Historical, Engineering, and Financial Triple Interpretation: Why Won't Bitcoin Decline?

Author: **@zzmjxy

When market sentiment turns cold, the narrative of “Bitcoin is dead” always resurfaces. The core assumption of this argument is that Bitcoin, as the first-generation blockchain technology, will eventually be replaced by its successors, just like the fate of all pioneering technologies in history.

This assumption seems logically flawless—but it is wrong.

1. The Curse of First-Generation Technology and the Exception of Bitcoin

The lessons from the history of technology are harsh.

Western Union - The telecommunications giant that controlled 90% of the telegraph business in the U.S. in 1866. In 1876, Bell wanted to sell the telephone patent to it, but the executives rejected the offer. Bell then founded Bell Telephone, which later evolved into AT&T - the largest company in the world in the 20th century. And what about Western Union, which rejected the telephone? Today it has a market value of $2.7 billion and ranks 3990th globally.

Intel - invented the commercial microprocessor in 1971, dominating PC chips for thirty years. At the peak of the 2000 bubble, its market value was $509 billion. Today, 25 years later, investors who bought at the peak have still not recovered their losses, with a market value of $160 billion - less than a third of its peak. It was not defeated by “faster CPUs,” but was left behind by the generational shift in architecture (the rise of ARM and TSMC's leading processes).

Cisco - the king of internet infrastructure. In 2000, its market value exceeded 500 billion, surpassing Microsoft to become the world's number one. After the bubble burst, its stock price fell by 88%, but since then its revenue has quadrupled, while its stock price has never returned to its peak. The value at the equipment layer has been siphoned off by the protocol layer and application layer.

The pattern seems very clear: first-generation technology establishes proof of concept, while second-generation technology harvests market returns.

However, 16 years after the birth of Bitcoin, the situation is completely different.

Today, the market capitalization of Bitcoin is approximately $1.8 trillion, accounting for more than 58% of the entire cryptocurrency market. The second place, Ethereum, is around $300 billion, less than one-sixth of Bitcoin. All “Ethereum killers” and “Bitcoin alternatives” combined still do not reach half of Bitcoin's market capitalization. Sixteen years have passed, and Bitcoin has not only not been replaced by newcomers but has instead widened the gap.

The difference is: telegrams, chips, and routers are tools; their value lies in functional efficiency, and if the function is replaced, their value drops to zero. Bitcoin is not a tool, but a protocol layer - a permissionless global consensus system.

The value of the protocol layer lies not in the speed of functional iterations, but in the accumulation of network effects, immutability, and the Lindy effect. TCP/IP will not be replaced by a “faster protocol” because the cost of replacement far exceeds the efficiency gains.

The logic of Bitcoin is exactly the same.

2. Misunderstood Positioning - From Payment Systems to Global Settlement Layer

The biggest narrative dilemma of Bitcoin is that it is judged as a “payment system”—and then deemed a failure.

Transactions are slow, fees are high, and throughput is low. These criticisms are all true. But they criticize something that Bitcoin has never attempted to be.

Payment and settlement are two different things.

You swipe your card at Starbucks, and it’s done in 2 seconds. But has the money really transferred? No. Visa just records a promise; the actual funds transfer has to wait for interbank clearing — it could be the same day, or it could be days later. Visa processes tens of thousands of transactions per second, but it’s handling promises, not settlements.

Settlement addresses another issue: is this money truly and irrevocably transferred from A to B? Final settlement between global banks still relies on SWIFT and central banks of various countries—a system that requires days, permissions, and trust in intermediaries.

Bitcoin is not a competitor of Visa. It is a competitor of SWIFT—a permissionless global settlement layer.

This is not theoretical. According to research data from Riot Platforms, the Bitcoin network settled over $19 trillion in transactions in 2024 - more than double that of 2023, with a single-day peak exceeding $30 billion. The Lightning Network, Ark, RGB - all these L2 protocols treat the Bitcoin main chain as the ultimate settlement anchor. This is exactly how a settlement layer should be: the underlying layer does not pursue speed but seeks irreversible finality.

From this perspective, Bitcoin's “disadvantages” are precisely by design: a block time of 10 minutes, limited block size, and conservative scripting capabilities—these are deliberate choices made to ensure that anyone can run a full node, verify the entire history, and not rely on any centralized entity.

