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I'm bullish on crypto, but there are many better ones out there other than bitcoin. The scaling and transaction cost issues that have been on display for the p

I'm bullish on crypto, but there are many better ones out there other than bitcoin. The scaling and transaction cost issues that have been on display for the past couple of months should scare anyone heavily invested in it. Without serious usage, what good is it?

snissn 9y ago
One analysis on bitcoin is that the entire value of the blockchain comes from the PoW powered by it. The bitcoin blockchain has so much more work that's gone into protecting it against double spending than any other blockchain. [1] https://fork.lol/pow/hashrate https://fork.lol/pow/hashrate
- shepardrtc 9y ago
  I used to agree with that, but at the current price levels I would say that if this is the source of value, then it is absolutely and incredibly overvalued. In addition, the PoW is centralized (for the most part) within a few massive mining operations. A 51% attack isn't an impossible notion. I know many would disagree with this, but while Bitcoin was the first of its kind, and it absolutely cleared the way for all the subsequent coins, its quickly becoming unusable. And that's not even considering the massive volatility of it. Such volatility implies that proper volumes aren't there to support its value. With that in mind, and also the notion of an aging technology, I think investing in it is not a good idea.
  - travoc 9y ago
    Bitcoin has about half the volatility of its cryptocurrency peers.
    - Florin_Andrei 9y ago
      Seems normal that the little networks are more volatile.
    - bmm6o 9y ago
      You would hope, with its much higher market cap, that the volatility would be much lower than only half as much.
  - Florin_Andrei 9y ago
    > A 51% attack isn't an impossible notion. I read somewhere that several bitcoin mining facilities in China, when counted together own over 50% of the hashing power currently online in the Bitcoin network. If true, collusion scenarios could easily be imagined.
    - jjxw 9y ago
      Certainly not impossible, but one thing is a disincentive to commit a 51% attack is that if you had that much computing power a more profitable use of it would be to just mine rather than create fake transactions which, if detected, could crash the value of the currency.
      - Florin_Andrei 9y ago
        > if detected How people think of that hypothetical if-then scenario depends a lot on numerous factors. I think, in places where corruption is more common, it is easier to believe it's less likely you'll get caught, or minimize the consequences when thinking about it. There's also a lower threshold for your imagination to go wandering off in that direction and begin architecting plans. "If detected, could crash the whole thing" is a way of thinking more common in cultures where the rule of law is far more established in the common mindset. I'm not making any sort of prediction (and I own bitcoin myself, though not a large amount). I'm just saying - this is how our minds work.
      - politician 9y ago
        > a disincentive to commit a 51% attack... Consider that if a state goal was to wipe out the wealth of the other 49% as a plausibly deniable economic attack, then having a majority of the mining power within your borders makes a lot of sense.
    - SkyMarshal 9y ago
      Last I checked it was around 60%. Also, Bitmain is the sole supplier of ASICs to most of the Chinese miners, and thus has some power over what those miners do or don't do (particularly in the Core vs Cash debate).
- kolinko 9y ago
  It's not as simple. Some networks use other hashing methods, so just comparing hash to hash is pointless - if anything, you could compare instructions per second, not hashes per second. Then, for certain hash methods, GPUs/FPGAs/ASICS give no speedup, so even if there are far fever instructions per second, they would be just as expensive to attack. Also, there are POS/DPOS, and other proof of sth networks, where it's not really about hashes, but about other resources - again, cost of attack would be a better metric here, not hashes. But most importantly - after a certain point, a network attack is so unlikely that additional security matters much less than other system properties, like speed, ability to execute smart contracts efficiently, or the ecosystem of startups around it.
  - DennisP 9y ago
    Exactly. Since the point of PoW is to make 51% attacks expensive, the best measure is how expensive it would be. Ethereum is approximately equal to Bitcoin on this measure. http://www.flippening.watch/ http://www.flippening.watch/
- mikeash 9y ago
  That seems circular. Bitcoin's massive PoW comes from its massive value (or more precisely, the massive value of block rewards). If Bitcoin's value dropped to one cent tomorrow, the PoW would disappear. Conversely, if some altcoin's value suddenly jumped such that its mining rewards were at Bitcoin's level, it would almost instantly gain Bitcoin-level PoW. Being circular doesn't make it wrong, but it does seem like a fragile basis for value.
  - derefr 9y ago
    It’s true that mining is mostly done for ROI; if you can’t make a profit by running your ASIC miner, or your GPU miner, or whatever else, then you won’t run it. That doesn’t mean, though, that Bitcoin would lose its network robustness; before BTC had any value at all, people were mining it “altruistically”, purely for the sake of adding auditing strength to the network so that they could use BTC to make transactions. The Bitcoin mainnet has far more of those plain-old CPU miner nodes than any other network, and they’d still be there even if the profit-mining operations cashed out. On the other hand, if the ASIC and GPU mining pools “went dark”, it’d always be a worry that someone would pay to start them up again just for long enough to execute a Sybil attack. But Bitcoin has been “steered” away from such attacks before with community forks, and I doubt such a future would be any different.
