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Can someone help me understand how a network that can only do 3.2[1] transactions-per-second stand up as anything other than a speculative commodity? How can BT

Can someone help me understand how a network that can only do 3.2[1] transactions-per-second stand up as anything other than a speculative commodity? How can BTC possibly survive at such slow (and increasingly expensive) transaction speeds? 1. http://hashingit.com/analysis/33-7-transactions-per-second http://hashingit.com/analysis/33-7-transactions-per-second

willempienaar 10y ago
It might not be viable as a means of facilitating transactions, but it can possibly survive as a store of value.
- Analemma_ 10y ago
  I don't understand this comment at all. What use do bitcoins have if they cannot process any transactions? They have no inherent value.
  - natrius 10y ago
    Currency is a collective delusion. It's valuable if everyone believes it is, which is why precious metals trade higher than their usefulness in industry. I don't think Bitcoin's delusion will last more than another decade. We'll probably find a way to design a delusion that distributes value "fairly" rather than to a class of nerd overlords. But until then, it's a fun story to watch.
    - joosters 10y ago
      But countries' currencies have a real value in that they are the only way to pay taxes. If the only way to obtain water was through my exclusive 'magic beans' tokens, then they would have real value too. Bitcoin ownership gives you nothing, except perhaps an increased risk of hacking losses...
  - wyager 10y ago
    There's no such thing as "inherent value". Value is an emergent property of the utility functions of the billions of humans involved in the market. Can you explain why gold is as valuable as it is? And no, the answer is not "you can use it in jewelery and circuits".
    - joosters 10y ago
      You can quantify how much the value of gold is through actual physical use value and how much is through mere speculation. So yes, 'using it in jewellery and circuits' is a perfectly fine explanation. It's not a binary choice. Things don't have to be pure speculation or pure 'real' value.
      - wyager 10y ago
        > You can quantify how much the value of gold is through actual physical use value Yes, and it's very very small. https://www.quora.com/If-gold-werent-used-as-a-store-of-value-how-much-would-it-be-worth https://www.quora.com/If-gold-werent-used-as-a-store-of-valu... The vast majority of gold's value comes from its utility as a fungible, divisible, verifiable value store.
        matt_wulfeck 10y ago
        People have been desiring gold for longer than documented history. It's beautiful to look at. It has inherent value, which is evident in the fact of it's desirable beauty and long history. Even in worst case scenario that it's comparable in value to dull, metallic gray Rhenium for its industrial applications: $42 an ounce is better than BTC's worst case $0. You'll always be able to exchange gold for bread.
        wyager 10y ago
        > People have been desiring gold for longer than documented history. Yes, it's been around longer than Bitcoin. Not really sure what you're trying to indicate there. > It's beautiful to look at. Which is responsible for a very small fraction of its value. Most gold is not used in jewelry. > It has inherent value There is no such thing as "inherent value". Humans assign value to things. Most of the reasons that humans assign a high value to gold (fungibility, divisibility, unforgeability) also apply to Bitcoin, only more so.
TD-Linux 10y ago
It obviously can't work for a lot of applications on its own. Another limitation is that blocks are only every 10 minutes, so you're at an hour wait for the recommended 6 confirmations. Worst case, you could imagine most Bitcoin trading going through something like Paypal, which would have some advantages over USD (you can't print Bitcoin) but many obvious disadvantages. Better though, Bitcoin has a built in scripting language that lets you implement more complicated logic on top. The lightning network is one way to do that, which coalesces payments into only a few on chain transactions, and allows instant confirmations, with the tradeoff that nodes must remain online part of the time (compared to Bitcoin where nodes never need to be online, other than to receive and send transactions).
aakilfernandes 10y ago
Off-chain transactions. There's no reason to settle every single transaction on the blockchain. That could take the form of regulated exchanges (coinbase/poloniex) or decentralized networks like lightning.
- davidgerard 10y ago
  The most important thing about off-chain transaction mechanisms - sidechains, Lightning Network - is that they don't exist. They've been trapped in development hell for years without any sign of emerging.
CalChris 10y ago
In addition to being slow transactions, they're also expensive transactions. https://blockchain.info/charts/cost-per-transaction https://blockchain.info/charts/cost-per-transaction Roughly, you're paying the miners. They (half of them) have to mine your transaction into the blockchain and they could be using that time to mine. So your transaction competes against mining time. That's roughly why it's slow and expensive. I'd never use BTC unless the kidnappers demanded it.
- wmf 10y ago
  Mining is done on ASICs while verifying transactions and building blocks is done on CPUs so they don't really compete. If a transaction includes fees, miners have essentially no reason not to mine it.
  - CalChris 10y ago
    CPUs mining that transaction into the blockchain will be even slower than ASICs (100M hashes/sec vs 1G h/sec). Moreover, a LOT of miners have to do this work and it doesn't clear until the last one does the work. This is slow. It's not cheap simply because it's done on cheaper HW.
