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The problem with the comparison to Visa and Mastercard, is that settlement is never really final with those services. A transaction can be reversed even 6 month

The problem with the comparison to Visa and Mastercard, is that settlement is never really final with those services. A transaction can be reversed even 6 months down the line, as anyone who runs a business probably knows. The cost of fraud-protection offered by these companies is the reason Bitcoin was proposed as a cheaper alternative. By making transactions final, the cost of fraud protection is put on the participants between each transaction, and not on every network user as a whole. Bitcoin can be expensive to transact small volumes when the network is busy. This is due to a limitation in the amount of transaction data that can fit into a block, and blocks are limited to 10 minutes on average. A transaction fee however, is not measured as a percentage of the value being transferred, but is measured in the bytes occupied in a block. Since the transaction amount is just a 64-bit value, the transaction fees are the same whether you're transferring $1 or $1M. In the latter case, it will be far cheaper than existing payment processors and banking settlement systems. This is why Bitcoin has emerged to become a settlement layer for larger value transactions, because block space is valuable (it costs money to replicate and store over hundreds of thousands of machines). People looking for a cheap payment processor for smaller value transactions are looking at solutions other than Bitcoin. The trade-off is that to scale their own blockchains, they deprioritize decentralization (fundamental to Bitcoin), or they print own currency (undermining the idea of finite supply). Since anyone can do this, it becomes difficult to tell which are scams. As more and more blockchains exist, the value accrued in each blockchain will become less and less as it gets shared between them. The logical conclusion is that the value of tokens in this myriad of chains will converge to nothing. On the other hand, if you could make a payment processor which does not undermine Bitcoin's decentralization or limited supply, then perhaps this would enable small, cheap transactions at a global scale. This is what the Lightning Network, among other solutions, are aiming to provide.

