HODLing breaks Bitcoin part 3

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In the previous installments of this series, we explored how the HODL culture has undermined Bitcoin’s privacy and squandered its potential as a global medium of exchange.

Now, in Part 3, we take a closer look at the long-term consequences of discouraging real economic activity on the blockchain. When Bitcoin’s network is locked in a state of dormancy, with small blocks designed to limit usage, it doesn’t just slow growth—it cultivates a toxic ecosystem driven by rent-seeking behavior and gatekeeping. With few opportunities to create new value, the network’s dominant players become more focused on controlling the narrative, extracting fees, and consolidating power, all while strangling the very innovation that Bitcoin was meant to unleash.

Rent-seekers, gatekeepers and aristocrats: The new blockchain class system

The decision to artificially limit Bitcoin’s block size is not just a technical choice but an economic and cultural decision. By capping capacity, the network has deliberately suppressed opportunities for value creation, forcing stakeholders into a zero-sum game. Instead of fostering vibrant commerce, where businesses and individuals generate wealth through productive activity, (BTC, but also the other split assets, to varying degrees) has become a battleground of middlemen. These actors position themselves to capture value, not by building anything new but by controlling access to information, liquidity, or network participation.

What has emerged is a kind of aristocratic hierarchy with distinct classes:

• Influencers: Social media personalities who act as ideological gatekeepers, setting the tone for Bitcoin’s toxic purity tests and deciding who is “in” or “out” of the community. They’ve embraced cancel culture, using social shaming and exclusionary tactics to weed out anyone with new business ideas or innovative uses for Bitcoin that deviate from the “HODL only” orthodoxy.

Bad actors.

Steer clear. pic.twitter.com/P7mCQYtIwX

— hodlonaut (@hodlonaut) October 14, 2024

• Exchanges and liquidity providers: These actors thrive on confusion, profiting off retail traders by offering highly speculative markets that pit them against institutional players. Their business model depends on volatility and volume—not sustainable economic activity—which distorts Bitcoin’s value proposition from a tool for commerce to little more than a casino game. They are incentivized to propagandize the culture the same way the military industrial complex propagandizes the people with their control of the mainstream media.

Great talk from Tristan Sherliker of Bird & Bird, one of the key lawyers who defeated CSW, in the COPA vs CSW trial#btcamsterdamhttps://t.co/InX6sLf5za

— BitMEX Research (@BitMEXResearch) October 10, 2024

• Full node pperators and core devs: A class that has evolved into a de facto governance layer. Full nodes, guided by their “Developer Lords,” undermine Bitcoin’s proof-of-work (PoW) principles by signaling network changes via cheap software updates—“1-IP-1-Vote,” just as Satoshi Nakamoto warned against in the original Bitcoin white paper. This system creates vulnerabilities by empowering those with the most IP addresses or the loudest voices to influence protocol changes without expending the real-world energy required by miners.

BTC Core has changed 99.94% of the code since Satoshi released the Bitcoin software.

Despite these radical changes, the version of "Bitcoin" we got is a slower, more expensive, and extremely restricted version of Satoshi's creation. pic.twitter.com/sD73jbVq7o

— Elon Moist ❄️ (@coinyeezy) October 13, 2024

The failure of dormant coins: Why value creation matters

At its core, Bitcoin was designed to be a dynamic, thriving system of commerce. Yet, the vast majority of BTC remains locked away in dormant unspent transaction outputs (UTXOs), unmoved for years and only valued by fiat measure sticks and paper derivatives held by globalist bankers and their custodians. The lack of transactional activity is not just a missed opportunity—it’s a liability. Dormant coins provide no value to the network, no opportunity for wealth creation, and no spillover benefits of economic growth.

When Bitcoin operates this way, it serves only those who profit from inertia: the aforementioned influencers, custodians, exchanges, devs and home node operators. Each group benefits from a network that discourages use because their rent-seeking activities—whether through trading fees, subscription models, or advertisement opportunities—depend on Bitcoin remaining a stagnant, speculative asset rather than a vibrant tool for global commerce.

For example, here’s Peter McCormack explaining that he has to sell ads in the wake of one of his biggest advertisers (BlockFi) exit scamming and going bankrupt on their customers.

My business is a podcast, I make content and I sell advertising. For each sponsor we take time to consider them and have rejected many.

