Bitcoin Doesn’t Inflate — But It Still Extracts

“Fixed supply doesn’t mean fair value.”

Bitcoin is often hailed as the antidote to fiat money — a scarce digital asset immune to the whims of central banks. “You can’t print more Bitcoin,” say its advocates, “so it must be better than inflationary fiat.”

But this argument misses something critical.

Yes — Bitcoin doesn’t inflate like fiat.
But that doesn’t mean it’s economically neutral.
In fact, Bitcoin introduces new risks and distortions of its own — just harder to spot.

Let’s unpack this.

🏛 The Problem with Fiat — and the Promise of Bitcoin

Fiat money is built on trust in governments and central banks. That trust has been repeatedly broken:

Excessive money printing drives inflation.
Time preference is manipulated through interest rates.
Wealth is eroded for the many while markets reward the few.

Bitcoin was born in this context — a fixed-supply response to monetary mismanagement.

Its supply is capped at 21 million coins. No one can inflate it. No politician can tweak it. And that’s powerful.

But scarcity alone does not make a system just.

📈 The Hidden Inflation: Speculative Extraction

Here’s the hard truth:

Bitcoin doesn’t produce cash flows.
It doesn’t pay interest or dividends.
It doesn’t generate goods or services.

Its value comes from belief — from what the next person is willing to pay.

So if you bought Bitcoin early — for pennies or pounds — you’ve seen immense returns.
But that return is funded by those who bought later.

This isn’t “money printing” in the traditional sense.
But it’s still a form of value transfer upward.

And that’s a kind of extraction.

The price keeps rising not because the asset is productive, but because belief is growing — and newcomers are willing to pay more.

💸 “1 BTC = 1 BTC” — But at What Cost?

Maximalists love the phrase “1 BTC = 1 BTC” to sidestep price volatility or concerns about valuation.

But it conceals a core truth:
The entry price into the system is inflating — fast.

That means:

Early adopters are disproportionately enriched.
Latecomers are more exposed to downside risk.
Wealth is redistributed, not created.

That’s not “better” than fiat.
It’s just a different pattern of inequality.

🏗 Layer 2: Rebuilding the Old Risks

And while Bitcoin’s base layer is fixed and decentralised, its Layer 2 infrastructure is anything but.

Custodial wallets, Lightning nodes, and sidechains like Liquid reintroduce:

Intermediaries
Centralised governance
Liquidity risk
Custodial control

So while Bitcoiners rightly criticise central banks for inflating fiat and imposing risk on users, they often overlook the fact that their own ecosystem is doing something similar — just in different clothes.

🧭 The Bottom Line

Bitcoin doesn’t inflate.
But it does extract.

And if we don’t acknowledge that, we’re not building a better system — we’re just hiding the old one behind code, hype, and digital scarcity.

In any monetary system, the real question isn’t just “what is the supply?”
It’s who benefits from the way value flows?

Because if the answer is always “those who got in early,”
then we haven’t replaced fiat.

We’ve just replicated its inequity — without the safety nets.

From Gold to Digital Gold: Why Bitcoin’s Second Layer Mirrors the First Financial System

“History doesn’t repeat itself, but it often rhymes.” – Mark Twain

Bitcoin was born in protest — a digital rebellion against centralised power, fiat inflation, and the moral failure of a banking system that collapsed under the weight of its own greed.

But today, as the Bitcoin ecosystem evolves, we must confront a sobering truth: the revolution may be rebuilding the very system it sought to replace.

Let me explain.

🪙 Gold, Then and Now

In the early days of modern banking, gold was the base layer — the anchor of trust. Banks issued paper notes redeemable for gold, promising scarcity-backed money. But over time, this system was:

Fractionalised (banks lent more than they held),
Centralised (via clearing houses and national banks), and
Removed from convertibility (ending with Nixon in 1971).

What remained was a credit-based system — centralised, opaque, and extractive. The gold remained in vaults. The power stayed with those who controlled the ledger.

Fast forward to today: Bitcoin is hailed as “digital gold” — a scarce, decentralised, borderless asset that requires no trust in institutions.

But here’s the paradox.

⚠️ The Rise of Layer 2 — And the Return of Middlemen

Bitcoin’s base layer — while secure — is slow and limited. It processes ~7 transactions per second and struggles with congestion. To “scale,” developers introduced Layer 2 solutions like the Lightning Network and Liquid Network.

