5 ms·

I think this is mostly correct, but I see it a bit differently. This initial wave of speculation is slowly building up network utility. Use cases like micro-tra

I think this is mostly correct, but I see it a bit differently. This initial wave of speculation is slowly building up network utility. Use cases like micro-transactions or Web payments become more and more viable as the network size grows. Eventually enough people own Bitcoin that it makes sense for it to be baked into a browser for micropayments, and for it to be used in lieu of Venmo/PayPal. Speculation is the boot loader for real utility

Nursie 9y ago
Micropayments are not that feasible when the fees per transaction are in the multiple dollars, surely?
- clarkmoody 9y ago
  Not on the blockchain. This is what Lightning Network and other Layer 2 technologies seek to enable: nearly-free micropayments.
  - nosuchthing 9y ago
    Why not use the fabled "lightning network" layer as layer 1 if it functions as it should? Is it not just a blockchain slapped on top of the slower blockchain?
    - rj123 9y ago
      The lightning network has no security (protection against double spend) on it's own. It relies on the underlying blockchain for that.
      - DINKDINK 9y ago
        >The lightning network has no security (protection against double spend) That's not true. By locking funds into a Lightning Network payment channel you solve the double spend problem _in the channel_ (the person receiving your payment knows that in order for you to double spend the channel, the payment recipient would need to approve the double spend). The risk of being double spent still exists on the underlying blockchain though, which is solved with a smart-contract structure that allows the counter party to the perpetrator of fraud to revoke a fraudulent double spend.
        nosuchthing 9y ago
        What's a practical use case? It sounds like you have to deposit a balance into a lightning channel, meanwhile wait for the block to be accepted, and once the funds are in the channel any activity still needs to be verified by another block being processed and accepted into the main chain.. This process effectively doubles the required amount of transactions and time spent for the 'lightning' transaction to take place?
        rj123 9y ago
        The main use case is small payments. You open a channel locking X amount of funds, and then can send or receive small payments to/from other parties on the network without broadcasting those transactions to the blockchain or paying fees. The only thing that is required is a route connecting payment channels from sender to recipient. For example, if A has a channel with B, B has one with C, and C with D, then A can transact with B, C or D.
        AgentME 9y ago
        No, once the channel is open, any number of transactions can happen within it as long as the net transfer from a party is less than the amount they committed to the channel. (I've made another post in this thread with a fuller explanation.)
        mikekchar 9y ago
        In Japan there are cards (and, indeed, your cell phone) that work exactly the same way. Debit cards don't really exist in Japan. Instead you buy a smart card (often the ones used for paying train or bus fares). You put some money on the card using a machine (you insert cash and it encodes the money on the card). Then you can flash the card onto a reader to pay for things (often train or bus fares, but in the past 10 years it has extended to vending machines, convenience stores, etc, etc). Lightning is exactly the same way. You set up a contract with the payment processor. This requires the transaction to be accepted into a block. Then you make as many smaller transactions (which require no blockchain transactions) with the payment processor as you want. At any time, the payment processor can terminate the contract by cashing in the amount of money you have spent. This requires a transaction to be accepted in the block chain. After that the channel is closed and only the amount spent is transferred (the remaining amount is freed up). If it goes beyond the contract length without the payment processor cashing in, then the contract is cancelled and the total amount is freed up. So basically it allows you to make many transactions through a payment processor, while only making 2 transactions on the block chain. Anyone can be a payment processor, but the protocol requires the payment processor to have capital equal to the transactions in process (they have to transfer funds to a third party before they get paid -- although they are guaranteed to get paid by the end of the contract). It's actually a pretty slick protocol. Their website has a video with implementation details that explains exactly how it works: https://lightning.network/ https://lightning.network/
    - clarkmoody 9y ago
      Here is some more information about what LN is doing: http://dev.lightning.community/overview/ http://dev.lightning.community/overview/
    - AgentME 9y ago
