This wouldn't be so bad, the "middlemen" would be on a Bitcoin standard with no inflation, a better standard than even back when banks were on gold. Now hopefully it doesn't turn out this way, but the worst case is a huge improvement over the fiat standard we have now.
Discussion
Actually, the security of the bitcoin network in the long term will largely be dependent on transaction fees as the subsidy drops each halving due to bitcoins tokenomics design.
If middle men via custodial wallets, liquidity providers, and federations are the ones taking the fees then the miners lose out. Which could make it easier to 51% attack the network.
Plus, because they regulate the fee market, they could manipulate miner incentives. Like incentivicing them to ignore certain chains over other with more fees. This is really dangerous
This may be a limit in my understanding, but I don't get what ya'll mean. The miner incentives should be the same as today, the payout will just be tiny, which might still be a lot of value if Bitcoin gets extremely valuable over the next 100 years. Shouldn't matter what the custodians or whoever are doing, miners will be taking transactions and offering the highest fees. Us plebs will still have nodes, and will be watching. On chain Bitcoin will just be far too expensive to use for anything other than huge sums, everyone will be down in the layers.
If those (not many) middlemen are the only ones using Bitcoin, then they can easily be targeted and corrupted. It also means that in combination with centralized mining, it is easier to take away the decision making about which chain to ignore or not.