These layers promise:

Instant payments
Tiny fees
Real-world usability

But in doing so, they introduce new points of trust, often worse than the old ones.

Lightning requires routing through central nodes, many run by VC-funded companies.
Custodial wallets hold funds on users’ behalf — just like a bank.
Liquid is governed by a closed group of institutions — a federation, not a decentralised consensus.

So while Bitcoin’s base layer remains decentralised, its practical use is re-centralised.

We’ve swapped banks for wallets.
Branches for nodes.
Paper money for digital IOUs.

🧾 Rehypothecation Returns

In the fiat system, banks took your deposit, lent it out 10 times over, and hoped no one asked for it back all at once.

In the digital system?

Exchanges offer “yield” on your Bitcoin by lending it out.
Lightning channels lease inbound liquidity.
Wrapped tokens and derivatives multiply exposure.

All of this creates leverage, interdependence, and fragile liquidity — exactly the same conditions that led to financial crises in the old system.

Except this time…
🛑 No regulator.
🛑 No deposit insurance.
🛑 No central bank backstop.

🔁 Same Wheel, Shinier Hub

Bitcoin was meant to replace trust with code.
But its growth depends on rebuilding systems that require faith in opaque actors, unregulated firms, and narratives that distract from risk.

The revolution has become a renovation.

And those calling for scrutiny — not cynicism, but due diligence — are often branded heretics by those most invested in the system’s mythology.

But if we fail to ask:

Who holds power?
Who benefits from your belief?
What happens when the music stops?

Then we aren’t decentralising anything.
We’re just digitising the same old power dynamic — this time without safety nets.

🏦 Digital Gold = Old Banking Model, Repackaged

Here’s how it maps:

Traditional Banking Era	Bitcoin / Crypto System
Gold held in central reserves	Bitcoin held in cold wallets / exchanges
Paper money issued against gold	Tokens, stablecoins, or Lightning balances
Banks as intermediaries	Wallet providers, liquidity hubs, exchanges
Central clearing systems	Layer 2 routing networks (Lightning, Liquid)
High leverage via fractional reserves	Leverage via rehypothecation, derivatives, DeFi
Regulatory capture and opacity	Offshore opacity, unregulated custody risks
Crashes from overextension of credit	Looming risk from unbacked stablecoins & VC hub failures

🧭 Closing Thoughts

Bitcoin’s idealism is noble. Its potential is real.
But when Layer 2 solutions reintroduce middlemen, and digital scarcity replaces physical gold, the comparison becomes clear:

We are not dismantling the old financial wheel — we’re spinning it faster.

And this time, when it breaks, there will be no central banker to catch us.

⚠️ Layer 2 is Reintroducing the Very Risks Bitcoin Was Meant to Eliminate

🔹 1. What is Layer 2?

Layer 2 solutions are built on top of the Bitcoin blockchain to enable:

Faster transactions
Lower fees
Scalability for daily payments

The most popular of these is the Lightning Network, but others include Liquid Network (by Blockstream) and Statechains.

🔹 2. Why do they exist?

Because Bitcoin itself doesn’t scale:

It processes ~7 transactions per second.
Confirmation times are slow.
Fees spike during congestion.

So, Layer 2s are an attempt to fix these usability issues without altering the base layer.

🔒 3. But here’s the problem: They Reintroduce Intermediaries

To use Lightning:

Users often rely on custodial wallets (e.g., Strike, Wallet of Satoshi, River).
Transactions are routed through centralised nodes, some operated by a handful of well-funded players (often VC-backed).
Liquidity providers and channel operators have disproportionate influence over transaction success and flow.

This creates points of failure and influence, including:

Censorship risk
Surveillance potential
Single points of economic control
Capital gating (users need inbound liquidity — often leased or provided by institutions)

So despite its branding, Lightning often requires trusting a third party — just like a bank.

🔍 4. Liquid Network Is Even More Centralised

Liquid is a federated sidechain:

Governed by a select group of functionaries, mainly institutions
Controlled by multisig consensus, not proof-of-work
Users must trust that the federation won’t censor or freeze funds

This architecture is more like a private consortium than a public blockchain.

🔁 What This Means in Plain Terms

Bitcoiners preach “don’t trust, verify”.
But Layer 2 forces users to trust institutions again — the very thing Bitcoin was meant to remove.