    - pr0zac 9y ago
      If all of the ASIC mining dropped off Bitcoin would end up with a "frisbee on the roof" problem with its difficulty scaling, ie with the current difficulty there wouldn't be enough mining power left to mine enough blocks (2016) to reach the next difficulty reset in any reasonable amount of time, effectively killing Bitcoin as its transaction throughput would grind to a halt. This is an unlikely death, but still a possible one.
      - CydeWeys 9y ago
        Why would all the ASIC mining drop off? What mechanism could cause such a thing? More generally, a severe hashpower reduction could be problematic. An emergency hard fork to a better difficulty readjustment algorithm (like what other coins use) would solve that. Ideally that change would be made before it ended up being needed.
- Nursie 9y ago
  Surely then a cryptocurrency that doesn't require competitive hashing for security is even better? The idea that the value comes from the energy already burned is rather silly.
  - juicyfroot 9y ago
    Amd the idea that energy must be burned for entertainment ia silly too?
- konschubert 9y ago
  The work is for the past. The moment the transaction fees and block rewards go down, the very expensive Prof of Work mechanism will weaken and future transactions are unprotected. Proof of Stake can offer the same protection mechanism without needing to finance a huge value destruction operation. And to those saying that the electricity is not wasted because it protects the block chain: If a mechanism exists that works without throwing away electricity, then that's definitely wasted. It's like saying my monster truck doesn't waste gas because it carries a child to school.
  - gt_ 9y ago
    I’m not necessarily disagreeing but what if the monster truck is carrying a child to the hospital? And the other option is to take the homemade electric hot rod your neighbor just completed yesterday?
  - Robotbeat 9y ago
    > It's like saying my monster truck doesn't waste gas because it carries a child to school. Betcha that kid totally would think it's worth it, tho... Arriving to school in a monster truck would be a dream come true. :) (Not that I disagree with your point...)
  - dcposch 9y ago
    > The moment the transaction fees and block rewards go down, the very expensive Prof of Work mechanism will weaken and future transactions are unprotected. Exactly. One critical, related vulnerability that I haven't seen people discuss: Right now, every new block gives miners about (12.5 new BTC + 3.5 BTC in fees) * $15,000 = $240,000 So miners are making a quarter million every ten minutes. That incentivizes massive capital expenditure on mining hardware and massive electricity burn. If the price drops significantly -- or Lightning Network etc solve the scale challenges, and transaction fees come down -- or in June 2020, when the block reward halves -- any combination of those may lead to a future where it's uneconomical to mine again, except in places where electricity is unnaturally cheap. When that happens, tons of mining equipment will fall idle. The network difficulty will adjust down, and in the immediate term Bitcoin will continue as normal. But now there's a big pool of latent hardware left over from the bubble, which can be activated at any time. This may break assumptions about the cost of attack. If, say, a Chinese mining group owns tons of hardware that is no longer economical to operate continuously, there's nothing stopping them from shorting BTC and then doing a "spawn camp" repeated 51% attack. (If you already own enough hardware, then such attacks are pretty cheap--you only have to burn tons of electricity a few times, for a few minutes each time.)
- sly010 9y ago
  But is there additional value in more (proof of) work or are the returns diminishing? In economic terms the best network hashrate would be the one that is sufficiently secure to protect against bad actors but uses as little electricity as possible. Anything more than that is waste, not added value. Edit: typo
ReverseCold 9y ago
Bitcoin has scaled as designed, but it was not designed to handle this many transactions. As such, some transactions are slower (as designed). If you need fast transactions, use a currency designed for a higher TPS.
cloakandswagger 9y ago
I have hope that Bitcoin's scaling issues will be solved eventually, though as we've seen it's going to be a slow, arduous process to get consensus among the various factions. If and when they are solved, the incredible hashing power of the network plus the massive amount of Bitcoin software and support should restore its reputation as the premier cryptocurrency.
- Nursie 9y ago
  How does the hashing power give it value? AFAICT it's the other way around - the value makes more hashing economically viable.
  - cloakandswagger 9y ago
    They're complimentary. Bitcoin attracted lots of hashing power due to its value, and its value is reinforced by its hashing power/network security.
mikedubc 9y ago
Which cryptos are you looking at that are better than bitcoin in dealing with the scaling and transaction cost issues? I'm watching BitShares pretty closely.
- yagodragon 9y ago