    - wmf 10y ago
      Mining doesn't work this way at all. I'm not sure how else to say it.
    - apapli 10y ago
      Go read up on bitcoin mining, it's essentially a code-cracking competition between miners but my description doesn't do it justice.
    - uncletammy 10y ago
      They said CPUs are NOT used to mine and it's true. All (successfull) mining is done on ASICs. Also, not every miner must do this work. The transaction "clears" as soon as ONE miner solves the puzzle then includes the transaction in that block. The other miners only have to verify it which takes a only a tiny fraction of the amount of work needed to solve the puzzle. It is slow but it's almost always faster than international (as well as domestic for some of us) wire transfers. Also, there are a lot of people working to make it faster. It's currently a pretty crap currency for most people in the world but it has potential to completely change the world. This potential is reflected in the market cap.
reddytowns 10y ago
There are ways to do transactions off chain, increasing the TPS dramatically https://lightning.network/ https://lightning.network/
- joosters 10y ago
  The only currently reliable off-chain transactions that are non-vapourware are selling the bitcoins for cash and then buying stuff with the cash! Lightning network doesn't exist yet!
dmoy 10y ago
Woah what, only 3.2 qps? Card transactions do like 3 orders of magnitude more, don't they? (Sustained, idk about peak)
- aianus 10y ago
  Card transactions also take days to settle, cost orders of magnitude more in interchange (depending on the value transferred), and can have significant chargeback risk.
  - matt_wulfeck 10y ago
    Yes but the chargeback risk protects me as a consumer.
    - aianus 10y ago
      When you buy a new $2,000 MacBook, for example, you're paying $20-40 in extra interchange (after your card rewards!) for that protection. While I agree it's worth it in a lot of situations, in other situations it would be nice to be able to opt out.
      - matt_wulfeck 10y ago
        But if somebody else steals my credit card I can still get a $2000 fraudulent charge reversed. BTC is created intentionally to prevent that from happening. Theft is your money being gone forever. Actually that's not really true, as we've seen with other crypto currency the stakeholders can simply vote to fork and thus invalidate the transactions of every other person.
        aianus 10y ago
        But it's much more difficult to steal my Bitcoin because I don't go around typing the private keys in plaintext nor are they printed on a plastic card I carry around in my wallet. Credit cards need velocity limits and insurance and fraud checks and all that stuff mostly because their actual security is godawful. Anyways all I'm saying is that for certain people and certain transactions, Bitcoin is superior to credit cards. For everything else there's Mastercard.
pmarreck 10y ago
Well, for one thing, this is an artificial limitation set in code. The only thing right now preventing them from upping that, is caution. I believe, though, that there will be an upper limit transaction speed on a decentralized network which will be slower than that possible on a centralized network. This is why folks have talked about using bitcoin as an end-of-day "settlement" currency and doing the day-to-day in your local fiat. Here's the thing- Bitcoin will thrive whenever the shit hits the fan somewhere (see: Venezuela right now). A currency controlled by no government* and weighing 0% of gold while being completely electronic, suddenly becomes quite appealing under those circumstances. Which then makes it a pretty good hedge. * arguments about chinese miners controlling most of the mining market are allowed
- za_creature 10y ago
  > Bitcoin will thrive whenever the shit hits the fan somewhere Not if "somewhere" is nearby elliptic curves
wyager 10y ago
That's an artificial limitation, not a practical one. The devs are being too conservative about increasing it, however. Also not sure what you mean by "expensive". I think I pay about 11 cents per transaction. Way less than credit cards!
- matt_wulfeck 10y ago
  > I think I pay about 11 cents per transaction. Way less than credit cards! Yes but you're currently competing against a lumbering, outdated and over-regulated marketplace that's ripe for renovation. What do you think will happen the minute these banks get real competition? They will update their network and make transactions cost 5c, or N-1 where N is the current BTC transaction cost. They will always be ahead because their limits are self-imposed and solved through simple software, not intentionally and computationally difficult. And they already are! I can instantly send money to all of my friends with venmo paying no transaction fees. And I don't even have to argue with them about the inherent value of US dollars and the problems with fiat currencies!
  - jsonau 10y ago
    What you said is true. Banks can always lower their transaction costs as they see fit(competitions) and beat BTC transaction fee anytime. So transaction cost might not be an advantage in such situation. But people might still use BTC and pay up that extra cost because of its special property: true ownership.
davidgerard 10y ago
It can't. Bitcoin remains volatile as hell. The market is seriously thin, with single large trades sending it up or down $30. The "price" isn't one, which is why the whales can't realise the supposed valud of their holding except in a dribble. The actual use case is 95% speculation. Next is drugs, next is ransomware. Even the actual market use case (drugs) hate using Bitcoin and find it a huge pain in the backside.

willempienaar 10y ago

It might not be viable as a means of facilitating transactions, but it can possibly survive as a store of value.

