You didn't think your formula and calculation through. Typical fluff, no substance There was no increase in supply, you may believe that, but the only thing that increased are counterparty risks to the same original amount of bitcoins Only idiots would try to rationalize greenrock, bluerock, graynrock borrowing bitcoins for the purpose of lending them out Absolute morons would put up huge capital collateral and risks for the purpose of lending them out to get what yield? You did not think it through Show one possible reason any market participant would be so stupid to do what a grayrock, bluerock, or whatever rock you listed? I'm a proud bagholder of Bitcoin and crypto assets, BWAHAHAAHAH, made more returns in percentage terms than you can ever dream of
Fractional reserve banking and securities lending - if they're declared securities have no relation to one another. Securities lending requires significant security deposits - no less than 140% of spot. Bitcoin will probably command more. The lending of securities is also based on the current stock rebate and is more likely to lessen float. The approval of the ETF/ETN/Trusts will clearly increase demand during the creation process. If approved as securities the mining process will also be impaired. You'll also get a slew of new regulators if they become securities.
OK, so formulas and textual examples aren't your forte. This short cartoon explains how fractional reserve lending works. Just imagine $ was changed to ₿ to see how it would work with Bitcoin. Surely, you have heard of staking? https://tokenist.com/okx-introduces-the-brc-30-standard-to-enable-staking-on-bitcoin/ And, if "That is the most fucking bullish scenario for bitcoin price" that you wrote is true, wouldn't you want to encourage it (assuming you prefer the price of Bitcoin to go up)?
I've done staking plenty of times. I've used lending & borrow crypto markets platforms many times That's not what you described with your post and formula Risk free interest rate above 5% Blackrock lends bitcoins to Bluerock for 8% APR + collateral Bluerock lends bitcoins to Orangreock for 16% APR + collateral Orangerock lends bitcoins to Grayrock for 24% APR + collateral Grayrock lends bitcoins to Redrock for 32% APR + collateral ..... Lastrock borrows at ++++% APR + collateral Lastrock gets hacked, everyone's collateral is forfeited and Blackrock lost the bitcoins I cannot encourage it because there is no way any of those ****rocks after Bluerock will ever exist