  you should check https://raiblocks.net/ https://raiblocks.net/
- CryoLogic 9y ago
  IOTA is probably the best at both of those
  - zby 9y ago
    So far IOTA is centralized, it relies on snapshots. It is just my intuition - but it does not look like "the tangle" could ever be decentralized - there is just no mechanism that would protect the network from bad actors.
  - duskwuff 9y ago
    Given that it currently depends on a centralized coordinator, that seems unlikely.
  - StavrosK 9y ago
    Have you actually tried to use IOTA? It's really bad, you get different balances depending on which node you connect to, sending is weird, odd things like that.
- shepardrtc 9y ago
  Ripple https://ripple.com/xrp/market-performance/ https://ripple.com/xrp/market-performance/
  - randyrand 9y ago
    Isn't it closed source and run by a single corporation? What's the benefit of being tied to a block chain if for a centralized currency? Just copy the current visa/banking system and you're good to go.
guelo 9y ago
It's great for speculation. Maybe there's some new speculation related innovation that can be developed on bitcoin.
sillysaurus3 9y ago
Ok, what's going on here is that people have this expectation of Bitcoin not based in reality. Bitcoin was not designed to be a high-throughput currency. It's a store of value. You put your money in it and let it sit. That's it. If you don't want to do that, don't use it. But that's what it's for. Or at least what it's evolved into. I think it can cause a gigantic speculative bubble that will put people like Thiel in control over even more wealth in the world than they already have – if BTC goes to $1M/coin, what do you think will happen? $10M? There's no upper limit. But that's a separate issue. Bitcoin doesn't have to do anything except what it was designed to do. And it was designed this way. Satoshi certainly thought through this scenario and specifically decided to do this, and not something else. So those who are putting money into BTC are betting on Satoshi's original vision. Now, do you think Satoshi really believed BTC would be the only crypto? I think he knew others would spring up. He solved the byzantine generals problem with sybil resistance. Of course he knew others could solve it too, in slightly different ways. So I think he just said "Well, let them do that." And hence, use different cryptos for different circumstances.
- debt 9y ago
  "It's a store of value." Maybe this was the intention all along, but this idea has only recently reached some saturation among information channels. Because I haven't heard much about "store of value" until about a month ago. Which seems to be either a shifting of goalposts which is bad, or a complete morphing of why people are interesting in crypto which is even worse. It means, people are scrambling trying to justify why the hell they're throwing all their money at crypto.
- phpnode 9y ago
  Where does this "bitcoin is a store of value, not a medium for exchange" nonsense come from? Literally the first line of the white paper: > A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
  - sillysaurus3 9y ago
    And it is. When you pay Coinbase, they send you BTC. Then you're free to send your BTC around if you decide the $20 transaction fee is worth it.
mudil 9y ago
CFTC and SEC classify bitcoin and other cryptocurrencies as commodities. In that case high transaction fees are appropriate. It's like handling oil or pork bellies. No joke!
- matt4077 9y ago
  I can buy pork on amazon, or in any store. Transaction costs: maybe $2.50 for shipping. The SEC's categorisation is among the most insane arguments I've heard. If you seriously believe it (which I doubt) you're engaging in some mind-bending motivated reasoning.
  - mudil 9y ago
    I actually agree with SEC. I think about bitcoin as a commodity. It's like gold, a commodity. And like gold, its storage and transfers cost money.
derefr 9y ago
They could be going long on the bet that the Lightning network will go through and turn Bitcoin into something reasonable to use for transactions again.
- wsc981 9y ago
  I am betting on this as well. If this happens and LN truly solves the big issues with Bitcoin (slow transactions, high fees), I truly believe the value of Bitcoin will sky-rocket.
  - theseatoms 9y ago
    This is my long-term expectation as well. The best criticism of "BTC as payment solution" remains fees / confirmation times. And the LN directly addresses this. But who knows how long it'll take for a critical threshold of users to adopt LN payment channels. And, of course, skeptics will just find another point of criticism, which is good because that's how technology evolves.
justboxing 9y ago
> The scaling and transaction cost issues That's why I'm bullish on Ripple ( Tick = XRP ). Transactions take about 3 seconds vs an hour on Bitcoin [1]. Plus Ripple's Blockchain technology has real use-cases with about 100 Banks around the world already using it for cross border transfers and liquidity. [1] Source: Ripple CEO on CNBC - https://www.reddit.com/r/Ripple/comments/7miikv/ripple_ceo_we_use_xrp_to_settle_liquidity_needs/ https://www.reddit.com/r/Ripple/comments/7miikv/ripple_ceo_w... Also, here's the No Paywall version of the OP https://archive.is/6BD2U https://archive.is/6BD2U
- contrarian_ 9y ago
  > Ripple Centralized.
  - konschubert 9y ago
    So what. I love decentralized crypto stuff. But let's be real, most people don't care how their payments are processed.
    - pera 9y ago
      I think those people are OK with Visa, MasterCard and PayPal.
      - konschubert 9y ago
        Yes, and this is exactly the market to go for if you wanna go beyond the speculators and crypto nerds (like me).
