Consider the following story:

Mt.Gox can’t transact client’s Bitcoins because the blocks are always full. That is actually a relief for them, because they are insolvent. In a attempt to circumvent their money problem, they reach out to major wallet providers: “We can’t easily transact on chain, so we must reach into some sort of gentleman’s agreement. If our clients try to transact between our wallets, we simply update our database with the transferred amount, instantly and cheaply!

“Since we are all grown up here, we can trust each other to actually make the Bitcoin transfer when needed, and in the worst case, we will keep this legally binding database with how much each wallet provider owes each other. Lets call it ‘the Bitcoin Central Bank’.”

Everybody agrees. Many users resisted giving up the custody of their precious bitcoins to one of the wallets under BCB, but Bitcoin is gaining mainstream now, and many new users are ignorant of the principles that made it so important to keep the custody of your own coins. Eventually, most users simply chooses cheap and fast transactions over the hassle of on-chain transactions.

Everything works well until, after some time, some BCB partners find out about Mt.Gox insolvency. The would be scandal is quickly covered up, and dealt with in low profile: “lets pass quietly this directive in BCB to allow partners to actually have some flexibility in their reserves, after all, the majority of BTC transactions are handled via our common system anyway, and everybody could benefit from a little ‘flexibility’, if you know what I mean. Nobody want that scandal of Mt.Gox going bankrupt, it is too big to fail, it would damage Bitcoin considerably.”

Since ever more people only transact now between wallets belonging to BCB, because the blockchain is always choked and Lightning Network is still 18 months away, “it is safe,” BCB statisticians say, “to raise flexibility factor a little more, for its is exceeding improbable someone will require an actual Bitcoin withdraw.”

A hundreds years from there, there are 3 trillions “Bitcoins” in circulation, and sevenfold that value in Bitcoin debt due to the interest rate for the earliest lendings. Nobody seems to remember (or even care) on how the situation got to that point.