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Tell me you don't understand the fundamental blockchain tradeoff between scalability, decentralization, and security, without telling me you don't understand. B

by lowkey 5y ago

Tell me you don't understand the fundamental blockchain tradeoff between scalability, decentralization, and security, without telling me you don't understand. Blockchain technology has unique advantages and constraints, like any novel technology. Bitcoin chose a set of parameters designed to ensure sufficient security budget to protect the network, while optimizing for decentralization thereby limiting transaction throughput on layer 1 as the tradeoff. Lightning and other layer-2 provide the scalability by leveraging the security of layer-1. Bitcoin layer-1 is ideal for sending large payments (say >$1000USD today): It currently costs ~$1USD to post a transaction on the Bitcoin layer-1 blockchain. For that I can send an arbitrary amount with no upper limit of value, enjoy payment finality in about 6 blocks (~1hr) and I never have to pay any more to store the value associated with my Bitcoin address. Security for the life of the network is included in my $1 transaction fee. Bitcoin layer-2 (Lightning) is ideal for small payments (<$1000USD today): It currently costs a small fraction of a penny to send funds across the Lightning network with near instant finality (seconds) and very good anonymity. The two technologies complement one another to provide an example to the world of what a sound-money system could mean if it was truly decentralized and immune from manipulation by centralized actors (central banks, governments, etc). Prove me wrong. Is there another form of money that: - is virtually guaranteed to be immune to manipulation by central actors? - allows you to transmit any amount of value to anyone (censorship resistance) anywhere in the world within about an hour for about $1USD and know with confidence that the payment will go through with finality? - allows you to send smaller amounts for fractions of a penny in seconds to anyone anywhere?

vgeek 5y ago
Solutions to non problems that introduce larger problems are inherently bad solutions. Point 1) there are more bad actors wash trading, manipulating markets and pump & dump scams involved in crypto than any other markets. (Even ignoring Tether, the common DAO exploits involving $xx,xxx,xxx+ of losses) Point 2/3 are the same. There isn't an easy, well known way to do this for no fee to any country. WU is expensive and PayPal will block your account. Egold tried to solve this in the past, until fraud caused it to shutter. There are niche Fintech startups that likely address this for sub 0.5% fees, without the learning curve and exposure to currency exchange volatility. Gas and BTC fees show that they weren't really built with this consideration in mind, they just added hacky pseudo-solutions at a later date. I'm lost as to the "anonymous" part, since I had to do all types of AML/KYC stuff when I've opened accounts with popular exchanges, so there is likely an element of discoverability.
- lowkey 5y ago
  Point 1) I don't believe you are describing Bitcoin, maybe altcoins, NFTs, DAOs but not Bitcoin. - wash trading: tell me who, how, and why is doing wash trading on Bitcoin? I would argue the only entities capable of moving markets with wash trading are major centralized exchanges, not whales. The Bitcoin market is too large to be meaningfully manipulated by whales via wash trading. If exchanges are wash trading, please cite evidence. I'm not saying it doesn't happen in other cryptocurrencies, just that it doesn't happen with Bitcoin. - manipulating market: again not sure what your claim is here related to Bitcoin? Who manipulates the Bitcoin market? How do they manipulate it? For what purpose? - pump & dump scams: again, what does this have to do with Bitcoin? Agree there is a lot of pump-n-dump activity in low-cap altcoins, just like there are pump-n-dumps in low-cap OTC stocks. For pump-n-dumps to work the market cap needs to be small enough for manipulators to manipulate. Who is capable of manipulating the $1 Trillion dollar Bitcoin market? Point 2/3) I may be misunderstanding what you mean (please correct me). If you are saying that digital payments and remittances are not a solved problem even with Bitcoin, well today I can send Bitcoin or Bitcoin over Lightning to anyone anywhere for less than an ATM fee. I could also send stablecoins instead or convert Bitcoin to Stablecoins and back without KYC using a self-custody wallet. Please help me understand what you mean by Point 2/3. Did I understand you comment correctly? Disclosure: I work for a startup (www.liquality.io) that has built tech into a self-custody wallet that allows you to swap any crypto to any other without KYC or added fees. We have several competitors so this space is rea
tromp 5y ago
> Security for the life of the network is included in my $1 transaction fee. Most of the security is paid for by the block subsidy. That will change within a few decades though, as the block subsidy keeps halving every 4 years. At that point, you'll be paying closer to $100 to transact on-chain with the same security that you enjoy today.
- lowkey 5y ago
  The block subsidy expires 99% by 2040 and 100% expired by 2140. I have no idea what the tx fee will be after that, but let’s take your guess of $100/tx as a baseline. Whatever the fee - whether $1/tx as it is today or $100/tx, once the fee is paid, the Bitcoin funds on that address are secured for no additional charge until such time as the funds are moved to another address via an on-chain transaction. So you could be paying $100 to store $1000 or $1 million in Bitcoin for 1 day or 20 years for the same fixed price. Seems like a good deal to me.