      - Casseres 9y ago
        So then why do those people need a cryptocurrency?
        martinko 9y ago
        They dont, thats the point.
adamnemecek 9y ago
That’s the thing bitcoin is the safe crypto investment.
Anderkent 9y ago
Bitcoin has the advantages of being the natural shelling point (the first big cryptocurrency), having a proven (if suboptimal) improvement / decision making process (many smaller ccs have not made significant changes to their tech, and so one can't know how they would handle that), not having an overly powerful scripting language. Many weaknesses in tech can be fixed or built around. Adoption, community, and trust are hard to get.
dcosson 9y ago
It seems like there's a couple of possible explanations for the continued dominance of bitcoin: 1. It's being mispriced by the market for some reason and will correct over time (i.e. it will lose valuation compared to other cryptos). This seems to have happened some in the past 2 weeks or so, but it's pretty early to see how this will play out. 2. The network effect of already being the biggest is strong enough to offset its "weaknesses" relative to other currencies. 3. The primary value of bitcoin, at least at present and in the short to medium term, is different than crypto enthusiasts believe. There is massive value in being a decentralized, secure, easily transferrable store of relatively large amounts of money, as basically a settlement layer. And there is relatively less value (at the current time) in being a new payment method to buy everything down to a cup of coffee, or powering smart contracts, or other things that crypto enthusiasts get excited about. To the extent that those things become important to the market, usage of Ethereum or other coins will increase. To the extent that privacy becomes important to the market, usage of ZCash or Monero or other coins will increase, etc. But the increases of these others won't necessarily reduce the primary value of Bitcoin itself. I personally think #3 is true, although long-term factors like the energy consumption of mining may be strong enough to render other currencies significantly better even for this primary use case.
- ThrustVectoring 9y ago
  The most important value of bitcoin is that transfers are non-repudiable. Any situation where sellers do not trust their buyers and have to eat the cost of things like credit-card chargebacks, there's a huge savings in accepting payments in a form that the buyer can't reverse. Of course, the huge dark side to that is that there's now a way to easily send money in a way you cannot reverse. This provides a huge incentive for things like kidnappers demanding their ransom in bitcoin. It's often valuable to be physically incapable of doing things. I'm long-run bearish on Bitcoin because of this analysis - the majority of its value is in something that makes governments and other coordination mechanisms interested in destroying it.
  - nicky0 9y ago
    However, another core property of Bitcoin is strong resistance to censorship and government interference, which is another big part of its value.
runeks 9y ago
> The scaling and transaction cost issues that have been on display for the past couple of months should scare anyone heavily invested in it. There are definitely issues, but no one has managed to solve them so far. A lot of competing cryptocurrencies claim to have solved the challenges that Bitcoin faces, but there hasn't been any fundamental innovation in this space since Bitcoin. Except for MimbleWimble[1], which has made advances in terms of both scalability and privacy. All other solutions out there just move further towards centralization, while in the process gaining scalability (which everyone already knows is trivially possible). [1] https://github.com/mimblewimble/grin/blob/master/doc/intro.md https://github.com/mimblewimble/grin/blob/master/doc/intro.m...
- juicyfroot 9y ago
  Bitcoin Cash solved it. As per the original whitepaper.
- xiphias 9y ago
  I wouldn't discard Bulletproofs either: https://eprint.iacr.org/2017/1066.pdf https://eprint.iacr.org/2017/1066.pdf
- edf13 9y ago
  Looks interesting until I got to this section: https://github.com/mimblewimble/grin/blob/master/doc/intro.md#change https://github.com/mimblewimble/grin/blob/master/doc/intro.m... > In the above example, you had to share your private key (the blinding factor) with Carol. In general, even though private keys should never be reused, this isn't generally very desirable. Practically, this isn't an issue because transactions include a change output. Yes - it's a change output and a new private key but it's not a great way of doing things. Also - what's with the name? MimbleWimble?
tboyd47 9y ago
Transaction costs are only a problem for one use case of Bitcoin (small payments). Other use cases, like hoarding and international remittances, aren't affected by it. Bitcoin does scale, just not in the direction everyone thinks it should, which is transactions per second. It scales spectacularly well in two important other directions: number of validating nodes and hash rate.
randyrand 9y ago
Investing in Bitcoin long-term should be seen as an investment in the community more than the protocol IMO. The bitcoin protocol is not written in stone. Bitcoin community could adopt improvements from other crypto currencies. Segwit is the tip of the iceberg. That said, the community is not very nimble...either.
runeks 9y ago
> Without serious usage, what good is it? Bitcoin is about the only cryptocurrency with serious usage, which is exactly the reason transaction fees are as high as they are.