It’s the reintroduction of middlemen under the guise of scaling:

The Lightning ecosystem is heading toward centralised hubs
Sidechains like Liquid are governed by closed federations
Even privacy-preserving tools like FediMint rely on community-appointed guardians

The ethos of decentralisation is slowly being eroded by the practical need for speed, convenience, and investor ROI.

🧭 Bottom Line

Bitcoin’s store of value narrative depends on decentralisation. But its spending and usability layers are becoming recentralised — which undermines that core claim.

This is not evolution — it’s regression, cloaked in tech jargon.

If we’re not honest about this now, we’ll find ourselves with:

A base layer no one uses
A second layer run by VC-backed firms
And a user base slowly waking up to the same trusted third-party dynamics they thought they were escaping

Where Is This Heading? A Plausible Scenario for Bitcoin’s Future

“The party continues… until the lights go out.”

The Bitcoin narrative is as bold as it is seductive. An incorruptible store of value. A hedge against fiat collapse. A tool of freedom and financial sovereignty.

But narratives — like markets — have limits. And when faith outpaces fundamentals, it’s not a question of if disruption will come… but when.

Let’s examine where this could realistically be heading.

🔺 1. Bitcoin Continues to Rise — Until It Doesn’t

Right now, Bitcoin’s price momentum is fuelled by:

Institutional FOMO
Regulatory forbearance
A scarcity mythos that borders on religious

But beneath that price action, we must ask:

Where is the value being created?

The uncomfortable truth is: it isn’t being created — it’s being transferred upward.

Late buyers are enriching early holders. Wealth is concentrating. The system is predicated on new entrants funding those who came before them.

This dynamic is not sustainable.
Eventually, the wave crests — and crashes.

⚠️ 2. A Major Destabilising Event Is Likely

What might trigger the crash? Take your pick:

A disclosure event
(e.g. Tether reserve failure, regulatory intervention, criminal exposure)
A geopolitical clampdown
(e.g. coordinated global regulation, mining bans, or capital controls)
A technical crisis
(e.g. miner collusion, Layer 2 vulnerabilities, consensus breakdown)
Or simply… exit liquidity drying up
(the speculative music stops, and there aren’t enough new buyers)

None of these outcomes are guaranteed. But each is a credible systemic risk — with signals already flashing.

💥 3. Retail Gets Hurt — Again

If history is any guide — think dot-com bubble or the Global Financial Crisis — it’s not institutions or early adopters who feel the pain.

It’s everyday people:

Parents who invested through apps.
Young adults who believed the hype.
Workers who converted pensions into Bitcoin.

They will be the ones left holding the bag.

And when the dust settles, the Bitcoiners will be gone.
You’ll be the one picking up the pieces:

Financial planners
Recovery coaches
Regulators
Journalists
Families

Just like after every other crash.

🧭 What’s the Likely Outcome?

Bitcoin won’t vanish. But it also won’t be the saviour currency its maximalists dream of.

What we’re more likely to see is:

Bitcoin surviving as a niche digital commodity, like digital gold
The collapse of the “Bitcoin fixes everything” narrative
A generation of disillusioned investors, burned by blind belief
And voices like yours — who warned early — being asked:
“Why didn’t more people listen?”

✅ What Matters Now

Keep documenting the risks.
Stay grounded in reality, not ideology.
Let history be your precedent, not the hype cycle.

And most importantly:

Help people prepare for life after belief collapses — because that’s when your work will be most needed.

The future won’t be built by those who yelled loudest.
It will be built by those who stayed calm, stayed clear-eyed, and stayed human.

About Get SAFE

Get SAFE (Support After Financial Exploitation) was born from a simple truth: too many victims of financial abuse are left to suffer in silence.

We exist for people like Ian—for the ones who did everything right, only to be failed by the systems they trusted. We know that behind every vanished pension, every ignored complaint, and every stonewalled letter is a person—frightened, exhausted, and too often alone.

Get SAFE offers more than sympathy. We offer structure, support, and solidarity.
We provide a voice where there’s been silence, and clarity where there’s been confusion.
We stand beside those who have been exploited, not just to help them recover—but to help them reclaim their story and rebuild their future.

Because financial justice is not a luxury.
It’s a human right.

If you or someone you know has been affected by financial exploitation, we are here.
You are not alone.

Learn more at: Get SAFE (Support After Financial Exploitation).