landryraccoon 8y ago
> A transaction can be reversed even 6 months down the line, as anyone who runs a business probably knows. This is a feature, not a bug. I'd want to see evidence that the total cost of fraud in crypto is less per user than the cost of fraud in traditional credit. I would guess that the cost of fraud in traditional credit is actually far lower because reversibility reduces the incentive to commit fraud. It's very difficult to steal money from someone's account because they can dispute the charge and get it back. Compare that to the case where your crypto account is hacked. There is zero recourse, the thief generally gets away with it scott free, so the incentives to commit fraud are huge.
- nicky0 8y ago
  Visa's reversibility is a feature, just as Bitcoin's irreversibility is a feature. They are quite different systems with different goals, and so comparing their properties in isolation such as transactions/second is not particularly illuminating.
- sparkie 8y ago
  It might be a feature if you're a consumer worried about having your card stolen. If you're a business, it's a bug. Ideally, you would prefer to not even accept credit card payments and only accept cleared funds, but since you'll potentially lose out on business by not accepting credit card payments, you have to take the risk sometimes. Reversibility does not reduce the incentive to commit fraud, it just enables it. People can use stolen credit cards to purchase real goods, and the seller usually ends up footing all of the cost. Bitcoin puts business first. You don't need to depend on Visa doing their (useless) fraud investigations anymore. You take payment, and you decide whether or not to return it. Anyone who isn't willing to provide the money up front can pay the additional escrow fee.
  - dan1234 8y ago
    As a consumer, why would I choose Bitcoin when it gives me less protection than Visa/MC?
    - sparkie 8y ago
      Because it allows you to save money without it losing value in the long term. That is, bad government policy cannot reduce the value of your Bitcoin by printing more of it.
      - mythrwy 8y ago
        Unless you buy at the wrong time, then it loses a lot of value quickly. The international decentralized non-government issued aspects of cryptocurrencies are cool though. As many scams as are in the space, there really is a seed of a neat idea.
notyourday 8y ago
> Since the transaction amount is just a 64-bit value, the transaction fees are the same whether you're transferring $1 or $1M. In the latter case, it will be far cheaper than existing payment processors and banking settlement systems. Large transactions in the US are done via wire transfers ($10-$20 charge against the account, offset via interest on balances of the cash management accounts) or via ACH transactions which cost about $0.25 also offset via interest on the balances of cash management accounts. No one is running transactions that exceed several thousand dollars via credit card settlement networks.
- bduerst 8y ago
  You're being downvoted, but its true - many CC and Debit card services have built in stop gaps that restrict the maximum transaction amounts, usually around $2,000. (You can temporarily remove these with a quick phone call)
  - nradov 8y ago
    What cards are those? I've made purchases significantly larger than $2K on several different Visa and American Express cards with no phone call necessary.
bduerst 8y ago
>Lightning The lightning network is a terrible workaround because it doesn't scale with users, which is a massive flaw: - With lightning: 2 people can only send 200,000,000 transactions in 20-30 minutes. - With lightning: 200,000,000 people can only send 2 transactions every 660 days. Imagine if the population of the U.S. used lightning, then you would only get to buy anything twice every two years. Lightning is an overengineered, failed 3rd-party solution tacked on to a cryptocurrency (bitcoin) to solve a problem that other cryptocurrencies have already solved.
- sparkie 8y ago
  There is no transaction limit for lightning payments. The quantity of payments through Lightning is limited only by computing and network resources along the routes. There are limitations on opening and closing the lightning channels. That's another issue which is being worked on in various ways. I'm not claiming it's a panacea, only one useful approach, out of potentially many.
  - badge 8y ago
    The lightening network inherently suffers from limitations on transaction rates and an inability to scale up. https://en.wikipedia.org/wiki/Race_condition https://en.wikipedia.org/wiki/Race_condition It's one of the most basic computer bugs, and LN design is incompatible with a fix for race conditions due to decentralization. There's also the aspect that the Lightening Network's design inevitably turns it into a banking network, designed to extract fees for the wealthy. https://youtu.be/Ug8NH67_EfE?t=623 https://youtu.be/Ug8NH67_EfE?t=623
    - eudora 8y ago
      You've made this claim with no evidence or detail at all.
      - badge 8y ago
        Anyone who knows how routing on the internet works can explain to you why the internet requires trusted backbones to route, and even then packets are dropped and bad routes happen. How then can a decentralized PAYMENT network preform better then routing on the trusted internet (which exists at layers below the lightening network)... in an adversarial decentralized global payment network, information does not propagate instantaneously. As transaction rates increase, race conditions will increasingly clog the network. There is no way to fix this as information takes time to travel across the network and because this is a payment network, all nodes are constantly shifting funds around. Optimizing away from race conditions inevitably requires a large enough pool of liquid capital that its only solution is for all nodes to connect to a single central hub, or a small number of centralized hubs large enough to support all users and all clients. This is not designed for a peer to peer system and there is no other solution. This can be verified though rudimentary modeling simulations of random nodes, and more so when node sizes are limited to what a normal person would have in a small amount of cash at any given time, or even a sum deposited into a checking account. The way Lightening Network is designed, is predictably to benefit capital holders with enough excess capital to act as the backbone hubs. Normal users will be unable to bypass the Bitcoin banking/payment processor LN hubs and unable to reliably route though peer to peer paths on the LN. This presumably is intended to enrich the Bitcoin oligarchs as a passive way to extract rent and wealth on the network simply for controlling existing capital. This design choice indicates either a comic level of negligence, or intent to shift away from p2p to centralized information control.
CogitoCogito 8y ago
Nicely put. Unfortunately much of the back and forth below about which system is really better due to [insert reason here] misses the point here. The different systems are optimized to different use cases. E.g. sometimes you want reversibility sometimes not. It all depends on your needs and desires.
puranjay 8y ago
> By making transactions final, the cost of fraud protection is put on the participants between each transaction That would make me not want to buy anything with Bitcoin, knowing that there is nothing I can do in case I get stuck with a lemon

landryraccoon 8y ago

> A transaction can be reversed even 6 months down the line, as anyone who runs a business probably knows. This is a feature, not a bug. I'd want to see evidence that the total cost of fraud in crypto is less per user than the cost of fraud in traditional credit. I would guess that the cost of fraud in traditional credit is actually far lower because reversibility reduces the incentive to commit fraud. It's very difficult to steal money from someone's account because they can dispute the charge and get it back. Compare that to the case where your crypto account is hacked. There is zero recourse, the thief generally gets away with it scott free, so the incentives to commit fraud are huge.

nicky0 8y ago
Visa's reversibility is a feature, just as Bitcoin's irreversibility is a feature. They are quite different systems with different goals, and so comparing their properties in isolation such as transactions/second is not particularly illuminating.
sparkie 8y ago
It might be a feature if you're a consumer worried about having your card stolen. If you're a business, it's a bug. Ideally, you would prefer to not even accept credit card payments and only accept cleared funds, but since you'll potentially lose out on business by not accepting credit card payments, you have to take the risk sometimes. Reversibility does not reduce the incentive to commit fraud, it just enables it. People can use stolen credit cards to purchase real goods, and the seller usually ends up footing all of the cost. Bitcoin puts business first. You don't need to depend on Visa doing their (useless) fraud investigations anymore. You take payment, and you decide whether or not to return it. Anyone who isn't willing to provide the money up front can pay the additional escrow fee.
- dan1234 8y ago
  As a consumer, why would I choose Bitcoin when it gives me less protection than Visa/MC?
  - sparkie 8y ago
    Because it allows you to save money without it losing value in the long term. That is, bad government policy cannot reduce the value of your Bitcoin by printing more of it.
    - mythrwy 8y ago
      Unless you buy at the wrong time, then it loses a lot of value quickly. The international decentralized non-government issued aspects of cryptocurrencies are cool though. As many scams as are in the space, there really is a seed of a neat idea.