Analemma_ 10y ago
I don't understand this comment at all. What use do bitcoins have if they cannot process any transactions? They have no inherent value.
- natrius 10y ago
  Currency is a collective delusion. It's valuable if everyone believes it is, which is why precious metals trade higher than their usefulness in industry. I don't think Bitcoin's delusion will last more than another decade. We'll probably find a way to design a delusion that distributes value "fairly" rather than to a class of nerd overlords. But until then, it's a fun story to watch.
  - joosters 10y ago
    But countries' currencies have a real value in that they are the only way to pay taxes. If the only way to obtain water was through my exclusive 'magic beans' tokens, then they would have real value too. Bitcoin ownership gives you nothing, except perhaps an increased risk of hacking losses...
- wyager 10y ago
  There's no such thing as "inherent value". Value is an emergent property of the utility functions of the billions of humans involved in the market. Can you explain why gold is as valuable as it is? And no, the answer is not "you can use it in jewelery and circuits".
  - joosters 10y ago
    You can quantify how much the value of gold is through actual physical use value and how much is through mere speculation. So yes, 'using it in jewellery and circuits' is a perfectly fine explanation. It's not a binary choice. Things don't have to be pure speculation or pure 'real' value.
    - wyager 10y ago
      > You can quantify how much the value of gold is through actual physical use value Yes, and it's very very small. https://www.quora.com/If-gold-werent-used-as-a-store-of-value-how-much-would-it-be-worth https://www.quora.com/If-gold-werent-used-as-a-store-of-valu... The vast majority of gold's value comes from its utility as a fungible, divisible, verifiable value store.
      - matt_wulfeck 10y ago
        People have been desiring gold for longer than documented history. It's beautiful to look at. It has inherent value, which is evident in the fact of it's desirable beauty and long history. Even in worst case scenario that it's comparable in value to dull, metallic gray Rhenium for its industrial applications: $42 an ounce is better than BTC's worst case $0. You'll always be able to exchange gold for bread.
        wyager 10y ago
        > People have been desiring gold for longer than documented history. Yes, it's been around longer than Bitcoin. Not really sure what you're trying to indicate there. > It's beautiful to look at. Which is responsible for a very small fraction of its value. Most gold is not used in jewelry. > It has inherent value There is no such thing as "inherent value". Humans assign value to things. Most of the reasons that humans assign a high value to gold (fungibility, divisibility, unforgeability) also apply to Bitcoin, only more so.

TD-Linux 10y ago

It obviously can't work for a lot of applications on its own. Another limitation is that blocks are only every 10 minutes, so you're at an hour wait for the recommended 6 confirmations. Worst case, you could imagine most Bitcoin trading going through something like Paypal, which would have some advantages over USD (you can't print Bitcoin) but many obvious disadvantages. Better though, Bitcoin has a built in scripting language that lets you implement more complicated logic on top. The lightning network is one way to do that, which coalesces payments into only a few on chain transactions, and allows instant confirmations, with the tradeoff that nodes must remain online part of the time (compared to Bitcoin where nodes never need to be online, other than to receive and send transactions).

aakilfernandes 10y ago

Off-chain transactions. There's no reason to settle every single transaction on the blockchain. That could take the form of regulated exchanges (coinbase/poloniex) or decentralized networks like lightning.

davidgerard 10y ago
The most important thing about off-chain transaction mechanisms - sidechains, Lightning Network - is that they don't exist. They've been trapped in development hell for years without any sign of emerging.

CalChris 10y ago

In addition to being slow transactions, they're also expensive transactions. https://blockchain.info/charts/cost-per-transaction https://blockchain.info/charts/cost-per-transaction Roughly, you're paying the miners. They (half of them) have to mine your transaction into the blockchain and they could be using that time to mine. So your transaction competes against mining time. That's roughly why it's slow and expensive. I'd never use BTC unless the kidnappers demanded it.