snissn 9y ago

One analysis on bitcoin is that the entire value of the blockchain comes from the PoW powered by it. The bitcoin blockchain has so much more work that's gone into protecting it against double spending than any other blockchain. [1] https://fork.lol/pow/hashrate https://fork.lol/pow/hashrate

shepardrtc 9y ago
I used to agree with that, but at the current price levels I would say that if this is the source of value, then it is absolutely and incredibly overvalued. In addition, the PoW is centralized (for the most part) within a few massive mining operations. A 51% attack isn't an impossible notion. I know many would disagree with this, but while Bitcoin was the first of its kind, and it absolutely cleared the way for all the subsequent coins, its quickly becoming unusable. And that's not even considering the massive volatility of it. Such volatility implies that proper volumes aren't there to support its value. With that in mind, and also the notion of an aging technology, I think investing in it is not a good idea.
- travoc 9y ago
  Bitcoin has about half the volatility of its cryptocurrency peers.
  - Florin_Andrei 9y ago
    Seems normal that the little networks are more volatile.
  - bmm6o 9y ago
    You would hope, with its much higher market cap, that the volatility would be much lower than only half as much.
- Florin_Andrei 9y ago
  > A 51% attack isn't an impossible notion. I read somewhere that several bitcoin mining facilities in China, when counted together own over 50% of the hashing power currently online in the Bitcoin network. If true, collusion scenarios could easily be imagined.
  - jjxw 9y ago
    Certainly not impossible, but one thing is a disincentive to commit a 51% attack is that if you had that much computing power a more profitable use of it would be to just mine rather than create fake transactions which, if detected, could crash the value of the currency.
    - Florin_Andrei 9y ago
      > if detected How people think of that hypothetical if-then scenario depends a lot on numerous factors. I think, in places where corruption is more common, it is easier to believe it's less likely you'll get caught, or minimize the consequences when thinking about it. There's also a lower threshold for your imagination to go wandering off in that direction and begin architecting plans. "If detected, could crash the whole thing" is a way of thinking more common in cultures where the rule of law is far more established in the common mindset. I'm not making any sort of prediction (and I own bitcoin myself, though not a large amount). I'm just saying - this is how our minds work.
    - politician 9y ago
      > a disincentive to commit a 51% attack... Consider that if a state goal was to wipe out the wealth of the other 49% as a plausibly deniable economic attack, then having a majority of the mining power within your borders makes a lot of sense.
  - SkyMarshal 9y ago
    Last I checked it was around 60%. Also, Bitmain is the sole supplier of ASICs to most of the Chinese miners, and thus has some power over what those miners do or don't do (particularly in the Core vs Cash debate).
kolinko 9y ago
It's not as simple. Some networks use other hashing methods, so just comparing hash to hash is pointless - if anything, you could compare instructions per second, not hashes per second. Then, for certain hash methods, GPUs/FPGAs/ASICS give no speedup, so even if there are far fever instructions per second, they would be just as expensive to attack. Also, there are POS/DPOS, and other proof of sth networks, where it's not really about hashes, but about other resources - again, cost of attack would be a better metric here, not hashes. But most importantly - after a certain point, a network attack is so unlikely that additional security matters much less than other system properties, like speed, ability to execute smart contracts efficiently, or the ecosystem of startups around it.
- DennisP 9y ago
  Exactly. Since the point of PoW is to make 51% attacks expensive, the best measure is how expensive it would be. Ethereum is approximately equal to Bitcoin on this measure. http://www.flippening.watch/ http://www.flippening.watch/
mikeash 9y ago
That seems circular. Bitcoin's massive PoW comes from its massive value (or more precisely, the massive value of block rewards). If Bitcoin's value dropped to one cent tomorrow, the PoW would disappear. Conversely, if some altcoin's value suddenly jumped such that its mining rewards were at Bitcoin's level, it would almost instantly gain Bitcoin-level PoW. Being circular doesn't make it wrong, but it does seem like a fragile basis for value.
- derefr 9y ago
