Two Prime CEO says Bitcoin L2 yields are drying up as risks pile on

Alexander Blume argues layer-2 rewards are subsidies that shrink as deposits grow, while every new chain adds another way to get hacked Bitcoin holders have spent the past few years chasing yield on layer-2 networks. Two Prime CEO Alexander Blume thinks much of that yield was never real to begin with. In an interview on October 22, 2026, Blume described the rewards offered by Bitcoin layer-2 protocols such as Babylon and Stacks as “basically just VC-funded subsidies.” His argument comes down to arithmetic. More capital is chasing the same pot of incentives, so each depositor gets a smaller share. The dilution problem Blume warned that leaning on venture capital forever is not a sustainable model. Investors eventually want their money working toward something other than paying depositors to show up. The scale of capital involved is not small. As of November 4, 2026, Babylon had approximately 40,800 BTC staked, worth around $3.28 billion. Its BABY token was running at 5.5% inflation at the time. Token inflation is one of the ways these rewards get paid. New tokens are minted and handed out to stakers. That works as long as the market keeps valuing those tokens, which is a large assum...