wmf 10y ago
Mining is done on ASICs while verifying transactions and building blocks is done on CPUs so they don't really compete. If a transaction includes fees, miners have essentially no reason not to mine it.
- CalChris 10y ago
  CPUs mining that transaction into the blockchain will be even slower than ASICs (100M hashes/sec vs 1G h/sec). Moreover, a LOT of miners have to do this work and it doesn't clear until the last one does the work. This is slow. It's not cheap simply because it's done on cheaper HW.
  - wmf 10y ago
    Mining doesn't work this way at all. I'm not sure how else to say it.
  - apapli 10y ago
    Go read up on bitcoin mining, it's essentially a code-cracking competition between miners but my description doesn't do it justice.
  - uncletammy 10y ago
    They said CPUs are NOT used to mine and it's true. All (successfull) mining is done on ASICs. Also, not every miner must do this work. The transaction "clears" as soon as ONE miner solves the puzzle then includes the transaction in that block. The other miners only have to verify it which takes a only a tiny fraction of the amount of work needed to solve the puzzle. It is slow but it's almost always faster than international (as well as domestic for some of us) wire transfers. Also, there are a lot of people working to make it faster. It's currently a pretty crap currency for most people in the world but it has potential to completely change the world. This potential is reflected in the market cap.

reddytowns 10y ago

There are ways to do transactions off chain, increasing the TPS dramatically https://lightning.network/ https://lightning.network/

joosters 10y ago
The only currently reliable off-chain transactions that are non-vapourware are selling the bitcoins for cash and then buying stuff with the cash! Lightning network doesn't exist yet!

dmoy 10y ago

Woah what, only 3.2 qps? Card transactions do like 3 orders of magnitude more, don't they? (Sustained, idk about peak)

aianus 10y ago
Card transactions also take days to settle, cost orders of magnitude more in interchange (depending on the value transferred), and can have significant chargeback risk.
- matt_wulfeck 10y ago
  Yes but the chargeback risk protects me as a consumer.
  - aianus 10y ago
    When you buy a new $2,000 MacBook, for example, you're paying $20-40 in extra interchange (after your card rewards!) for that protection. While I agree it's worth it in a lot of situations, in other situations it would be nice to be able to opt out.
    - matt_wulfeck 10y ago
      But if somebody else steals my credit card I can still get a $2000 fraudulent charge reversed. BTC is created intentionally to prevent that from happening. Theft is your money being gone forever. Actually that's not really true, as we've seen with other crypto currency the stakeholders can simply vote to fork and thus invalidate the transactions of every other person.
      - aianus 10y ago
        But it's much more difficult to steal my Bitcoin because I don't go around typing the private keys in plaintext nor are they printed on a plastic card I carry around in my wallet. Credit cards need velocity limits and insurance and fraud checks and all that stuff mostly because their actual security is godawful. Anyways all I'm saying is that for certain people and certain transactions, Bitcoin is superior to credit cards. For everything else there's Mastercard.

pmarreck 10y ago

Well, for one thing, this is an artificial limitation set in code. The only thing right now preventing them from upping that, is caution. I believe, though, that there will be an upper limit transaction speed on a decentralized network which will be slower than that possible on a centralized network. This is why folks have talked about using bitcoin as an end-of-day "settlement" currency and doing the day-to-day in your local fiat. Here's the thing- Bitcoin will thrive whenever the shit hits the fan somewhere (see: Venezuela right now). A currency controlled by no government* and weighing 0% of gold while being completely electronic, suddenly becomes quite appealing under those circumstances. Which then makes it a pretty good hedge. * arguments about chinese miners controlling most of the mining market are allowed

za_creature 10y ago
> Bitcoin will thrive whenever the shit hits the fan somewhere Not if "somewhere" is nearby elliptic curves

wyager 10y ago

That's an artificial limitation, not a practical one. The devs are being too conservative about increasing it, however. Also not sure what you mean by "expensive". I think I pay about 11 cents per transaction. Way less than credit cards!

matt_wulfeck 10y ago
> I think I pay about 11 cents per transaction. Way less than credit cards! Yes but you're currently competing against a lumbering, outdated and over-regulated marketplace that's ripe for renovation. What do you think will happen the minute these banks get real competition? They will update their network and make transactions cost 5c, or N-1 where N is the current BTC transaction cost. They will always be ahead because their limits are self-imposed and solved through simple software, not intentionally and computationally difficult. And they already are! I can instantly send money to all of my friends with venmo paying no transaction fees. And I don't even have to argue with them about the inherent value of US dollars and the problems with fiat currencies!
- jsonau 10y ago
  What you said is true. Banks can always lower their transaction costs as they see fit(competitions) and beat BTC transaction fee anytime. So transaction cost might not be an advantage in such situation. But people might still use BTC and pay up that extra cost because of its special property: true ownership.

davidgerard 10y ago

It can't. Bitcoin remains volatile as hell. The market is seriously thin, with single large trades sending it up or down $30. The "price" isn't one, which is why the whales can't realise the supposed valud of their holding except in a dribble. The actual use case is 95% speculation. Next is drugs, next is ransomware. Even the actual market use case (drugs) hate using Bitcoin and find it a huge pain in the backside.