5 ms·

I don't know how Bitcoin transactions work, but can a company (like Paypal) buy bunch of bitcoins (10000), and then proceed to do all transaction internally wit

I don't know how Bitcoin transactions work, but can a company (like Paypal) buy bunch of bitcoins (10000), and then proceed to do all transaction internally with their own ledger mechanism without depending on other networks?, wouldn't this allow anybody within paypal network to send/receive super fast?

unwoundmouse 5y ago
Yeah that's how all centralized crypto exchanges do it
- CSSer 5y ago
  What if there's a run on the exchange?
  - ChainOfFools 5y ago
    they suddenly have a 'technical issue' and suspend trading until it is 'fixed.' sometimes its never fixed and the exchange founder mysteriously disappears to Thailand or dies, or claims to start an orphanage in india. sometimes all three.
  - wmf 5y ago
    If the blockchain gets backed up it would take a few days to get money in/out of exchanges.
  - beiller 5y ago
    I don't think there can theoretically be a run on the exchange because in theory all the deposits are there, in the exchange, in theory, unlike a bank which only had a fraction of the deposited money in reserve. A run on a crypto exchange would be great for them considering they usually charge a withdrawal fee.
    - CyberDildonics 5y ago
      Those aren't withdrawal fees, those are transaction fees for the network. Most cryptocurrencies cost next to nothing for each transaction, while bitcoin and ethereum cost from $20 - $60 USD for the average transaction.
      - beiller 5y ago
        No I'm not confusing it. My exchange and all other exchanges charge a fee to withdrawal money. Its usually quite large.
        CyberDildonics 5y ago
        Again, that fee is not something the exchange is charging you. The fee doesn't go to them. If it is bitcoin or ethereum there are very high fees for each transaction. The exchange is showing you those fees in your native currency. They aren't getting that money, it is going to the miners.
        beiller 5y ago
        No you still are misunderstanding what I'm saying. The text on the exchange for me is like "We charge 0.05% fee on all withdrawals NOT INCLUDING the transaction fee to send to your wallet".
        CyberDildonics 5y ago
        If you are not talking about the spread between exchanging two currencies, that should be a GIANT red flag to not use that exchange.
  - smabie 5y ago
    They pause withdrawals while they get their coins out of cold storage. Or if the exchange isn't fully collateralized, it's a scam and goes under.
  - boc 5y ago
    Just in case you aren't catching on here, cryptocurrencies are not the future. They are just digital tulips - beautiful to look at and comprehend, but separate from any meaningful contribution to the economic system. You can still get rich from them by hyping and selling them before people catch on more broadly. Civilization works because of laws that are interpreted by courts and norms which are broadly accepted but not often checked/enforced. Crypto is trying to create a "trustless" future where you do not need society to coordinate and regulate. Our modern financial system needs that squishiness/trust which you get from the legal system to operate at full capacity. Picture the suspension of a car. In our modern financial world, the legal system and regulatory institutions serve as the shocks and struts of your car. It allows you to drive fast while not having to worry about every imperfection on the road. Cryptocurency is like driving a car where your wheels are attached directly to the axel - yes it's perfectly efficient and there's nothing between you and the road, but that also means you have to be exceptionally careful where you are driving, and you can't do it fast. There's a reason all cars come with suspensions.
quadcore 5y ago
This is basically the principle behind a tech on top of bitcoin called lighning network: https://lightning.network https://lightning.network
CrLf 5y ago
That’s how traditional financial systems work.
MereInterest 5y ago
Correct. This adds a point of centralization, which defeats the entire purpose of cryptocurrency. As far as I can tell, cryptocurrency is based on wanting (1) a shared database that (2) can be updated by anyone within specific rules and (3) doesn't require anybody to trust anybody else. In the same way that low-trust societies have a much bigger overhead as a result of the lack of trust, I do not think cryptocurrencies are feasible while holding to (3) without massive, massive expenditure as a result.
- CSSer 5y ago
  > without massive, massive expenditure as a result. Could you elaborate on this? The problem I foresee is that having someone you have to trust is not a bad thing because at least you're able to identify that entity's traits and act accordingly. If that entity is, for example, the world's largest military power, I might feel like I have a lot less to worry about than if they're, as another example, a publicly traded company about half the size of the average major U.S. bank. Is this what you're alluding to?
  - MereInterest 5y ago
    In general, the more people cooperate, the better the results are overall. The downside is that the more people cooperate, the more they can be taken advantage of by defectors, by bad actors who decide to harm the public good in exchange for personal benefit. I absolutely agree that being able to trust particular actors is a huge benefit. Part of the problem is language. "Trust" isn't just trust in a particular actor's intent, but also in their capabilities to carry through on a promise. In order to trust somebody to carry out a promise, you need to indirectly trust on others not to interfere with that promise. In this case, if you don't trust the US government to handle currency, then you certainly can't trust a publicly traded company that is beholding to work within and has assets that can be seized by the US government. If you assume ill-intent on the part of the government, then there's no reason to assume that a smaller actor wouldn't be influenced by the government. In this case, I trust the US government to manage currency well, because it is in its best interest to do so.
- tshaddox 5y ago
lottin 5y ago
The whole selling point of bitcoin is that it's a decentralised ledger that isn't owned by anybody. If the transactions are managed by a central entity, then that's no longer true. For example, what's to stop such an entity from creating bitcoins out of nothing and thus debasing the bitcoin currency?
- MereInterest 5y ago
  Absolutely nothing is preventing it. Depending on your viewpoint, it happened back in 2014, and somehow the cryptocurrency community just sort of shrugged and got back to wildly speculating. https://en.wikipedia.org/wiki/Mt._Gox https://en.wikipedia.org/wiki/Mt._Gox
hgfxgkgc 5y ago
Paypal already does this with bitcoin.

