security.

“We’re going to see Bitcoin DeFi dwarf Ethereum DeFi within the next three years because Bitcoin is a superior collateral asset.”

Bitcoin as a Strategic Reserve Asset

Governments and sovereign wealth funds are beginning to view Bitcoin not as a currency but as a strategic reserve asset. The potential for a U.S. Bitcoin strategic reserve, as well as broader global adoption at the nation-state level, could create a new financial paradigm.

“People are talking about building strategic Bitcoin reserves for the first time.”

The idea of Bitcoin replacing gold as a primary store of value is becoming more tangible. Rines asserts that Bitcoin’s scarcity and decentralization make it a superior alternative to gold.

“I think within the next decade, Bitcoin will become the global reserve asset, replacing gold.”

Bitcoin Privacy: The Final Frontier

While Bitcoin is often hailed as a decentralized and censorship-resistant asset, privacy remains a significant challenge. Unlike cash transactions, Bitcoin’s public ledger exposes all transactions to anyone with access to the blockchain.

Rines believes that improving Bitcoin privacy will be a critical step in its evolution.

“I’ve wanted private Bitcoin transactions for a really long time. I’m pretty bearish on it ever happening on the base layer, but there’s potential in scaling solutions.”

While solutions like CoinJoin and the Lightning Network offer some privacy improvements, full-scale anonymity remains elusive. Core is exploring innovations that could enable confidential transactions without sacrificing Bitcoin’s security and transparency.

“On Core, we’re working with teams on potentially having confidential transactions—where you can tell that a transaction is happening, but not the amount or counterparties involved.”

As governments continue to increase scrutiny over digital financial activity, the need for enhanced Bitcoin privacy features will only grow. Whether through native protocol upgrades or second-layer solutions, the future of Bitcoin privacy remains a crucial area of development.

The Future of Bitcoin: A Trillion-Dollar Market in the Making

As the interview progresses, Rines outlines how Bitcoin’s economic framework is expanding beyond speculation and into productive financial instruments. He predicts that within a decade, Bitcoin will command a $10 trillion market cap, with DeFi applications becoming a significant portion of its economic ecosystem.

“The Bitcoin DeFi market is a trillion-dollar opportunity, and we’re just getting started.”

His perspective aligns with a broader industry trend where Bitcoin is not only used as a store of value but also as an active financial asset within decentralized networks.

Rich Rines Roadmap for Bitcoin’s Future

Figure 1: Here is a visual representation of the key concepts Rich Rines discusses in the video interview.

Final Thoughts

The conversation between Matt Crosby and Rich Rines provides a compelling glimpse into the future of Bitcoin. With institutional adoption accelerating, Bitcoin DeFi expanding, and the growing recognition of Bitcoin as a strategic reserve, it is clear that Bitcoin’s best years are ahead.

As Rines puts it:

“Building on Bitcoin is one of the most exciting opportunities in the world. There’s a trillion-dollar market waiting to be unlocked.”

For investors, developers, and policymakers, the key takeaway is clear: Bitcoin is no longer just a speculative asset—it is the foundation of a new financial system.

For more detailed Bitcoin analysis and to access advanced features like live charts, personalized indicator alerts, and in-depth industry reports, check out Bitcoin Magazine Pro.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always do your own research before making any investment decisions.

 As Bitcoin continues to dominate the financial landscape, Rich Rines of Core DAO explores its evolution—delving into institutional adoption, DeFi expansion, and its potential as a global reserve asset. 

Continue Reading

Shadow Banned

Copyright © 2023 mesh news project // awake, not woke // news, not narrative // deep inside the filter bubble