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I read an interesting analogy yesterday in a poker chat of all places. The guy basically said, let's put bitcoin to buy a coffee litmus test. If I were to buy

by mmgutz 9y ago

I read an interesting analogy yesterday in a poker chat of all places. The guy basically said, let's put bitcoin to buy a coffee litmus test. If I were to buy a cup of coffee in the current frenzy, I would be at the cashier waiting a day for the transaction to go through and when it does go through the fee for transaction would be greater than cost of the coffee. If that is true, how is bitcoin better? Would that transaction even go through considering miners would prioritize transactions with larger fees.

montecarl 9y ago
For a cup of coffee you probably don't need to wait a full day to be certain the transaction has gone through. Blocks are mined on average every 10 minutes and pending transactions are broadcast immediately and (assuming a large enough fee is paid) will be included in the next block. For a $3 purchase, you probably don't even need to wait for it to be included in the blockchain (although to protect against double spend you do). But the poker guy is right, bitcoin is not really appropriate for replacing credit cards for small purchases at the minute for several reasons: 1) You must wait between 1-20 minutes to get your transaction included in the next block. 2) You must pay a fee that could be 100% of the total transaction or more (for small purchases). 3) You must pay capital gains tax on your purchase (possibly at the short term capital gains rate even), which complicates your tax reporting. Issue 1 and 2 may be solved with technological solutions soon, if the lighting network (distributed settlement layer on top of bitcoin) is successful.
beager 9y ago
The narrative has shifted as the dynamics and value have shifted. It’s more like gold now. You wouldn’t pay for coffee with gold.
- mmgutz 9y ago
  Right, I wouldn't. Maybe it's better termed cryptomineral instead of cryptocurrency.
jsutton 9y ago
Bitcoin isn't better as a currency, that use of Bitcoin is long gone. It's a store of value and the backbone of the cryptocurrency market place at the moment. Most cryptocurrencies are paired with BTC.
nathan_f77 9y ago
The Lightning Network [1] is very close to being released. If that works out, then you'll be able to buy a cup of coffee instantly, and with no fees. You would still have to open a "payment channel", which requires a single Bitcoin transaction. So you might fund this single payment channel with $100 USD, and use that to buy all your coffees for a month or two. I think that's no different to having $100 in a checking account. [1] https://en.wikipedia.org/wiki/Lightning_Network https://en.wikipedia.org/wiki/Lightning_Network

by mmgutz 9y ago

montecarl 9y ago

For a cup of coffee you probably don't need to wait a full day to be certain the transaction has gone through. Blocks are mined on average every 10 minutes and pending transactions are broadcast immediately and (assuming a large enough fee is paid) will be included in the next block. For a $3 purchase, you probably don't even need to wait for it to be included in the blockchain (although to protect against double spend you do). But the poker guy is right, bitcoin is not really appropriate for replacing credit cards for small purchases at the minute for several reasons: 1) You must wait between 1-20 minutes to get your transaction included in the next block. 2) You must pay a fee that could be 100% of the total transaction or more (for small purchases). 3) You must pay capital gains tax on your purchase (possibly at the short term capital gains rate even), which complicates your tax reporting. Issue 1 and 2 may be solved with technological solutions soon, if the lighting network (distributed settlement layer on top of bitcoin) is successful.

beager 9y ago

The narrative has shifted as the dynamics and value have shifted. It’s more like gold now. You wouldn’t pay for coffee with gold.

mmgutz 9y ago
Right, I wouldn't. Maybe it's better termed cryptomineral instead of cryptocurrency.

jsutton 9y ago

Bitcoin isn't better as a currency, that use of Bitcoin is long gone. It's a store of value and the backbone of the cryptocurrency market place at the moment. Most cryptocurrencies are paired with BTC.

nathan_f77 9y ago

The Lightning Network [1] is very close to being released. If that works out, then you'll be able to buy a cup of coffee instantly, and with no fees. You would still have to open a "payment channel", which requires a single Bitcoin transaction. So you might fund this single payment channel with $100 USD, and use that to buy all your coffees for a month or two. I think that's no different to having $100 in a checking account. [1] https://en.wikipedia.org/wiki/Lightning_Network https://en.wikipedia.org/wiki/Lightning_Network