Inspiration from TCP/IP

In the 1970s, the performance metrics of TCP/IP were quite “poor”—high latency, low bandwidth, and no native encryption. IBM's SNA and DEC's DECnet were technically more “advanced”. But TCP/IP won. Not because it was faster, but because it was simple enough, open enough, and difficult enough to control.

Fifty years later, no one has attempted to replace TCP/IP with a “faster protocol.” It's not that there aren't faster options, but the cost of replacement has become unbearable.

This is a profound inspiration at the protocol layer: once trust is established, efficiency is no longer the primary metric, but rather irreplacability.

Proof of Human Collaborative Ability

In November 2025, Bitcoin Core completed its first independent security audit since its inception 16 years ago, with the results being: zero critical vulnerabilities and zero medium vulnerabilities.

Behind this number is an even more astonishing fact: a protocol supporting nearly $20 trillion in market value has only 41 core developers globally, with annual funding of just $8.4 million. In contrast, Polkadot—valued at less than 1% of Bitcoin—has an annual development expenditure of $87 million.

We may have underestimated humanity's ability to self-organize. Without companies, without foundations, without CEOs, a group of developers distributed around the world maintains the largest decentralized financial infrastructure in human history with minimal resources. This itself is a validation of a new form of organization.

The underlying architecture is also evolving. v3 trading, Package Relay, Ephemeral Anchors - the goal of these upgrades is the same: to enable L2 to anchor more reliably to the main chain. This is not a functional stacking, but a structural enhancement.

The Grand Strategy of the Agreement: The Last Few Pieces Before Petrochemicals

Adam Back - the inventor of Hashcash, a thought leader behind Bitcoin's proof-of-work mechanism, and CEO of Blockstream - recently pointed out the direction of Bitcoin for the next decade: L1 should be conservative and minimal, ultimately becoming “petrified” - not unupgraded, but only making the last few most important upgrades.

Before this, several key primitives need to be completed: BitVM, Covenants, Simplicity. These terms may not mean much to most people, but their common goal is very clear: to make Bitcoin a sufficiently powerful “anchor layer” and then push all innovations to L2.

The roadmap is: minimum L1 → key primitives → innovative uplift → final solidification.

This is a strategic plan at the protocol level. It is remarkably similar to the evolution of TCP/IP: the core protocol remains stable while complex functions are implemented at higher layers.

Bitcoin appears weak on the payment side, but is becoming stronger on the structural side. This is design, not a flaw.

3. Value Capture at the Protocol Layer - The Mother Currency Status of Bitcoin

TCP/IP is one of the most successful protocols in human history, but it has a fatal flaw: there is no value capture mechanism.

The internet has created trillions of dollars in value, almost all of which has flowed to the application layer—Google, Amazon, Meta. TCP/IP itself is not valuable. Vint Cerf and Bob Kahn changed human civilization, but the protocol itself has not captured any economic returns.

This is the classic dilemma of the protocol layer: the more fundamental and open it is, the harder it is to charge fees.

Bitcoin has broken this dilemma.

Financial Native Protocol Layer

Bitcoin has been financially native from day one. The transfer of value itself is the function of the protocol, with every transaction and settlement directly involving the flow of BTC. The success of the protocol is directly tied to the value of the tokens.

There is no “TCP coin” in TCP/IP. There is no “HTTP coin” in HTTP. But Bitcoin has BTC.

When Bitcoin becomes the global settlement layer, BTC automatically becomes the pricing unit of this settlement layer - in financial terms, it is referred to as the numeraire.

Observe the actual behavior of the market: the main trading pairs on the exchange are priced in BTC; when institutions allocate crypto assets, BTC serves as the benchmark, while others represent “risk exposure relative to BTC”; the risk parameters of stablecoins, DeFi, and AI computing networks are ultimately tied to BTC. This is not faith, but market structure.

One layer more than gold, one layer more than TCP/IP

“Digital Gold” only tells half the story.

Gold is a store of value, but not a protocol layer. You cannot build applications or run L2 networks on top of gold. The value of gold comes from its scarcity, but it does not generate network effects.

Bitcoin is both a store of value and a protocol layer. The Lightning Network, RGB protocol, and various L2 solutions are built on top of it, and their existence in turn reinforces Bitcoin's network effects. This is a compound growth logic that gold does not possess.