  It’s true that mining is mostly done for ROI; if you can’t make a profit by running your ASIC miner, or your GPU miner, or whatever else, then you won’t run it. That doesn’t mean, though, that Bitcoin would lose its network robustness; before BTC had any value at all, people were mining it “altruistically”, purely for the sake of adding auditing strength to the network so that they could use BTC to make transactions. The Bitcoin mainnet has far more of those plain-old CPU miner nodes than any other network, and they’d still be there even if the profit-mining operations cashed out. On the other hand, if the ASIC and GPU mining pools “went dark”, it’d always be a worry that someone would pay to start them up again just for long enough to execute a Sybil attack. But Bitcoin has been “steered” away from such attacks before with community forks, and I doubt such a future would be any different.
  - pr0zac 9y ago
    If all of the ASIC mining dropped off Bitcoin would end up with a "frisbee on the roof" problem with its difficulty scaling, ie with the current difficulty there wouldn't be enough mining power left to mine enough blocks (2016) to reach the next difficulty reset in any reasonable amount of time, effectively killing Bitcoin as its transaction throughput would grind to a halt. This is an unlikely death, but still a possible one.
    - CydeWeys 9y ago
      Why would all the ASIC mining drop off? What mechanism could cause such a thing? More generally, a severe hashpower reduction could be problematic. An emergency hard fork to a better difficulty readjustment algorithm (like what other coins use) would solve that. Ideally that change would be made before it ended up being needed.
Nursie 9y ago
Surely then a cryptocurrency that doesn't require competitive hashing for security is even better? The idea that the value comes from the energy already burned is rather silly.
- juicyfroot 9y ago
  Amd the idea that energy must be burned for entertainment ia silly too?
konschubert 9y ago
The work is for the past. The moment the transaction fees and block rewards go down, the very expensive Prof of Work mechanism will weaken and future transactions are unprotected. Proof of Stake can offer the same protection mechanism without needing to finance a huge value destruction operation. And to those saying that the electricity is not wasted because it protects the block chain: If a mechanism exists that works without throwing away electricity, then that's definitely wasted. It's like saying my monster truck doesn't waste gas because it carries a child to school.
- gt_ 9y ago
  I’m not necessarily disagreeing but what if the monster truck is carrying a child to the hospital? And the other option is to take the homemade electric hot rod your neighbor just completed yesterday?
- Robotbeat 9y ago
  > It's like saying my monster truck doesn't waste gas because it carries a child to school. Betcha that kid totally would think it's worth it, tho... Arriving to school in a monster truck would be a dream come true. :) (Not that I disagree with your point...)
- dcposch 9y ago
  > The moment the transaction fees and block rewards go down, the very expensive Prof of Work mechanism will weaken and future transactions are unprotected. Exactly. One critical, related vulnerability that I haven't seen people discuss: Right now, every new block gives miners about (12.5 new BTC + 3.5 BTC in fees) * $15,000 = $240,000 So miners are making a quarter million every ten minutes. That incentivizes massive capital expenditure on mining hardware and massive electricity burn. If the price drops significantly -- or Lightning Network etc solve the scale challenges, and transaction fees come down -- or in June 2020, when the block reward halves -- any combination of those may lead to a future where it's uneconomical to mine again, except in places where electricity is unnaturally cheap. When that happens, tons of mining equipment will fall idle. The network difficulty will adjust down, and in the immediate term Bitcoin will continue as normal. But now there's a big pool of latent hardware left over from the bubble, which can be activated at any time. This may break assumptions about the cost of attack. If, say, a Chinese mining group owns tons of hardware that is no longer economical to operate continuously, there's nothing stopping them from shorting BTC and then doing a "spawn camp" repeated 51% attack. (If you already own enough hardware, then such attacks are pretty cheap--you only have to burn tons of electricity a few times, for a few minutes each time.)
sly010 9y ago
But is there additional value in more (proof of) work or are the returns diminishing? In economic terms the best network hashrate would be the one that is sufficiently secure to protect against bad actors but uses as little electricity as possible. Anything more than that is waste, not added value. Edit: typo

