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The Future of Bitcoin: Scaling, Institutional Adoption, and Strategic Reserves with Rich Rines

Bitcoin’s evolution from an obscure digital currency to a global financial force has been nothing short of extraordinary. As Bitcoin enters a new era, institutions, governments, and developers are working to unlock its full potential. Matt Crosby, Bitcoin Magazine Pro’s lead market analyst, sat down with Rich Rines, contributor at Core DAO, to discuss Bitcoin’s next phase of growth, the rise of Bitcoin DeFi, and its potential as a global reserve asset. Watch the full interview here: The Future Of Bitcoin – Featuring Rich Rines

Bitcoin’s Evolution & Institutional Adoption

Rich Rines has been in the Bitcoin space since 2013, having witnessed firsthand its transformation from an experimental technology to a globally recognized financial instrument.

“By the 2017 cycle, I was pretty determined that this is what I was going to spend the rest of my career on.”

The conversation delves into Bitcoin’s growing role in institutional portfolios, with spot Bitcoin ETFs already surpassing $41 billion in inflows. Rines believes the institutionalization of Bitcoin will continue to reshape global finance, particularly with the rise of yield-generating products that appeal to Wall Street investors.

“Every asset manager in the world can now buy Bitcoin with ETFs, and that fundamentally changes the market.”

What is Core DAO?

Core DAO is an innovative blockchain ecosystem designed to enhance Bitcoin’s functionality through a proof-of-stake (PoS) mechanism. Unlike traditional Bitcoin scaling solutions, Core DAO leverages a decentralized PoS structure to improve scalability, programmability, and interoperability while maintaining Bitcoin’s security and decentralization.

At its core, Core DAO acts as a Bitcoin-aligned Layer-1 blockchain, meaning it extends Bitcoin’s capabilities without altering its base layer. This enables a range of DeFi applications, smart contracts, and staking opportunities for Bitcoin holders.

“Core is the leading Bitcoin scaling solution, and the way to think about it is really the proof-of-stake layer for Bitcoin.”

By securing 75% of the Bitcoin hash rate, Core DAO ensures that Bitcoin’s security principles remain intact while offering greater functionality for developers and users. With a growing ecosystem of over 150+ projects, Core DAO is paving the way for the next phase of Bitcoin’s financial expansion.

Core: Bitcoin’s Proof-of-Stake Layer & DeFi Expansion

One of the biggest challenges facing Bitcoin is scalability. The Bitcoin network’s high fees and slow transaction speeds make it a powerful settlement layer but limit its utility for day-to-day transactions. This is where Core DAO comes in.

“Bitcoin lacks scalability, programmability. It’s too expensive. All these things that make it a great settlement layer is exactly the reason that we need a solution like Core to extend those capabilities.”

Core DAO functions as a proof-of-stake layer for Bitcoin, allowing users to generate yield without third-party risk. It provides an ecosystem where Bitcoin holders can participate in DeFi applications without compromising on security.

“We’re going to see Bitcoin DeFi dwarf Ethereum DeFi within the next three years because Bitcoin is a superior collateral asset.”

Bitcoin as a Strategic Reserve Asset

Governments and sovereign wealth funds are beginning to view Bitcoin not as a currency but as a strategic reserve asset. The potential for a U.S. Bitcoin strategic reserve, as well as broader global adoption at the nation-state level, could create a new financial paradigm.

“People are talking about building strategic Bitcoin reserves for the first time.”

The idea of Bitcoin replacing gold as a primary store of value is becoming more tangible. Rines asserts that Bitcoin’s scarcity and decentralization make it a superior alternative to gold.

“I think within the next decade, Bitcoin will become the global reserve asset, replacing gold.”

Bitcoin Privacy: The Final Frontier

While Bitcoin is often hailed as a decentralized and censorship-resistant asset, privacy remains a significant challenge. Unlike cash transactions, Bitcoin’s public ledger exposes all transactions to anyone with access to the blockchain.

Rines believes that improving Bitcoin privacy will be a critical step in its evolution.

“I’ve wanted private Bitcoin transactions for a really long time. I’m pretty bearish on it ever happening on the base layer, but there’s potential in scaling solutions.”

While solutions like CoinJoin and the Lightning Network offer some privacy improvements, full-scale anonymity remains elusive. Core is exploring innovations that could enable confidential transactions without sacrificing Bitcoin’s security and transparency.

“On Core, we’re working with teams on potentially having confidential transactions—where you can tell that a transaction is happening, but not the amount or counterparties involved.”

As governments continue to increase scrutiny over digital financial activity, the need for enhanced Bitcoin privacy features will only grow. Whether through native protocol upgrades or second-layer solutions, the future of Bitcoin privacy remains a crucial area of development.

