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Bitcoin has two incredible properties. Most critics downplay the first, and never even mention the second. One is that amounts, tiny or astronomical can be sa

by krupan 6y ago

Bitcoin has two incredible properties. Most critics downplay the first, and never even mention the second. One is that amounts, tiny or astronomical can be safely transferred and settled without trusted 3rd parties, in a matter of minutes. I think people know this. The other property is that it is completely impossible to counterfeit it. There is no possible way to fake bitcoin. You can try claiming you own bitcoin that doesn't exist, but if someone wants proof, there is no way for you to fake it. There is no way to counterfeit it with clever artistic skill, specialized machinery, nothing that can do this. This also means that if you own bitcoin (meaning you control the keys), you really own it. You don't own some promise of future bitcoin payment, an entry in a volatile database at your bank or brokerage, an IOU, or some faked certificate. You own real, trivially verifiable, bitcoin. Also, no trusted 3rd party is needed to ensure this. That is the value of bitcoin.

Robotbeat 6y ago
Tiny amounts literally cannot be settled in minutes. To get a transaction in an hour requires a much higher transaction fee ($11 as of my writing now) than an equivalent Visa purchase (which clears faster). I can buy a $1 (fee-inclusive) candy bar with a Visa from a vending machine and the transaction costs literally pennies and is approved in seconds with no prior relationship with the owner of the vending machine. You can argue $10-100 is “tiny,” if you like, but as Bitcoin is today, it is only really useful for large transfers. Or perhaps medium sized transfers if you live in a place like Venezuela. This is less true even for other blockchain-based cryptocurrencies for two reasons: 1) they’re less popular so less demand for transactions 2) they use a larger blocksize and/or shorter time between blocks (both of which have drawbacks and limits). Regardless of what the Satoshi white paper said, base blockchain simply doesn’t scale well globally for small transactions. Currently still doable for medium and large transactions, but if 7 billion people used Bitcoin as it is now (limited to 7 transactions per second), they could only settle to the blockchain once every billion seconds on average (a billion seconds is over thirty years).
- spmurrayzzz 6y ago
  I do think there's a use case for zero-confirmation transactions which, although are not settled fully, have to pass a long list of acceptance rules to be fully propagated to the mempool across the network. While this doesn't have the full double spend protection that you get after 6+ confirmations— its arguably reasonable enough to use network mempool quorum for buying a cup of coffee. Beyond that though, there are a number of solutions at layer 2 that can be used here as well, lightning network being the most widely used at this point.
  - Robotbeat 6y ago
    Right. The solution to small transactions is to use another thing which is not Bitcoin (although I suppose if you felt like it you could denominate it in Bitcoins without settling the transaction...). And/or compromise on the decentralized trustlessness thing.
    - spmurrayzzz 6y ago
      Well thats not entirely true. Lightning network _does_ use bitcoin smart contracts settled on-chain as a way to provide more liquidity for efficient payment routing. So it is bootstrapped to the same decentralization/trustlessness (mostly). The analogy here is that its like saying: using TCP (layer 4) for transport reliability isn't giving up on IP (layer 3), its building on top of it. You still get the benefits of the basal level protocol.
- krupan 6y ago
  "an equivalent Visa purchase (which clears faster)" How long does it take for a Visa purchase to clear equivalently to bitcoin? I think to be equivalent to bitcoin it would have to be, I have some cash, and now someone else has that cash. Not a promise of cash. Not a balance in my bank's database. Actual cash. How long does that take using the Visa network? EDIT: also, what are all the costs involved in that Visa transaction? Payer has to travel to an ATM, deposit cash, Payee has to set up a merchant account or use stripe or something, they have to travel to an ATM, withdraw cash, etc., etc.

by krupan 6y ago

Robotbeat 6y ago

Tiny amounts literally cannot be settled in minutes. To get a transaction in an hour requires a much higher transaction fee ($11 as of my writing now) than an equivalent Visa purchase (which clears faster). I can buy a $1 (fee-inclusive) candy bar with a Visa from a vending machine and the transaction costs literally pennies and is approved in seconds with no prior relationship with the owner of the vending machine. You can argue $10-100 is “tiny,” if you like, but as Bitcoin is today, it is only really useful for large transfers. Or perhaps medium sized transfers if you live in a place like Venezuela. This is less true even for other blockchain-based cryptocurrencies for two reasons: 1) they’re less popular so less demand for transactions 2) they use a larger blocksize and/or shorter time between blocks (both of which have drawbacks and limits). Regardless of what the Satoshi white paper said, base blockchain simply doesn’t scale well globally for small transactions. Currently still doable for medium and large transactions, but if 7 billion people used Bitcoin as it is now (limited to 7 transactions per second), they could only settle to the blockchain once every billion seconds on average (a billion seconds is over thirty years).

spmurrayzzz 6y ago
I do think there's a use case for zero-confirmation transactions which, although are not settled fully, have to pass a long list of acceptance rules to be fully propagated to the mempool across the network. While this doesn't have the full double spend protection that you get after 6+ confirmations— its arguably reasonable enough to use network mempool quorum for buying a cup of coffee. Beyond that though, there are a number of solutions at layer 2 that can be used here as well, lightning network being the most widely used at this point.
- Robotbeat 6y ago
  Right. The solution to small transactions is to use another thing which is not Bitcoin (although I suppose if you felt like it you could denominate it in Bitcoins without settling the transaction...). And/or compromise on the decentralized trustlessness thing.
  - spmurrayzzz 6y ago
    Well thats not entirely true. Lightning network _does_ use bitcoin smart contracts settled on-chain as a way to provide more liquidity for efficient payment routing. So it is bootstrapped to the same decentralization/trustlessness (mostly). The analogy here is that its like saying: using TCP (layer 4) for transport reliability isn't giving up on IP (layer 3), its building on top of it. You still get the benefits of the basal level protocol.
krupan 6y ago
"an equivalent Visa purchase (which clears faster)" How long does it take for a Visa purchase to clear equivalently to bitcoin? I think to be equivalent to bitcoin it would have to be, I have some cash, and now someone else has that cash. Not a promise of cash. Not a balance in my bank's database. Actual cash. How long does that take using the Visa network? EDIT: also, what are all the costs involved in that Visa transaction? Payer has to travel to an ATM, deposit cash, Payee has to set up a merchant account or use stripe or something, they have to travel to an ATM, withdraw cash, etc., etc.