ReverseCold 9y ago

Bitcoin has scaled as designed, but it was not designed to handle this many transactions. As such, some transactions are slower (as designed). If you need fast transactions, use a currency designed for a higher TPS.

cloakandswagger 9y ago

I have hope that Bitcoin's scaling issues will be solved eventually, though as we've seen it's going to be a slow, arduous process to get consensus among the various factions. If and when they are solved, the incredible hashing power of the network plus the massive amount of Bitcoin software and support should restore its reputation as the premier cryptocurrency.

Nursie 9y ago
How does the hashing power give it value? AFAICT it's the other way around - the value makes more hashing economically viable.
- cloakandswagger 9y ago
  They're complimentary. Bitcoin attracted lots of hashing power due to its value, and its value is reinforced by its hashing power/network security.

mikedubc 9y ago

Which cryptos are you looking at that are better than bitcoin in dealing with the scaling and transaction cost issues? I'm watching BitShares pretty closely.

yagodragon 9y ago
you should check https://raiblocks.net/ https://raiblocks.net/
CryoLogic 9y ago
IOTA is probably the best at both of those
- zby 9y ago
  So far IOTA is centralized, it relies on snapshots. It is just my intuition - but it does not look like "the tangle" could ever be decentralized - there is just no mechanism that would protect the network from bad actors.
- duskwuff 9y ago
  Given that it currently depends on a centralized coordinator, that seems unlikely.
- StavrosK 9y ago
  Have you actually tried to use IOTA? It's really bad, you get different balances depending on which node you connect to, sending is weird, odd things like that.
shepardrtc 9y ago
Ripple https://ripple.com/xrp/market-performance/ https://ripple.com/xrp/market-performance/
- randyrand 9y ago
  Isn't it closed source and run by a single corporation? What's the benefit of being tied to a block chain if for a centralized currency? Just copy the current visa/banking system and you're good to go.

guelo 9y ago

It's great for speculation. Maybe there's some new speculation related innovation that can be developed on bitcoin.

sillysaurus3 9y ago

Ok, what's going on here is that people have this expectation of Bitcoin not based in reality. Bitcoin was not designed to be a high-throughput currency. It's a store of value. You put your money in it and let it sit. That's it. If you don't want to do that, don't use it. But that's what it's for. Or at least what it's evolved into. I think it can cause a gigantic speculative bubble that will put people like Thiel in control over even more wealth in the world than they already have – if BTC goes to $1M/coin, what do you think will happen? $10M? There's no upper limit. But that's a separate issue. Bitcoin doesn't have to do anything except what it was designed to do. And it was designed this way. Satoshi certainly thought through this scenario and specifically decided to do this, and not something else. So those who are putting money into BTC are betting on Satoshi's original vision. Now, do you think Satoshi really believed BTC would be the only crypto? I think he knew others would spring up. He solved the byzantine generals problem with sybil resistance. Of course he knew others could solve it too, in slightly different ways. So I think he just said "Well, let them do that." And hence, use different cryptos for different circumstances.

debt 9y ago
"It's a store of value." Maybe this was the intention all along, but this idea has only recently reached some saturation among information channels. Because I haven't heard much about "store of value" until about a month ago. Which seems to be either a shifting of goalposts which is bad, or a complete morphing of why people are interesting in crypto which is even worse. It means, people are scrambling trying to justify why the hell they're throwing all their money at crypto.
phpnode 9y ago
Where does this "bitcoin is a store of value, not a medium for exchange" nonsense come from? Literally the first line of the white paper: > A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
- sillysaurus3 9y ago
  And it is. When you pay Coinbase, they send you BTC. Then you're free to send your BTC around if you decide the $20 transaction fee is worth it.

mudil 9y ago

CFTC and SEC classify bitcoin and other cryptocurrencies as commodities. In that case high transaction fees are appropriate. It's like handling oil or pork bellies. No joke!

matt4077 9y ago
I can buy pork on amazon, or in any store. Transaction costs: maybe $2.50 for shipping. The SEC's categorisation is among the most insane arguments I've heard. If you seriously believe it (which I doubt) you're engaging in some mind-bending motivated reasoning.
- mudil 9y ago
  I actually agree with SEC. I think about bitcoin as a commodity. It's like gold, a commodity. And like gold, its storage and transfers cost money.

derefr 9y ago

They could be going long on the bet that the Lightning network will go through and turn Bitcoin into something reasonable to use for transactions again.

wsc981 9y ago
I am betting on this as well. If this happens and LN truly solves the big issues with Bitcoin (slow transactions, high fees), I truly believe the value of Bitcoin will sky-rocket.
- theseatoms 9y ago
  This is my long-term expectation as well. The best criticism of "BTC as payment solution" remains fees / confirmation times. And the LN directly addresses this. But who knows how long it'll take for a critical threshold of users to adopt LN payment channels. And, of course, skeptics will just find another point of criticism, which is good because that's how technology evolves.

justboxing 9y ago

> The scaling and transaction cost issues That's why I'm bullish on Ripple ( Tick = XRP ). Transactions take about 3 seconds vs an hour on Bitcoin [1]. Plus Ripple's Blockchain technology has real use-cases with about 100 Banks around the world already using it for cross border transfers and liquidity. [1] Source: Ripple CEO on CNBC - https://www.reddit.com/r/Ripple/comments/7miikv/ripple_ceo_we_use_xrp_to_settle_liquidity_needs/ https://www.reddit.com/r/Ripple/comments/7miikv/ripple_ceo_w... Also, here's the No Paywall version of the OP https://archive.is/6BD2U https://archive.is/6BD2U

contrarian_ 9y ago
> Ripple Centralized.
- konschubert 9y ago
  So what. I love decentralized crypto stuff. But let's be real, most people don't care how their payments are processed.
  - pera 9y ago
    I think those people are OK with Visa, MasterCard and PayPal.
    - konschubert 9y ago
      Yes, and this is exactly the market to go for if you wanna go beyond the speculators and crypto nerds (like me).
    - Casseres 9y ago
      So then why do those people need a cryptocurrency?
      - martinko 9y ago
        They dont, thats the point.

adamnemecek 9y ago

That’s the thing bitcoin is the safe crypto investment.