The Future of Bitcoin: A Trillion-Dollar Market in the Making

As the interview progresses, Rines outlines how Bitcoin’s economic framework is expanding beyond speculation and into productive financial instruments. He predicts that within a decade, Bitcoin will command a $10 trillion market cap, with DeFi applications becoming a significant portion of its economic ecosystem.

“The Bitcoin DeFi market is a trillion-dollar opportunity, and we’re just getting started.”

His perspective aligns with a broader industry trend where Bitcoin is not only used as a store of value but also as an active financial asset within decentralized networks.

Rich Rines Roadmap for Bitcoin’s Future

Figure 1: Here is a visual representation of the key concepts Rich Rines discusses in the video interview.

Final Thoughts

The conversation between Matt Crosby and Rich Rines provides a compelling glimpse into the future of Bitcoin. With institutional adoption accelerating, Bitcoin DeFi expanding, and the growing recognition of Bitcoin as a strategic reserve, it is clear that Bitcoin’s best years are ahead.

As Rines puts it:

“Building on Bitcoin is one of the most exciting opportunities in the world. There’s a trillion-dollar market waiting to be unlocked.”

For investors, developers, and policymakers, the key takeaway is clear: Bitcoin is no longer just a speculative asset—it is the foundation of a new financial system.

For more detailed Bitcoin analysis and to access advanced features like live charts, personalized indicator alerts, and in-depth industry reports, check out Bitcoin Magazine Pro.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always do your own research before making any investment decisions.

Szabo’s Micropayments and Mental Transaction Costs: 25 Years Later

What if every click you made online cost just a fraction of a penny? What if your favorite news site, your go-to streaming service, or even your daily email usage could be paid for at tiny increments, rather than one big chunk at the end of the month? This vision—where nearly every digital interaction could be monetized by “micropayments”—has hovered over the internet economy since its earliest days. But as Nick Szabo’s seminal 1999 paper, Micropayments and Mental Transaction Costs, pointed out, there’s a lot more than technology standing in the way.

Twenty-five years on, Szabo’s warnings about mental transaction costs—the cognitive overhead of deciding whether something is worth paying for—still resonate. Even as developments like AI-based “intelligent agents” and Bitcoin solutions such as the Lightning Network promise frictionless micropayments, Szabo’s observations remain crucial to understanding why this idea hasn’t fully taken flight, and whether that might finally change.

Below, we’ll examine:

• The core arguments from Szabo’s 1999 paper

• Why micropayments remained on the fringes for decades

• How AI and Bitcoin’s Lightning Network attempt to overcome these barriers

• Whether mental transaction costs can, at long last, be reduced enough to make micropayments mainstream

The Paper That Defined the Dilemma

In Micropayments and Mental Transaction Costs, Nick Szabo pinpointed a truth that technologists often overlooked: while computational costs (like processing payments, preventing fraud, or validating cryptography) can be driven down, the mental overhead of deciding, monitoring, or worrying about every tiny expense remains stubbornly high.

“Customer mental transaction costs will soon dominate the technological transaction costs of the payment system used in the transaction (if they don’t already), and micropayment technology efforts which stress technological savings over cognitive savings will become irrelevant. ”

– Nick Szabo, Micropayments and Mental Transaction Costs (1999)

Szabo’s core argument is that for most consumers, there’s a cognitive “hassle factor” in even the smallest payment decisions. Asking yourself, “Is this article worth 2 cents? 5 cents? 10?” quickly leads to fatigue, overshadowing the supposed simplicity of micropayments. Instead, consumers gravitate toward flat fees and all-you-can-eat bundles, even if those end up costing slightly more in the long run. The mental relief of knowing that you won’t be nickel-and-dimed with every click is simply more valuable than the few pennies saved.

Sources of These Cognitive Costs”?

3 points are listed in the paper, but they can be many more.

1. Uncertain Cash Flows

Consumers rarely have perfect foresight into exactly how much they will earn or spend at any given time. Flat fees or bundling reduce the stress of planning and budgeting for these uncertainties.

2. Assessing Product Quality

In many online purchases—especially digital goods—you can’t know the true “quality” of what you’re buying until you’ve used it. Whether it’s an article, a game, or a movie, the mental effort needed to decide “Is this worth x?” every time you click can be more expensive than the micropayment itself.

3. Decision-Making Complexity

Our brains are good at making quick calls when stakes are high or options are few, but terrible when we have infinite micro-decisions.

