The Impact of Bitcoin Exchange-Traded Funds (ETFs) on Bitcoin’s Future
Bitcoin Drivechain proponent Paul Sztorc believes the growing mainstream acceptance of BTC will drive a need for greater scalability and functionality of its infrastructure.
In a wide-ranging interview with Cointelegraph, Sztorc touched on the advantages and drawbacks of the high-profile approval of Bitcoin (BTC) exchange-traded funds (ETF) in the United States and the long-term implications of institutional money flooding into the ecosystem.
Bitcoin ETFs: A Sign of Validation and Increased Accessibility
“It’s a sign of health, a sign of validation. Bitcoin is certainly more recognizable, and its name is getting out there. It’s also a result of certain types of money that must flow through ETFs,” Sztorc said.
The co-founder of LayerTwo Labs described Bitcoin ETFs as an “inevitable consequence of age,” highlighting that customers of the BTC-backed investment products differ from everyday retail investors and hardcore Bitcoiners. Sztorc admits that the hype around Bitcoin ETFs may serve as an entry point for investors and individuals who have yet to learn about BTC. At the same time, the focus on their impact could be causing undue attention on Bitcoin’s value rather than its underlying metrics and performance.
“The bad things? ETFs continue people’s obsession with price. A CEO should never talk about stock price, they should focus on what drives it. The quality of the product and how happy their workers are,” Sztorc adds.
Bitcoin Scaling: The Need for Continuous Improvement
LayerTwo Labs has been developing Drivechains for over four years. Bitcoin Improvement Proposals (BIPs) 300 and 301 outline how the Bitcoin network could create, delete, send, and receive BTC from layer-2 blockchains, commonly called sidechains. Sztorc, who authored BIP-300, is a proponent of the functionality afforded by Drivechains and has spoken at length about the intricacies of the two BIPs at several Bitcoin conferences in recent years.
As more liquidity flows into the Bitcoin ecosystem through major adoption-driving events like the approval of Bitcoin ETFs, the network could face higher transaction volumes. It’s a point that Sztorc highlights, referring to a statement from Bitcoin’s pseudonymous creator.
“Satoshi Nakamoto said that in 20 years, there will be high transaction volume or no volume. Large blockers used that to say Satoshi was a large blocker; regardless, I am fairly confident he’s right,” Sztorc said.
The Role of BIP-300 in Strengthening Bitcoin’s Ecosystem
While the Lightning Network has been influential in providing a means for the Bitcoin network to process low-fee, high-throughput transactions, Sztorc maintains that the ecosystem needs additional functionality to combat existing threats from altcoin competition, hard fork campaigns, and extension block campaigns.
“BIP-300 is about having competition, it’s the thing we need. Different software developers will compete, and it solves the last piece that people overlook. Sidechains allow people to play whatever game they want, while Bitcoiners who don’t opt in never need to care what a sidechain is doing,” Sztorc said.
As Cointelegraph previously reported, BIPs have played an essential role in laying the foundations for soft forks that have helped improve the functionality of Bitcoin’s protocol and the development of innovations like the Lightning Network.
Analyst comment
Positive news.
Bitcoin ETFs are seen as a sign of validation and increased accessibility for BTC. However, the focus on their impact may distract from Bitcoin’s underlying metrics and performance. As more liquidity flows into the Bitcoin ecosystem, scalability and functionality improvements will be necessary. BIP-300, the Drivechain proposal, aims to provide additional functionality to combat altcoin competition and strengthen the Bitcoin ecosystem. Overall, the market is expected to see increased mainstream acceptance and competition among software developers.
