Unlike traditional interest rates, Bitcoin staking reward rates are determined by the users who participate rather than central banks.
Bitcoin’s (BTC) transformation into a layer-2 (L2) solution benefits every user. From supporting increased transaction speeds and volumes to enhancing security and enabling smart contracts directly within Bitcoin, an L2’s technical advantages alone make it a major development within the Bitcoin ecosystem.
However, the effects of a Bitcoin L2 have the potential to reach far beyond technical improvement. The emergence of Bitcoin staking, which has been impossible until now, is a major step in legitimizing and mainstreaming crypto staking in general. As well as creating value for currency holders, staking creates a new kind of interest rate, defined by users rather than by central banks and government policy. This “people’s interest rate” offers an alternative to the flawed traditional interest rate systems — and the ability to stake a trusted and highly-recognized asset bolsters the feasibility and credibility of this vision.
Essentially, the introduction of a Bitcoin L2 means that instead of relying on the public internet to transmit data, Bitcoin transactions can now be conveyed across a layer-2 (or the data-link layer), guaranteeing data speeds and packet delivery regardless of traffic levels between the two parties.