by lowkey 5y ago

vgeek 5y ago

Solutions to non problems that introduce larger problems are inherently bad solutions. Point 1) there are more bad actors wash trading, manipulating markets and pump & dump scams involved in crypto than any other markets. (Even ignoring Tether, the common DAO exploits involving $xx,xxx,xxx+ of losses) Point 2/3 are the same. There isn't an easy, well known way to do this for no fee to any country. WU is expensive and PayPal will block your account. Egold tried to solve this in the past, until fraud caused it to shutter. There are niche Fintech startups that likely address this for sub 0.5% fees, without the learning curve and exposure to currency exchange volatility. Gas and BTC fees show that they weren't really built with this consideration in mind, they just added hacky pseudo-solutions at a later date. I'm lost as to the "anonymous" part, since I had to do all types of AML/KYC stuff when I've opened accounts with popular exchanges, so there is likely an element of discoverability.

lowkey 5y ago
Point 1) I don't believe you are describing Bitcoin, maybe altcoins, NFTs, DAOs but not Bitcoin. - wash trading: tell me who, how, and why is doing wash trading on Bitcoin? I would argue the only entities capable of moving markets with wash trading are major centralized exchanges, not whales. The Bitcoin market is too large to be meaningfully manipulated by whales via wash trading. If exchanges are wash trading, please cite evidence. I'm not saying it doesn't happen in other cryptocurrencies, just that it doesn't happen with Bitcoin. - manipulating market: again not sure what your claim is here related to Bitcoin? Who manipulates the Bitcoin market? How do they manipulate it? For what purpose? - pump & dump scams: again, what does this have to do with Bitcoin? Agree there is a lot of pump-n-dump activity in low-cap altcoins, just like there are pump-n-dumps in low-cap OTC stocks. For pump-n-dumps to work the market cap needs to be small enough for manipulators to manipulate. Who is capable of manipulating the $1 Trillion dollar Bitcoin market? Point 2/3) I may be misunderstanding what you mean (please correct me). If you are saying that digital payments and remittances are not a solved problem even with Bitcoin, well today I can send Bitcoin or Bitcoin over Lightning to anyone anywhere for less than an ATM fee. I could also send stablecoins instead or convert Bitcoin to Stablecoins and back without KYC using a self-custody wallet. Please help me understand what you mean by Point 2/3. Did I understand you comment correctly? Disclosure: I work for a startup (www.liquality.io) that has built tech into a self-custody wallet that allows you to swap any crypto to any other without KYC or added fees. We have several competitors so this space is rea

tromp 5y ago

> Security for the life of the network is included in my $1 transaction fee. Most of the security is paid for by the block subsidy. That will change within a few decades though, as the block subsidy keeps halving every 4 years. At that point, you'll be paying closer to $100 to transact on-chain with the same security that you enjoy today.

lowkey 5y ago
The block subsidy expires 99% by 2040 and 100% expired by 2140. I have no idea what the tx fee will be after that, but let’s take your guess of $100/tx as a baseline. Whatever the fee - whether $1/tx as it is today or $100/tx, once the fee is paid, the Bitcoin funds on that address are secured for no additional charge until such time as the funds are moved to another address via an on-chain transaction. So you could be paying $100 to store $1000 or $1 million in Bitcoin for 1 day or 20 years for the same fixed price. Seems like a good deal to me.