Anderkent 9y ago

Bitcoin has the advantages of being the natural shelling point (the first big cryptocurrency), having a proven (if suboptimal) improvement / decision making process (many smaller ccs have not made significant changes to their tech, and so one can't know how they would handle that), not having an overly powerful scripting language. Many weaknesses in tech can be fixed or built around. Adoption, community, and trust are hard to get.

dcosson 9y ago

It seems like there's a couple of possible explanations for the continued dominance of bitcoin: 1. It's being mispriced by the market for some reason and will correct over time (i.e. it will lose valuation compared to other cryptos). This seems to have happened some in the past 2 weeks or so, but it's pretty early to see how this will play out. 2. The network effect of already being the biggest is strong enough to offset its "weaknesses" relative to other currencies. 3. The primary value of bitcoin, at least at present and in the short to medium term, is different than crypto enthusiasts believe. There is massive value in being a decentralized, secure, easily transferrable store of relatively large amounts of money, as basically a settlement layer. And there is relatively less value (at the current time) in being a new payment method to buy everything down to a cup of coffee, or powering smart contracts, or other things that crypto enthusiasts get excited about. To the extent that those things become important to the market, usage of Ethereum or other coins will increase. To the extent that privacy becomes important to the market, usage of ZCash or Monero or other coins will increase, etc. But the increases of these others won't necessarily reduce the primary value of Bitcoin itself. I personally think #3 is true, although long-term factors like the energy consumption of mining may be strong enough to render other currencies significantly better even for this primary use case.

ThrustVectoring 9y ago
The most important value of bitcoin is that transfers are non-repudiable. Any situation where sellers do not trust their buyers and have to eat the cost of things like credit-card chargebacks, there's a huge savings in accepting payments in a form that the buyer can't reverse. Of course, the huge dark side to that is that there's now a way to easily send money in a way you cannot reverse. This provides a huge incentive for things like kidnappers demanding their ransom in bitcoin. It's often valuable to be physically incapable of doing things. I'm long-run bearish on Bitcoin because of this analysis - the majority of its value is in something that makes governments and other coordination mechanisms interested in destroying it.
- nicky0 9y ago
  However, another core property of Bitcoin is strong resistance to censorship and government interference, which is another big part of its value.

runeks 9y ago

> The scaling and transaction cost issues that have been on display for the past couple of months should scare anyone heavily invested in it. There are definitely issues, but no one has managed to solve them so far. A lot of competing cryptocurrencies claim to have solved the challenges that Bitcoin faces, but there hasn't been any fundamental innovation in this space since Bitcoin. Except for MimbleWimble[1], which has made advances in terms of both scalability and privacy. All other solutions out there just move further towards centralization, while in the process gaining scalability (which everyone already knows is trivially possible). [1] https://github.com/mimblewimble/grin/blob/master/doc/intro.md https://github.com/mimblewimble/grin/blob/master/doc/intro.m...

juicyfroot 9y ago
Bitcoin Cash solved it. As per the original whitepaper.
xiphias 9y ago
I wouldn't discard Bulletproofs either: https://eprint.iacr.org/2017/1066.pdf https://eprint.iacr.org/2017/1066.pdf
edf13 9y ago
Looks interesting until I got to this section: https://github.com/mimblewimble/grin/blob/master/doc/intro.md#change https://github.com/mimblewimble/grin/blob/master/doc/intro.m... > In the above example, you had to share your private key (the blinding factor) with Carol. In general, even though private keys should never be reused, this isn't generally very desirable. Practically, this isn't an issue because transactions include a change output. Yes - it's a change output and a new private key but it's not a great way of doing things. Also - what's with the name? MimbleWimble?

tboyd47 9y ago

Transaction costs are only a problem for one use case of Bitcoin (small payments). Other use cases, like hoarding and international remittances, aren't affected by it. Bitcoin does scale, just not in the direction everyone thinks it should, which is transactions per second. It scales spectacularly well in two important other directions: number of validating nodes and hash rate.

randyrand 9y ago

Investing in Bitcoin long-term should be seen as an investment in the community more than the protocol IMO. The bitcoin protocol is not written in stone. Bitcoin community could adopt improvements from other crypto currencies. Segwit is the tip of the iceberg. That said, the community is not very nimble...either.

runeks 9y ago

> Without serious usage, what good is it? Bitcoin is about the only cryptocurrency with serious usage, which is exactly the reason transaction fees are as high as they are.