100% this. I work at a merchant that accepts Bitcoin for payment, and 90+% of our volume comes in over lightning (a layer 2 solution built on top of Bitcoin).

These layer 2 solutions lead to centralization and make some nodes more important than others. The fact that most cryptocurrency enthusiasts tend to brush this under the carpet shows that it's more about getting rich than some ideological fight against the banks. Cryptocurrency developers are slowly but surely reinventing the banking system, just less efficient and less regulated.

Then there's the question of whether a deflationary currency can even work in the first place.

I don't think that Bitcoin or any other crypto asset needs to become the main currency of any country. They can live as tertiary assets with valuable properties, that can facilitate trade or act as collateral for certain contracts, without being declared a currency in any geographical jurisdiction.

So, only 1 order of magnitude down.

EDIT: according to a chart here [0], 1 "raw" Bitcoin transaction is equivalent to 400k Visa transactions. That's 5 orders of magnitude. Unless Lightning handles 99.999% of all Bitcoin transactions, the Bitcoin network will be unbelievably wasteful.

https://digiconomist.net/bitcoin-energy-consumption/

What’s the real difference between a layer on top of BTC (effectively a new currency backed by BTC) and an existing currency backed by traditional things like gold and international treaties?

I mean, he spells it out, but it is doing 1/1000 the value.

And if you make that comparison, how much energy is being used to run Fedwire? A few kilowatts maybe?

The security of the US financial systems is maintained in part by the US military which is not exactly free either

Without the sun we'd all be really cold.