First of all this isn’t an original idea, I read something somewhere and will definitely go pull the source. The general theme was that as paper bitcoin increase(etfs,dats etc) there will be less circulating bitcoin and thus transactions fees will be impacted negatively. It sounds plausible, I’m a bit stuck on the a holder is a holder no matter where they are self custody or third party, but do you think this will have cause transactions to drop off over time as more adoption happens on the paper side?
Is there anything like paper investors in bitcoin ? if you don't have a self custody in bitcoin you do not own a bitcoin, to validate this point the "Not your keys not your coins" remains valid. No one who invested through ETFs owns any bitcoin they only own contract papers from a company that they invested in the company which invested in bitcoin. so let's stop convincing people that they are holders if they hold contract papers for ETFs.
Incentives that are paid for TX are only the rewards for miners and that should be balanced if they are not going to be rewarded in any other way if the circulation of bitcoin reduces, infact during low demand bitcoin tx fees still do not increase, instead it only grows when there is congestion in the network.