Why Micropayments Stalled—Despite New Tech

1. The Early “Internet Payment” Hype

In the late 1990s and early 2000s, the internet was hailed as a new frontier for micro-billing. Systems like NetBill, Millicent, and PayWord promised frictionless flows of tiny sums. The dream? Artists, newspapers, and website owners would all be paid directly for each page view or each minute of content consumed.

But even as processing costs and fraud got more manageable, user adoption never reached critical mass. Szabo’s mental transaction cost argument largely explains this: Consumers found it simpler to deal with one monthly subscription than to handle countless pennies flying out of their digital wallets.

2. The Rise of “Free” Services Funded by Ads

Search engines, social media, and news sites gradually adopted a free-to-consume, ads-supported model. Why? It’s easy on the consumer’s mind—no sign-up or micro-accounting for every page load. Meanwhile, the site owner monetizes your attention via advertisements.

Even premium content gravitated toward low-friction paywalls and subscription models. Once the mental load of frequent, tiny payments was replaced by a single monthly charge, customers complained less and paid more consistently.

3. “Intelligent Agents” and AI: Early Promises, Slow Results

Szabo also anticipated solutions like “intelligent agents” that could, in theory, handle many micro-decisions on behalf of the consumer. The idea was that an AI could internalize your preferences (“I like reading about finance, but only from reputable sources, and I’m willing to pay up to 10 cents an article.”) and then automatically approve or decline micro-charges.

Yet building a truly personalized agent that doesn’t require continuous training and oversight—let alone potential conflicts of interest—has proven extremely challenging. For AI to manage micropayments accurately, it must grasp your tacit preferences and be trusted to act in your best interest.

Has Anything Changed in 25 Years?

While Szabo’s insights remain valid, the landscape in 2024 (and onward) does differ in a few important ways:

1. User Interfaces Have Improved

From intuitive mobile wallets to chatbots, user interface design is leagues ahead of where it was in 1999. Some friction has been removed: you can tap to pay, use passwordless logins, or integrate with wearables. But the cognitive overhead—the act of deciding whether a purchase is worthwhile—hasn’t vanished. Even a single tap is too much if you have to do it hundreds of times a day.

2. Blockchain & Cryptocurrencies

The Lightning Network has aimed to fix payments by enabling near-instant transactions with very low fees. It doesn’t solve the core argument of the paper, which assumes technical transaction costs are zero. But the Lightning Network is the current best standard and protocol on the internet for open, interoperable money to flow on the internet.

3. AI Enters The Chat

Tools like ChatGPT, advanced personalized recommendation engines, and agent frameworks have made it possible to tailor experiences more deeply to each user. In theory, an AI assistant could learn your tastes or budgets so well that you’re rarely disturbed with micro-approval prompts, or can automate them entirely within a certain budget. However, building up that trust in an AI agent remains a hurdle. The question moves from “Is this worth it?” to “What is my AI agent doing?”.

Looking Ahead: Are We Ready for a Micropayment Renaissance?

For mass adoption to happen, people need to avoid feeling nickel-and-dimed at every turn. Even if the technical fees are near zero, the mental transaction cost can make micropayments feel cumbersome. Making micropayments as invisible as possible, while keeping track of the value being exchanged, is therefore crucial.

Getting micropayments right will likely require a rethinking of business models, there are exciting examples where micropayments are emerging as a viable strategy:

• Pay-Per-API Call

In the AI SaaS world—micropayments are already thriving (called credits or tokens). Because companies evaluate usage strictly on ROI and business needs, they’re less deterred by the mental friction that keeps consumers at bay. They use just as much as they need in real-time.

• Tips & Donations

Small, voluntary payments for creators or open-source projects can work precisely because they don’t trigger the same sense of obligation. Users donate out of gratitude or community spirit, making micropayments feel more like a gesture than a forced charge. Stacker News and Nostr have been pushing this paradigm forward leveraging the Lighting Network.

Clever Design for Seamless Experiences

No matter the business model, user experience design is key to making micropayments practical. The simpler the interface, the more “invisible” the payments become. Some ideas include:

• Automated Rules & AI: Let users set broad preferences (“I don’t mind spending up to $2/day on premium articles”) and rely on an intelligent agent to handle decisions in the background.

• Bundled Invoices: Aggregate multiple micro-charges into one easy-to-understand statement, reducing the mental toll of each individual transaction. Ideally, this would be a standard and cross-product, instead of itemized in one niche or vertical.

• Intuitive Feedback: Offer clear yet minimal prompts—like a progress bar of monthly spend—that helps users track costs without being overwhelmed.

Overcoming the cognitive barriers identified by Nick Szabo demands not only faster, cheaper transaction rails but also thoughtful design that caters to real human psychology. When these elements come together—AI-based automation, usage-based models that don’t feel invasive, and a user interface that’s nearly frictionless—micropayments could see a genuine renaissance.