unwoundmouse 5y ago

Yeah that's how all centralized crypto exchanges do it

CSSer 5y ago
What if there's a run on the exchange?
- ChainOfFools 5y ago
  they suddenly have a 'technical issue' and suspend trading until it is 'fixed.' sometimes its never fixed and the exchange founder mysteriously disappears to Thailand or dies, or claims to start an orphanage in india. sometimes all three.
- wmf 5y ago
  If the blockchain gets backed up it would take a few days to get money in/out of exchanges.
- beiller 5y ago
  I don't think there can theoretically be a run on the exchange because in theory all the deposits are there, in the exchange, in theory, unlike a bank which only had a fraction of the deposited money in reserve. A run on a crypto exchange would be great for them considering they usually charge a withdrawal fee.
  - CyberDildonics 5y ago
    Those aren't withdrawal fees, those are transaction fees for the network. Most cryptocurrencies cost next to nothing for each transaction, while bitcoin and ethereum cost from $20 - $60 USD for the average transaction.
    - beiller 5y ago
      No I'm not confusing it. My exchange and all other exchanges charge a fee to withdrawal money. Its usually quite large.
      - CyberDildonics 5y ago
        Again, that fee is not something the exchange is charging you. The fee doesn't go to them. If it is bitcoin or ethereum there are very high fees for each transaction. The exchange is showing you those fees in your native currency. They aren't getting that money, it is going to the miners.
        beiller 5y ago
        No you still are misunderstanding what I'm saying. The text on the exchange for me is like "We charge 0.05% fee on all withdrawals NOT INCLUDING the transaction fee to send to your wallet".
        CyberDildonics 5y ago
        If you are not talking about the spread between exchanging two currencies, that should be a GIANT red flag to not use that exchange.
- smabie 5y ago
  They pause withdrawals while they get their coins out of cold storage. Or if the exchange isn't fully collateralized, it's a scam and goes under.
- boc 5y ago
  Just in case you aren't catching on here, cryptocurrencies are not the future. They are just digital tulips - beautiful to look at and comprehend, but separate from any meaningful contribution to the economic system. You can still get rich from them by hyping and selling them before people catch on more broadly. Civilization works because of laws that are interpreted by courts and norms which are broadly accepted but not often checked/enforced. Crypto is trying to create a "trustless" future where you do not need society to coordinate and regulate. Our modern financial system needs that squishiness/trust which you get from the legal system to operate at full capacity. Picture the suspension of a car. In our modern financial world, the legal system and regulatory institutions serve as the shocks and struts of your car. It allows you to drive fast while not having to worry about every imperfection on the road. Cryptocurency is like driving a car where your wheels are attached directly to the axel - yes it's perfectly efficient and there's nothing between you and the road, but that also means you have to be exceptionally careful where you are driving, and you can't do it fast. There's a reason all cars come with suspensions.

quadcore 5y ago

This is basically the principle behind a tech on top of bitcoin called lighning network: https://lightning.network https://lightning.network

CrLf 5y ago

That’s how traditional financial systems work.

MereInterest 5y ago

Correct. This adds a point of centralization, which defeats the entire purpose of cryptocurrency. As far as I can tell, cryptocurrency is based on wanting (1) a shared database that (2) can be updated by anyone within specific rules and (3) doesn't require anybody to trust anybody else. In the same way that low-trust societies have a much bigger overhead as a result of the lack of trust, I do not think cryptocurrencies are feasible while holding to (3) without massive, massive expenditure as a result.

CSSer 5y ago
> without massive, massive expenditure as a result. Could you elaborate on this? The problem I foresee is that having someone you have to trust is not a bad thing because at least you're able to identify that entity's traits and act accordingly. If that entity is, for example, the world's largest military power, I might feel like I have a lot less to worry about than if they're, as another example, a publicly traded company about half the size of the average major U.S. bank. Is this what you're alluding to?
- MereInterest 5y ago
  In general, the more people cooperate, the better the results are overall. The downside is that the more people cooperate, the more they can be taken advantage of by defectors, by bad actors who decide to harm the public good in exchange for personal benefit. I absolutely agree that being able to trust particular actors is a huge benefit. Part of the problem is language. "Trust" isn't just trust in a particular actor's intent, but also in their capabilities to carry through on a promise. In order to trust somebody to carry out a promise, you need to indirectly trust on others not to interfere with that promise. In this case, if you don't trust the US government to handle currency, then you certainly can't trust a publicly traded company that is beholding to work within and has assets that can be seized by the US government. If you assume ill-intent on the part of the government, then there's no reason to assume that a smaller actor wouldn't be influenced by the government. In this case, I trust the US government to manage currency well, because it is in its best interest to do so.
tshaddox 5y ago

lottin 5y ago

The whole selling point of bitcoin is that it's a decentralised ledger that isn't owned by anybody. If the transactions are managed by a central entity, then that's no longer true. For example, what's to stop such an entity from creating bitcoins out of nothing and thus debasing the bitcoin currency?

MereInterest 5y ago
Absolutely nothing is preventing it. Depending on your viewpoint, it happened back in 2014, and somehow the cryptocurrency community just sort of shrugged and got back to wildly speculating. https://en.wikipedia.org/wiki/Mt._Gox https://en.wikipedia.org/wiki/Mt._Gox

hgfxgkgc 5y ago

Paypal already does this with bitcoin.