But I don’t run these companies, I don’t make their business decisions. I sell space and read ads.

— Peter McCormack 🏴‍☠️ (@PeterMcCormack) November 13, 2022

If, instead, Bitcoin were used for daily transactions, the incentives would shift toward fostering innovation. Entrepreneurs would build businesses on the blockchain, generating economic activity that drives demand for block space and fuels network growth. This is where the magic of Bitcoin lies—not as a store of value that gathers dust but as a platform for wealth creation that benefits everyone connected to it. The real power of Bitcoin is not in hoarding coins but in enabling frictionless commerce, identity solutions, and data integrity systems. When coins move, businesses grow. When businesses grow, so does wealth. And when wealth grows, society prospers.

A vicious cycle of rent-seeking and toxic culture

The toxic culture that permeates BTC today is a direct result of the failed “Hodl” economic model. When productive business activity is stifled, all that remains is power struggles over who controls access to the shrinking pool of opportunities. The influencers who once promoted Bitcoin as a tool for freedom now act as gatekeepers, ensuring that anyone with new ideas that might challenge their influence is quickly labeled a threat. Innovation is discouraged, suspicion reigns, and the culture becomes increasingly hostile to outsiders.

You have zero credibility and zero relevance.
Bad actor. pic.twitter.com/wwwl6KqWMH

— hodlonaut (@hodlonaut) August 18, 2019

This behavior mirrors the dysfunction of a failing aristocracy, where those in power cling desperately to their privilege, knowing they have no new value to offer. The purity tests, social shaming and ideological rigidity that dominate BTC’s public discourse are the natural outcomes of a system that no longer creates wealth—it merely shuffles power among a few entrenched players.

At the same time, exchanges and liquidity providers benefit from the confusion, raking in profits from retail investors lured by speculative narratives and false promises. The result is a toxic ecosystem where real innovation is seen not as an opportunity but as a threat to the status quo, and anyone advocating for meaningful change is treated as an enemy to be purged.

Proof of work vs. cheap governance: A warning fulfilled

I mentioned briefly that Satoshi Nakamoto warned in the Bitcoin white paper that a system governed by “1-IP-1-Vote” could be easily subverted by those with the most IP addresses. Today, we see this warning come to life. Full node operators, who run the software that determines Bitcoin’s rules, have become a shadow governance layer, signaling changes to the network without bearing the cost of mining. This undermines the integrity of PoW, which was designed to ensure that only those who expend real-world energy have a say in Bitcoin’s consensus.

“Non-mining” nodes have subverted the #BTC network’s proof-of-work by using 1 ip = 1 vote, which Satoshi directly warned against in the white paper.

Change my mind. pic.twitter.com/rovY1TuIAn

— Bit_Faced (@Bit_Faced) May 24, 2024

In a network driven by commerce, the miners—those who secure the blockchain—would be incentivized to prioritize growth and efficiency. But in the small-block, HODL-centric version of Bitcoin, power rests with home node operators who resist any changes that could disrupt their grip on the network. This is governance by inertia, not by innovation, and it leaves Bitcoin vulnerable to stagnation and decay.

A call for commerce, not custodians

If Bitcoin is to fulfill its original promise, and I think only the BSV derivation can do this, it must be freed from the grip of rent-seekers and gatekeepers. The network must encourage commerce, not custodianship. It must prioritize the creation of value, not the extraction of fees. Most importantly, it must be driven by the needs of businesses and individuals who create real economic activity, not by influencers and full nodes clinging to their influence.

Bitcoin has the potential to ignite an economic revolution. But that revolution will only happen if the coins are moved, the blocks are packed with transactions and the network is used to build businesses and create wealth. If we continue down the path of HODLing and small blocks, Bitcoin will remain trapped in a cycle of toxicity, rent-seeking, and missed opportunities until the dwindling subsidy demands either new inflation of coins or something much worse to keep the network secure.

The question we must ask ourselves is simple: Do we want Bitcoin to be a tool for economic freedom, or do we want it to remain a playground for influencers, custodians, and node operators and their friends in big government, big tech and the big banks? The answer will determine the future of the Bitcoin economy—and perhaps even the future of economic growth itself.

Watch: CoinGeek Weekly Livestream w/ Kurt Wuckert Jr. – Untangling Bitcoin Mining