Conclusion: Szabo’s Insights Still Rule

Nick Szabo’s 1999 paper has proven remarkably prescient and held up after all these years. Even as technology has advanced—faster internet speeds, blockchain-based payment rails, and sophisticated AI—the central problem remains:

People don’t want to think about small payments all the time.

It’s not just about software or cryptography; it’s about the psychology of how we value attention, convenience, and certainty. Micropayments can succeed only if these mental costs can be minimized or “bundled away.” AI agents and the Bitcoin Lightning Network are crucial new pieces of the puzzle, but their success hinges on delivering a user experience that hides or automates micropayment decisions altogether.

Will the next 25 years finally bring an era where micropayments flourish? Possibly—if we figure out how to make paying a fraction of a penny feel as effortless as a monthly subscription. Even then, we might realize that micropayments simply become one more arrow in the quiver of payment models, coexisting with ad-based, subscription-based, and outright “free” offerings.

But for now, Szabo’s warning stands: a world of pure micropayments still collides with human psychology. Our mental transaction costs are real, and if the solutions of the future—be they AI, Lightning, or something else entirely—don’t address our deeper preference for simplicity, micropayments will remain an intriguing idea that never quite becomes the default.

References & Further Reading

• Szabo, N. (1999) “Micropayments and Mental Transaction Costs

• Fishburn, P., Odlyzko, A. M., and Siders, R. C. (1997) “Fixed fee versus unit pricing for information goods

• Nielsen, J. (1998) “The Case for Micropayments

• Rivest, R. L. and Shamir, A. (1996) “PayWord and MicroMint—Two Simple Micropayment Schemes

This is a guest post by Jacob Brown. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Fold Launches Bitcoin Rewards Credit Card

Fold recently announced it will launch its Bitcoin Rewards Credit Card in partnership with Visa.

📣 Introducing the Fold Bitcoin Rewards Credit Card

It pays to be a Fold+ Credit Cardholder

☑️2% Unlimited Bitcoin Rewards
☑️Up to $250 Welcome Bonus
☑️Free Metal Card

Join and climb your way to the top of the waitlist. $200,000 of prizes await!

Sign-up link and blog 👇 pic.twitter.com/kSrvKAgXQA

— FOLD BITCOIN (@fold_app) February 11, 2025

Rewards for the card will vary depending on Fold membership level. Fold+ members will earn 2% back in bitcoin rewards and up to $250 in bonuses that will be paid out for hitting specific activity levels, while Fold members will earn 1.5% in rewards and up to $100 in bonuses.

Cardholders will gain access to a suite of financial services through the Fold app, including the ability to trade bitcoin with zero fees and to take advantage of exclusive bonuses from partner merchants. The app also provides access to FDIC-insured transactional accounts and insured bitcoin custody.

Fold is bringing this new product to market largely due to requests from current users.

“This has been one of the most highly requested products,” Mitch Port, General Manager for Credit and Loans at Fold, told Bitcoin Magazine. “The majority of users like to spend on credit and earn in bitcoin.”

Port also noted that this new credit card is the newest addition to the suite of products that Fold already offers.

“A Fold Debit Card currently gets you access to an account from which you can pay bills, direct deposit fiat or automatically convert paychecks into bitcoin,” he said. “Adding a credit card is a great addition for users that prefer to spend on credit rather than from an existing balance.”

Fold currently has 600,000 debit card users who have earned approximately $75 million worth of bitcoin rewards (which would have been $20 million if rewards were distributed in US dollars). With the combination of its current user base and this new credit card, Fold hopes to make bitcoin the new standard for credit card rewards.

“Fold has already empowered hundreds of thousands of users to incorporate bitcoin into their daily lives,” said Fold founder and CEO Will Reeves in a press release shared with Bitcoin Magazine.

“With this credit card, we aim to dethrone miles as the go-to credit card reward. If the top miles cards can process 1% of US GDP, we’re confident the Fold Bitcoin Rewards Credit Card can reach the same heights,” he added.

“We’re building the hub of personal finance, powered by bitcoin, to ensure everyone has the tools to earn, save, and grow their wealth with bitcoin every day.”

Fold is issuing this new credit card as the company prepares to list on the NASDAQ as the first publicly-traded Bitcoin financial services company. Fold also has a top 25 bitcoin treasury among public companies, as it holds over 1,000 bitcoin in its reserves. Its initiative in accumulating bitcoin aligns with its mission to make bitcoin the cornerstone for personal savings for millions of Americans.

Those interested in obtaining a Fold Bitcoin Rewards Credit Card can join the waitlist here.