notyourday 8y ago

> Since the transaction amount is just a 64-bit value, the transaction fees are the same whether you're transferring $1 or $1M. In the latter case, it will be far cheaper than existing payment processors and banking settlement systems. Large transactions in the US are done via wire transfers ($10-$20 charge against the account, offset via interest on balances of the cash management accounts) or via ACH transactions which cost about $0.25 also offset via interest on the balances of cash management accounts. No one is running transactions that exceed several thousand dollars via credit card settlement networks.

bduerst 8y ago
You're being downvoted, but its true - many CC and Debit card services have built in stop gaps that restrict the maximum transaction amounts, usually around $2,000. (You can temporarily remove these with a quick phone call)
- nradov 8y ago
  What cards are those? I've made purchases significantly larger than $2K on several different Visa and American Express cards with no phone call necessary.

bduerst 8y ago

>Lightning The lightning network is a terrible workaround because it doesn't scale with users, which is a massive flaw: - With lightning: 2 people can only send 200,000,000 transactions in 20-30 minutes. - With lightning: 200,000,000 people can only send 2 transactions every 660 days. Imagine if the population of the U.S. used lightning, then you would only get to buy anything twice every two years. Lightning is an overengineered, failed 3rd-party solution tacked on to a cryptocurrency (bitcoin) to solve a problem that other cryptocurrencies have already solved.

sparkie 8y ago
There is no transaction limit for lightning payments. The quantity of payments through Lightning is limited only by computing and network resources along the routes. There are limitations on opening and closing the lightning channels. That's another issue which is being worked on in various ways. I'm not claiming it's a panacea, only one useful approach, out of potentially many.
- badge 8y ago
  The lightening network inherently suffers from limitations on transaction rates and an inability to scale up. https://en.wikipedia.org/wiki/Race_condition https://en.wikipedia.org/wiki/Race_condition It's one of the most basic computer bugs, and LN design is incompatible with a fix for race conditions due to decentralization. There's also the aspect that the Lightening Network's design inevitably turns it into a banking network, designed to extract fees for the wealthy. https://youtu.be/Ug8NH67_EfE?t=623 https://youtu.be/Ug8NH67_EfE?t=623
  - eudora 8y ago
    You've made this claim with no evidence or detail at all.
    - badge 8y ago
      Anyone who knows how routing on the internet works can explain to you why the internet requires trusted backbones to route, and even then packets are dropped and bad routes happen. How then can a decentralized PAYMENT network preform better then routing on the trusted internet (which exists at layers below the lightening network)... in an adversarial decentralized global payment network, information does not propagate instantaneously. As transaction rates increase, race conditions will increasingly clog the network. There is no way to fix this as information takes time to travel across the network and because this is a payment network, all nodes are constantly shifting funds around. Optimizing away from race conditions inevitably requires a large enough pool of liquid capital that its only solution is for all nodes to connect to a single central hub, or a small number of centralized hubs large enough to support all users and all clients. This is not designed for a peer to peer system and there is no other solution. This can be verified though rudimentary modeling simulations of random nodes, and more so when node sizes are limited to what a normal person would have in a small amount of cash at any given time, or even a sum deposited into a checking account. The way Lightening Network is designed, is predictably to benefit capital holders with enough excess capital to act as the backbone hubs. Normal users will be unable to bypass the Bitcoin banking/payment processor LN hubs and unable to reliably route though peer to peer paths on the LN. This presumably is intended to enrich the Bitcoin oligarchs as a passive way to extract rent and wealth on the network simply for controlling existing capital. This design choice indicates either a comic level of negligence, or intent to shift away from p2p to centralized information control.

CogitoCogito 8y ago

Nicely put. Unfortunately much of the back and forth below about which system is really better due to [insert reason here] misses the point here. The different systems are optimized to different use cases. E.g. sometimes you want reversibility sometimes not. It all depends on your needs and desires.

puranjay 8y ago

> By making transactions final, the cost of fraud protection is put on the participants between each transaction That would make me not want to buy anything with Bitcoin, knowing that there is nothing I can do in case I get stuck with a lemon