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> What everybody seems to leave out is that fully settling on the blockchain is slow and costly. What do you mean?

Closi 5y ago
I assume they mean that the major cryptocurrencies have fees to clear transactions, and the more you pay the faster they clear. At the moment the transfer fee for Bitcoin/Eth is about $1.80/$4, so if you are buying a $5 coffee it’s not really cost effective to do that on chain. The main issue that drives up cost is that Bitcoin has a scalability problem for transactions, particularly as the market cap/difficulty has gone up. This is why the lightning network was introduced - although that comes with its own drawbacks compared to “pure” crypto.
- nkrisc 5y ago
  So if transferring cryptocurrency isn’t free, then how is it ever going to replace cash, theoretically? Right now I can buy a coffee for cash and the exchange of currency is free if I hand over the bills right then and there. I guess the alternative would be to actually transact on the exchange instead of the blockchain? But then we’re just back to centralized banking? What’s the ideal scenario here? Transactions on chain eventually become free and then we truly have a useful distributed currency?
  - kasey_junk 5y ago
    The exchange of cash in your coffee example is definitely not free. Vendors spend a lot of money in cash management. Compliance costs, loss prevention, storage & movement etc. They price that in to the $5. But frankly that’s besides the point. There are very few physical transactions in the “cash” world. Crypto can become very successful and never touch those transactions if it can work to standardize & disintermediate the electronic movement of money it could be a massive change. I don’t know if that will happen and it’s not a goal of the crypto diehards I’ve met, but that’s a path to success that allows for fees along the way.
    - nkrisc 5y ago
      > The exchange of cash in your coffee example is definitely not free. Vendors spend a lot of money in cash management. Compliance costs, loss prevention, storage & movement etc. They price that in to the $5. Fair point. But there are still many more informal cash transactions that don't have that issue, but maybe that's not what cryptocurrency will solve. That's fair. > But frankly that’s besides the point. There are very few physical transactions in the “cash” world. Crypto can become very successful and never touch those transactions if it can work to standardize & disintermediate the electronic movement of money it could be a massive change. Definitely agree traditional electronic money transfer today has many issues. But I don't yet understand why cryptocurrency is the necessary solution. Sure it's a solution, but surely it's possible to fix the issues without cryptocurrency. I think I understand the core principle and appeal of crytpocurrency as a decentralized currency, underground currency among those wishing to avoid traditional financial institutions. But everywhere I look I see cryptocurrency turning into traditional banking and I don't really understand the overall benefit. It seems the few benefits it does have over traditional banking (speed, ease of transfer, univeral currency) are outweighed by the drawbacks (power hungry, surprisingly insecure, easy to simply lose everything you have with no recourse).

I assume they mean that the major cryptocurrencies have fees to clear transactions, and the more you pay the faster they clear. At the moment the transfer fee for Bitcoin/Eth is about $1.80/$4, so if you are buying a $5 coffee it’s not really cost effective to do that on chain. The main issue that drives up cost is that Bitcoin has a scalability problem for transactions, particularly as the market cap/difficulty has gone up. This is why the lightning network was introduced - although that comes with its own drawbacks compared to “pure” crypto.

nkrisc 5y ago
So if transferring cryptocurrency isn’t free, then how is it ever going to replace cash, theoretically? Right now I can buy a coffee for cash and the exchange of currency is free if I hand over the bills right then and there. I guess the alternative would be to actually transact on the exchange instead of the blockchain? But then we’re just back to centralized banking? What’s the ideal scenario here? Transactions on chain eventually become free and then we truly have a useful distributed currency?
- kasey_junk 5y ago
  The exchange of cash in your coffee example is definitely not free. Vendors spend a lot of money in cash management. Compliance costs, loss prevention, storage & movement etc. They price that in to the $5. But frankly that’s besides the point. There are very few physical transactions in the “cash” world. Crypto can become very successful and never touch those transactions if it can work to standardize & disintermediate the electronic movement of money it could be a massive change. I don’t know if that will happen and it’s not a goal of the crypto diehards I’ve met, but that’s a path to success that allows for fees along the way.
  - nkrisc 5y ago
    > The exchange of cash in your coffee example is definitely not free. Vendors spend a lot of money in cash management. Compliance costs, loss prevention, storage & movement etc. They price that in to the $5. Fair point. But there are still many more informal cash transactions that don't have that issue, but maybe that's not what cryptocurrency will solve. That's fair. > But frankly that’s besides the point. There are very few physical transactions in the “cash” world. Crypto can become very successful and never touch those transactions if it can work to standardize & disintermediate the electronic movement of money it could be a massive change. Definitely agree traditional electronic money transfer today has many issues. But I don't yet understand why cryptocurrency is the necessary solution. Sure it's a solution, but surely it's possible to fix the issues without cryptocurrency. I think I understand the core principle and appeal of crytpocurrency as a decentralized currency, underground currency among those wishing to avoid traditional financial institutions. But everywhere I look I see cryptocurrency turning into traditional banking and I don't really understand the overall benefit. It seems the few benefits it does have over traditional banking (speed, ease of transfer, univeral currency) are outweighed by the drawbacks (power hungry, surprisingly insecure, easy to simply lose everything you have with no recourse).