On the other hand, TCP/IP is a protocol layer, but it does not capture value. Bitcoin is both a protocol layer and can capture value.

So the ultimate positioning of Bitcoin is: the network effect of TCP/IP technology + the value storage attributes of gold + the financial native value capture ability.

The three are superimposed, rather than substitutive.

4. The Increment of the AI Era - Why the Big Picture Has Changed

The above three layers of logic are all based on the extrapolation of the “stock” world. But the real variable is that we are entering a completely different era.

The internet connects people and data. AI connects algorithms, computing power, and autonomous agents.

This is not a change in degree, but a change in nature.

In the internet era, the main body of value flow is human beings — humans create content, humans consume services, and humans make decisions. The financial system is designed for humans, with KYC, business hours, national borders, and manual approval — these frictions are bearable for humans.

In the AI era, the main entities of value flow will include a large number of non-human agents. There is a key structural constraint here: AI agents cannot use the existing financial system.

It's not “inconvenient”; it's “impossible”:

• AI agents cannot open bank accounts - without an ID card, they cannot pass KYC.
• The AI agent cannot wait for T+2 settlement - its decision-making cycle is in milliseconds.
• The AI agent does not understand “working days”—it operates 24/7.
• AI agents cannot tolerate manual approval - any human process is a bottleneck.

Every feature of the existing financial system is not a friction for the AI economy, but a fundamental obstacle.

Algorithmic economy needs algorithmic currency

When AI agents begin to trade autonomously—buying computing power, paying for API calls, exchanging data, settling services—they need a “mother coin”. A benchmark that all agents can recognize, trust, and use for valuation.

The US dollar is not suitable for this role because it relies on human institutional intermediaries. Ethereum is not suitable for this role because its monetary policy can be altered through governance, and it has a clear leadership—Vitalik and the Ethereum Foundation can influence the direction of the protocol.

And BTC—fixed supply cap of 21 million, predictable issuance curve, rules that cannot be modified by any entity, no founders, no foundation, no CEO—precisely possesses all the characteristics required of the “mother coin of the algorithm era.” Returning to the previously audited set of data: 41 developers, $8.4 million annual funding, zero high-risk vulnerabilities. This is not only a miracle of capital efficiency but also an ultimate proof of absolute decentralization and self-organized collaboration.

The AI era does not make humans need Bitcoin more, but rather it is the first time that non-human intelligence requires a global settlement layer.

This is why the economic scale of the AI era may far exceed that of the human internet era. The number of internet users is 8 billion humans. The participants in the AI economy could be billions of autonomous agents, conducting millions of microtransactions every second.

Bitcoin is not competing for market share in a finite world. It is laying the groundwork for a yet-to-be-fully-unfolded incremental world, establishing the settlement layer in advance.

Conclusion: The Endgame Valuation and the Return of Capital

Reviewing the logical chain of the entire text: Bitcoin is not the first generation of blockchain technology, but a protocol layer; it is evolving into a truly reliable global settlement layer through architectural upgrades; as a natively financial protocol, it inherently possesses value capture ability and is becoming the mother currency of the crypto world; the arrival of the AI era will provide this mother currency with application scenarios far exceeding those of the internet era.

If this logic holds, the valuation anchor for Bitcoin will not just be “digital gold”.

The total market value of gold is approximately 18 trillion USD. The total value of the global internet economy is measured in trillions of USD. The economic scale of the AI era will far exceed the sum of the two.

Bitcoin is the intersection of several layers of value. If it is merely “digital gold,” benchmarked at 18 trillion, each BTC is about 850,000 USD. If it simultaneously carries the network effects of the protocol layer and the settlement demands of the AI era, this number is just the starting point.

Understanding this endgame logic allows one to comprehend the current behavior of the market.

The temporary departure of capital is not “giving up”. If the long-term goal for BTC is $1 million per coin, will smart money choose to start buying at $120,000, or wait for a pullback to $80,000 or $50,000 before entering?

Every panic sell-off is a transfer of chips from weak hands to strong hands. Every narrative of “Bitcoin is dead” is the market re-pricing at a lower position.

The mission of Bitcoin is not completed, but just beginning.