      Transactions are encoded into the blockchain to set up a "lightning channel" that incentivize the participants of off-chain transactions to correctly settle the net payments of the channel on the chain later. Only once it's set up on the blockchain can users use it for off-chain payments (which can be instantly confirmed and have much lower fees). Once the channel is set up on the blockchain between two users and has some amount of bitcoin committed to it, the participants can securely transact between each other with only private communications between each other, without requiring transactions in the blockchain. When either user is done with the channel, either of them may broadcast the settlement transaction which withdraws the committed funds in the correct amounts to each participant. (Every time the participants make a transaction between each other, they create create a new settlement transaction, and a separate transaction which invalidates the previous settlement transaction. These are regular Bitcoin transactions, but they're held privately by the participants instead of being broadcast on the blockchain immediately. If either of the particpants tries to broadcast an earlier version of the settlement transaction, then the other participant can broadcast the invalidation transaction within a certain pre-agreed time, which rewards them the funds as punishment to the defector.) Then the real fun comes from the "lightning network" part: if Alice wants to send funds to Charlie but has no open lightning channel to Charlie, but she knows that both her and Charlie have an open channel with Bob, then she can do an off-chain lightning transaction through Bob to Charlie, without any risk of Bob taking the funds for himself.
      - hossbeast 9y ago
        Importantly, the maximum net amount that can flow from A to B over the channel is capped at the amount which A contributes to the funding transaction.
  - Nursie 9y ago
    Firstly, well the post I replied to implied that it was already there - AFAICT lightning is not in production use yet. And secondly, frankly, I think Bitcoin dreadful for micropayments. It's really hard to get hold of for most people, requiring all sorts of setup and accounts.
SapphireSun 9y ago
Sorry.... I had to. "I think this is mostly correct, but I see it a bit differently. This bubble is slowly building up real housing for hard working poor and middle class people. Use cases like pay-day loans and sub-prime mortgages become more and more viable as the network size grows. Eventually enough people own mortgages that it makes sense for it to be baked into a CDO, and for it to be used in lieu of liquid assets. Bubbles are the boot loader of real utility."
- droopyEyelids 9y ago
  I don't necessarily agree with bobbygoodlatte but it seems like you wrote a themed mad-libs rather than an analogy.. Did you mean for the terms you listed to relate to the bitcoin situation in any way?
  - SapphireSun 9y ago
    Mainly the idea of a bubble resulting in real utility to people. If bitcoin isn't used for transactions, it's a store of value. It's gold + technology people don't understand. I don't understand how that's any different from a tulip except that you don't have to wash the dirt off of it when you uproot it. EDIT: I was also trying to make a point that CDOs were based in a kind of network effect where the risk was submerged under an ocean of statistics. Yet in the end, the underlying assumptions were faulty and the network effects lit on fire like gasoline.
    - v45h 9y ago
      https://stratechery.com/2017/tulips-myths-and-cryptocurrencies/ https://stratechery.com/2017/tulips-myths-and-cryptocurrenci...
      - SapphireSun 9y ago
        This is an interesting critique. I don't deny that other alt-coins might make use of blockchains to solve other problems that aren't currency. The thing I'm taking away from the article is that it compares BTC to gold favorably, which is an interesting angle. I generally think that gold is an irrational investment, after all there is no intrinsic value to gold other than for jewelry electronics, and high tech science experiments but that's not what the gold bugs claim. However, if you kind of turn the argument on its head a bit, gold is sort of like a ground up fiat currency. It has no intrinsic value and it has no army, but it forms a focal point of public consciousness that renders it deflationary fiat. However, there are other problems with BTC even if you accept the idea of deflationary fiat. For instance, money doesn't just pool in rich people's pockets, you can literally lose a BTC wallet and the money is just gone forever. Over time, this will result in the number of BTC in circulation approaching zero. I don't know how long that will take. The other argument against BTC is that its essentially capitalism run amok. We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself. It's a satire of capitalism in a world of environmental catastrophe. As for the Tulips, maybe I'm interpreting the chart incorrectly, but while the options price rose to insane levels, the realized prices, for a shorter duration, still rose to 100x (options were at 200x).
wbl 9y ago
I don't need to own bitcoin to carry out a transaction with it for longer then a few minutes. With a global cap of soon to be 28 transactions a second Bitcoin will never be competitive with Visa.
- gerhardi 9y ago
  The capacity for large volume ("real life scale") of transactions with reasonable verification latency is something that I have always seen as the real blocker with Bitcoin. I continue to be slightly surprised that the issue isn't covered more actively.
- solotronics 9y ago
  the problem currently has not been the number of TPS but the fact that different groups have incentive to "spam" the blockchain with fluff transactions 1) miners do this to set a minimum floor for transaction fees 2) subversive elements do this to make a point that Bitcoin cannot handle the use cases it was originally intended for really thinking about this it is probably not a problem because the free market should find the true price for an on-chain immutable transaction. coffee transactions will happen off chain and be settled up on-chain (lightning network)
- mrb 9y ago
  «global cap of soon to be 28 transactions a second Bitcoin» Bitcoin competes more against Western Union than against Visa. WU does only 31 transactions per second, perfectly within range of Bitcoin's capabilities (https://corporate.westernunion.com/annual-report/highlights.html https://corporate.westernunion.com/annual-report/highlights....)

