The roach report vol 10: Why Bitcoin is currently a roach motel
The problem with Bitcoin is that without a 2nd tier layer or block size increase you have a serious problem and I will describe that problem below. I also have a lot of doubts about LN working due to probably needing to place all channel closings in a common, centralized queue. The problem is Bitcoin's value is based around transaction flow and artificial block size scarcity as I explain here:
This means Bitcoin doesn't really function as a store of value, yet it's small load bearing capability delegates it to only functioning as a settlement layer in which being a store of value is key. Do you see the completely conflicting traits here? Anything that functions only as a settlement layer HAS to function as a store of value, otherwise there's no point in using it as a settlement layer. Speculators have given Bitcoin the illusion that it functions as a store of value, but I think this will break down once Bitcoin hits a growth wall.
What will happen is, transaction fees will go sky high while the price per coin also increases at the same time. This will make it so nearly everyone is booted off of the chain except for settlement purposes. Now here is where you reach your problem. Typically objects used in settlement (like gold) can sit in one place for a long time and never move. They don't have to, but often times that is the case. The invisible hand of the market will then decide that far better, more anti-fragile options exist to just sit in place to store value than Bitcoin (like gold).
That is when the Bitcoin downward spiral begins and why Bitcoin is doomed without vastly increasing it's TPS. I used to think ~50 TPS (8 MB + Schnorr sigs) would be enough to prevent this, but now I'm not too sure and you might require an order of magnitude or two above that. So, as you can see, my current thesis is that Bitcoin is doomed without a functional Lightning Network, but I'm not super confident they can even make LN work in a decentralized manner.
The "wall" has not yet been reached, but I think it would likely occur somewhere around $10k per coin and 1 MB blocks.
Excellent post!