Subject: Input on Bitcoin ETF in general, important technicals that the SEC should pay close attention
From: Fan Xia

June 7, 2019

Trying to keep it short, 

Bitcoin ETF has far more problems than a market that does not have rules.  By design Bitcoin block reward halves about once every 4 years for a reason.  The block reward is a subsidy paying miners while the network grows and transition to user fees once applications are running on Bitcoin and transaction volumes are at global scale. 

2017 Bitcoin community infighting forked the chain into BTC and BCH.  The SEC needs to pay close attention to this event and most importantly why it happened.  The two camps one lead by Bitcoin Core developers or Blockstream has a very different vision.  They thought to turn bitcoin from a fully functional blockchain to a stripped down and simplified "Digital Gold." 

By design the chain needs to scale and transition to user fees in massive scales so that miner revenue transition from fixed block reward current 12.5 BTC to user fees.  When billion transactions are happening daily micro payments with fee as little as 0.01 per transaction adds up to lucrative revenues for miners.  This is by design how Bitcoin can be sustainable when miners have dependable revenue stream from users.  This is why block reward halves about every 4 years by design as the network grows the subsidized block reward diminishes over time. 

However, when Core developers capped block size from scale up and stripped down bitcoin functions and turn it into digital gold they are ignoring the economics of the Bitcoin design.  If block size can't scale it means miners are stuck with just the block reward.  As the block reward halves miner revenues are cut in half with no way to make up the lost revenue that was supposed to come from user fees as the chain scale.   

For this reason, the current Bitcoin goes by ticker BTC is not sustainable system.  By 2020 April or so the block reward will drop from 12.5 BTC to 6.25, mining revenue will be greatly affected.  This then requires artificial pump of the coin price to at least double to sustain the network.  This is no longer the tech that once was. 

It is turning into digital gold, an artificial system that must be maintained by doubling the price every halving.  By nature a diminishing system cannot sustain.  By 2024 block reward would be down to 3.125, and by 2028 the block reward would be near zero. Therefore, the SEC cannot approve the BTC ETF as it is a system that cannot sustain long term without allowing the chain to scale and transition to user fee based.   

If the SEC allows such ETF and wall street with little knowledge of what they are getting into pumps the BTC price it will create the biggest man made bubble we have ever seen.  The higher they pump the price the greater the consequences when such system collapse by design.  BTC ETF cannot be approve as it will end badly with people messing with technology they don't understand. 

Fan Xia 
Rite-Hite Holding Company 
Lotus Notes Application Administrator 
8900 N Arbon Drive 
Milwaukee, WI 53223 
Phone: [redacted] 
Office Hours: 8:00AM - 4:30PM