Recently, I’ve been pondering the idea that Bitcoin Layer 2 entities should begin incorporating bitcoin into their treasury reserves. The rationale behind this move is compelling.
It appears I’m not alone in this thought.
As an observer of this evolving landscape, allow me to outline why Bitcoin Layer 2 entities should heed Molly and my advice.
For a significant duration, bitcoin has been perceived as a “digital rock”—a robust value reserve, yet not much beyond that. However, with the advent of Bitcoin Layer 2s, bitcoin is evolving into a “programmable rock.” These layers add features such as smart contracts and scaling solutions, enhancing bitcoin’s versatility.
Here’s an interesting point: these projects amass millions from VCs and investors, and most of this wealth ends up in fiat currencies like the US dollar. This is a massive misstep.
Why, you ask? Because fiat currency is similar to a melting ice cube. Annually, it loses 5-10% of its value due to inflation. The longer it’s held, the less valuable it becomes. Conversely, bitcoin has a Compound Annual Growth Rate (CAGR) of approximately 70%. If these entities stored their treasury in bitcoin instead of fiat, their financial stability wouldn’t just remain—it would increase.
Imagine having 70% more resources each year to support developers, grants, and projects. That could significantly impact a Layer 2 ecosystem.
Yes, I understand — Bitcoin is unstable, and these entities require some stability. Due to this, maintaining 3 to 4 years of financial stability in fiat is sensible. It can cover short-term requirements. However, the remaining should be in bitcoin. Over time, this strategy could double or even triple these entities’ financial stability, providing them with the necessary time and resources for success.
There’s a historical instance of this too. Remember EOS? They raised $4.2 billion in 2018 and reportedly purchased 164,000 bitcoin with it. Today, that bitcoin is valued at around $16 billion—even though EOS itself has lost its prominence. Now, imagine if Bitcoin Layer 2 entities did the same but actually utilized their bitcoin to expand and maintain their ecosystem. The prospects are enormous.
Ultimately, these entities are developing on Bitcoin. They have faith in its future, so why not incorporate it into their treasuries? Bitcoin is the superior value reserve out there. If you’re managing a Bitcoin Layer 2 entity, cease holding depreciating fiat, and begin holding bitcoin. It’s not merely a wise move—it’s the optimal move.
This article is a Take. The views expressed are solely the author’s and do not necessarily echo those of BTC Inc or Bitcoin Magazine.