Nursie 9y ago

Micropayments are not that feasible when the fees per transaction are in the multiple dollars, surely?

clarkmoody 9y ago
Not on the blockchain. This is what Lightning Network and other Layer 2 technologies seek to enable: nearly-free micropayments.
- nosuchthing 9y ago
  Why not use the fabled "lightning network" layer as layer 1 if it functions as it should? Is it not just a blockchain slapped on top of the slower blockchain?
  - rj123 9y ago
    The lightning network has no security (protection against double spend) on it's own. It relies on the underlying blockchain for that.
    - DINKDINK 9y ago
      >The lightning network has no security (protection against double spend) That's not true. By locking funds into a Lightning Network payment channel you solve the double spend problem _in the channel_ (the person receiving your payment knows that in order for you to double spend the channel, the payment recipient would need to approve the double spend). The risk of being double spent still exists on the underlying blockchain though, which is solved with a smart-contract structure that allows the counter party to the perpetrator of fraud to revoke a fraudulent double spend.
      - nosuchthing 9y ago
        What's a practical use case? It sounds like you have to deposit a balance into a lightning channel, meanwhile wait for the block to be accepted, and once the funds are in the channel any activity still needs to be verified by another block being processed and accepted into the main chain.. This process effectively doubles the required amount of transactions and time spent for the 'lightning' transaction to take place?
        rj123 9y ago
        The main use case is small payments. You open a channel locking X amount of funds, and then can send or receive small payments to/from other parties on the network without broadcasting those transactions to the blockchain or paying fees. The only thing that is required is a route connecting payment channels from sender to recipient. For example, if A has a channel with B, B has one with C, and C with D, then A can transact with B, C or D.
        AgentME 9y ago
        No, once the channel is open, any number of transactions can happen within it as long as the net transfer from a party is less than the amount they committed to the channel. (I've made another post in this thread with a fuller explanation.)
        mikekchar 9y ago
        In Japan there are cards (and, indeed, your cell phone) that work exactly the same way. Debit cards don't really exist in Japan. Instead you buy a smart card (often the ones used for paying train or bus fares). You put some money on the card using a machine (you insert cash and it encodes the money on the card). Then you can flash the card onto a reader to pay for things (often train or bus fares, but in the past 10 years it has extended to vending machines, convenience stores, etc, etc). Lightning is exactly the same way. You set up a contract with the payment processor. This requires the transaction to be accepted into a block. Then you make as many smaller transactions (which require no blockchain transactions) with the payment processor as you want. At any time, the payment processor can terminate the contract by cashing in the amount of money you have spent. This requires a transaction to be accepted in the block chain. After that the channel is closed and only the amount spent is transferred (the remaining amount is freed up). If it goes beyond the contract length without the payment processor cashing in, then the contract is cancelled and the total amount is freed up. So basically it allows you to make many transactions through a payment processor, while only making 2 transactions on the block chain. Anyone can be a payment processor, but the protocol requires the payment processor to have capital equal to the transactions in process (they have to transfer funds to a third party before they get paid -- although they are guaranteed to get paid by the end of the contract). It's actually a pretty slick protocol. Their website has a video with implementation details that explains exactly how it works: https://lightning.network/ https://lightning.network/
  - clarkmoody 9y ago
    Here is some more information about what LN is doing: http://dev.lightning.community/overview/ http://dev.lightning.community/overview/
  - AgentME 9y ago
    Transactions are encoded into the blockchain to set up a "lightning channel" that incentivize the participants of off-chain transactions to correctly settle the net payments of the channel on the chain later. Only once it's set up on the blockchain can users use it for off-chain payments (which can be instantly confirmed and have much lower fees). Once the channel is set up on the blockchain between two users and has some amount of bitcoin committed to it, the participants can securely transact between each other with only private communications between each other, without requiring transactions in the blockchain. When either user is done with the channel, either of them may broadcast the settlement transaction which withdraws the committed funds in the correct amounts to each participant. (Every time the participants make a transaction between each other, they create create a new settlement transaction, and a separate transaction which invalidates the previous settlement transaction. These are regular Bitcoin transactions, but they're held privately by the participants instead of being broadcast on the blockchain immediately. If either of the particpants tries to broadcast an earlier version of the settlement transaction, then the other participant can broadcast the invalidation transaction within a certain pre-agreed time, which rewards them the funds as punishment to the defector.) Then the real fun comes from the "lightning network" part: if Alice wants to send funds to Charlie but has no open lightning channel to Charlie, but she knows that both her and Charlie have an open channel with Bob, then she can do an off-chain lightning transaction through Bob to Charlie, without any risk of Bob taking the funds for himself.
    - hossbeast 9y ago
      Importantly, the maximum net amount that can flow from A to B over the channel is capped at the amount which A contributes to the funding transaction.
- Nursie 9y ago
  Firstly, well the post I replied to implied that it was already there - AFAICT lightning is not in production use yet. And secondly, frankly, I think Bitcoin dreadful for micropayments. It's really hard to get hold of for most people, requiring all sorts of setup and accounts.

