Could BlackRock Destroy Bitcoin?
"In this video, I discuss possible downsides to BlackRock becoming a large player in the Bitcoin ecosystem.
What happens if BlackRock accumulates a lot of Bitcoin and then loses all of it, such that it is no longer accessible (private keys have been lost)?
In that case, BlackRock has just made a large pro-rata donation to the whole Bitcoin network and Bitcoiners like ourselves.
Could BlackRock issue a lot of "paper Bitcoin" and thus suppress the price of Bitcoin? Possibly, but then so can anyone else.
BlackRock is economically incentivized NOT to suppress the price of Bitcoin, if it wants the largest AUM and hence the most fee revenue as possible.
BlackRock could of course be forced by a hostile outside actor like the US gov to create a lot of paper Bitcoin to suppress the price.
One thing is certain though:
-- Central banks are not going to want to hold paper Bitcoin.
-- Nation-states are not going to want to hold paper Bitcoin.
-- Billionaires are not going to want the counter-party risk that comes with holding paper Bitcoin.
-- Serious Bitcoiners are not going to want to hold paper Bitcoin.
Issuing paper Bitcoin also comes with huge risks. If enough people ask to convert their paper Bitcoin into real Bitcoin (i.e. withdraw from BlackRock's ETF) and BlackRock doesn't have enough real BTC, then they will need to go into the open market and buy real BTC. The resulting spike caused by this short squeeze could easily bankrupt BlackRock.
It's much more difficult to suppress the price of an easily portable digital commodity than it is to suppress the price of a bulky physical commodity like gold. Taking delivery of BTC takes 10 minutes. Taking delivery of physical gold takes a lot more time, money, and coordination. It is also much easier to verify/assay Bitcoin and provide proof of reserves than it is with physical gold.
BlackRock could also fork Bitcoin and create its own proof of stake version. However, they cannot force Bitcoin node operators to run this new software or hodl the new tokens. I would take any PoS BTC tokens issued to me and dump them for real proof of work BTC. Something similar happened with BCH, which made that hard fork unsuccessful. I would also never run a PoS version of Bitcoin on my nodes.
The PoW fork of Bitcoin (i.e. real BTC) will not be just for pirates and El Salvador. It will be for anyone who doesn't want BlackRock to control their money, like:
-- Freedom-minded individuals
-- Billionaires seeking to escape the tentacles of the US
-- Nation-states
-- Foreign central banks
That's a lot of capital, and it's not going to want to house itself inside of a BlackRock or US gov walled garden.
Finally, under a proof of work protocol, owning more BTC does NOT give you additional control over the protocol. In a proof of stake protocol, it does. For that reason, Ethereum better hope that BlackRock never comes out with an ETH ETF lol."