SapphireSun 9y ago

Sorry.... I had to. "I think this is mostly correct, but I see it a bit differently. This bubble is slowly building up real housing for hard working poor and middle class people. Use cases like pay-day loans and sub-prime mortgages become more and more viable as the network size grows. Eventually enough people own mortgages that it makes sense for it to be baked into a CDO, and for it to be used in lieu of liquid assets. Bubbles are the boot loader of real utility."

droopyEyelids 9y ago
I don't necessarily agree with bobbygoodlatte but it seems like you wrote a themed mad-libs rather than an analogy.. Did you mean for the terms you listed to relate to the bitcoin situation in any way?
- SapphireSun 9y ago
  Mainly the idea of a bubble resulting in real utility to people. If bitcoin isn't used for transactions, it's a store of value. It's gold + technology people don't understand. I don't understand how that's any different from a tulip except that you don't have to wash the dirt off of it when you uproot it. EDIT: I was also trying to make a point that CDOs were based in a kind of network effect where the risk was submerged under an ocean of statistics. Yet in the end, the underlying assumptions were faulty and the network effects lit on fire like gasoline.
  - v45h 9y ago
    https://stratechery.com/2017/tulips-myths-and-cryptocurrencies/ https://stratechery.com/2017/tulips-myths-and-cryptocurrenci...
    - SapphireSun 9y ago
      This is an interesting critique. I don't deny that other alt-coins might make use of blockchains to solve other problems that aren't currency. The thing I'm taking away from the article is that it compares BTC to gold favorably, which is an interesting angle. I generally think that gold is an irrational investment, after all there is no intrinsic value to gold other than for jewelry electronics, and high tech science experiments but that's not what the gold bugs claim. However, if you kind of turn the argument on its head a bit, gold is sort of like a ground up fiat currency. It has no intrinsic value and it has no army, but it forms a focal point of public consciousness that renders it deflationary fiat. However, there are other problems with BTC even if you accept the idea of deflationary fiat. For instance, money doesn't just pool in rich people's pockets, you can literally lose a BTC wallet and the money is just gone forever. Over time, this will result in the number of BTC in circulation approaching zero. I don't know how long that will take. The other argument against BTC is that its essentially capitalism run amok. We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself. It's a satire of capitalism in a world of environmental catastrophe. As for the Tulips, maybe I'm interpreting the chart incorrectly, but while the options price rose to insane levels, the realized prices, for a shorter duration, still rose to 100x (options were at 200x).

wbl 9y ago

I don't need to own bitcoin to carry out a transaction with it for longer then a few minutes. With a global cap of soon to be 28 transactions a second Bitcoin will never be competitive with Visa.

gerhardi 9y ago
The capacity for large volume ("real life scale") of transactions with reasonable verification latency is something that I have always seen as the real blocker with Bitcoin. I continue to be slightly surprised that the issue isn't covered more actively.
solotronics 9y ago
the problem currently has not been the number of TPS but the fact that different groups have incentive to "spam" the blockchain with fluff transactions 1) miners do this to set a minimum floor for transaction fees 2) subversive elements do this to make a point that Bitcoin cannot handle the use cases it was originally intended for really thinking about this it is probably not a problem because the free market should find the true price for an on-chain immutable transaction. coffee transactions will happen off chain and be settled up on-chain (lightning network)
mrb 9y ago
«global cap of soon to be 28 transactions a second Bitcoin» Bitcoin competes more against Western Union than against Visa. WU does only 31 transactions per second, perfectly within range of Bitcoin's capabilities (https://corporate.westernunion.com/annual-report/highlights.html https://corporate.westernunion.com/annual-report/highlights....)