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We would not use Bitcoin for ordinary transactions, at least not Layer 1. That would be the equivalent of transporting your money in an armored truck. There is

We would not use Bitcoin for ordinary transactions, at least not Layer 1. That would be the equivalent of transporting your money in an armored truck. There is plenty of ways to scale with Layer 2, but Layer 1 fees on Bitcoin Cash or other smaller cryptos are currently so low that this is not necessary.

throwway120385 4y ago
So what you're saying is we will have some kind of central system, like a bank, that issues Bitcoin, and then a bunch of spoke systems that issue currency based on the value of the Bitcoin holdings? How is that different from what we do now?
- ericd 4y ago
  I'm pretty sure that's not at all what he's saying, he's just saying that the existing bitcoin network would serve as a net settlement layer for L2 systems, which handle the much higher volume of everyday transactions. My understanding is that net settlement between banks is much less frequent than the capacity of BTC. Lightning (an L2 system on Bitcoin) is essentially a system of peer to peer exchange of signed BTC transactions, which supersede previous ones, but don't get committed to the main net. In that way, you can keep a running tab between counterparties with effectively no marginal cost until one of you decides to close the tab by committing it.
  - toast0 4y ago
    There were 4,746 FDIC insured banks as of the end of Q3 2022, and 5,099 NCUA insured credit unions as of the end of 2020. If each of those institutions does net settlement with 200 other institutions daily, you've got roughly 1 million settlements a day (each settlement has two parties, so 100 * 10,000). Earlier in the thread, someone said BTC can do 3-7 transactions a second, which doesn't quite make it to 1 million transactions per day. Of course, I just made a wild guess about how many net settlements between banks would happen; maybe banks don't settle up from check clearing daily, but in a world where transactions are difficult to reverse and nobody trusts anyone, you'd want to settle up regularly.
    - ericd 4y ago
      Thanks for running the numbers. The amounts in the channels are committed with those signed transactions, there’s no opportunity to double spend, so it’s fine to settle much less than daily, as long as the net flows are well balanced (big if). Transactions hop through the graph, you don’t have to have a running tab with more than a few other nodes.
    - incrudible 4y ago
      Again, how many armored trucks are used for settlement each day? Probably not a million. The transaction limit on Bitcoin is artificial, the result of a negotiation between the miners, who provide the security and the users, who implicitly demand that security, by choosing Bitcoin over any other cryptocurrency. Ethereum on the other hand already processes a million transactions per day on L1.

throwway120385 4y ago

So what you're saying is we will have some kind of central system, like a bank, that issues Bitcoin, and then a bunch of spoke systems that issue currency based on the value of the Bitcoin holdings? How is that different from what we do now?

ericd 4y ago
I'm pretty sure that's not at all what he's saying, he's just saying that the existing bitcoin network would serve as a net settlement layer for L2 systems, which handle the much higher volume of everyday transactions. My understanding is that net settlement between banks is much less frequent than the capacity of BTC. Lightning (an L2 system on Bitcoin) is essentially a system of peer to peer exchange of signed BTC transactions, which supersede previous ones, but don't get committed to the main net. In that way, you can keep a running tab between counterparties with effectively no marginal cost until one of you decides to close the tab by committing it.
- toast0 4y ago
  There were 4,746 FDIC insured banks as of the end of Q3 2022, and 5,099 NCUA insured credit unions as of the end of 2020. If each of those institutions does net settlement with 200 other institutions daily, you've got roughly 1 million settlements a day (each settlement has two parties, so 100 * 10,000). Earlier in the thread, someone said BTC can do 3-7 transactions a second, which doesn't quite make it to 1 million transactions per day. Of course, I just made a wild guess about how many net settlements between banks would happen; maybe banks don't settle up from check clearing daily, but in a world where transactions are difficult to reverse and nobody trusts anyone, you'd want to settle up regularly.
  - ericd 4y ago
    Thanks for running the numbers. The amounts in the channels are committed with those signed transactions, there’s no opportunity to double spend, so it’s fine to settle much less than daily, as long as the net flows are well balanced (big if). Transactions hop through the graph, you don’t have to have a running tab with more than a few other nodes.
  - incrudible 4y ago
    Again, how many armored trucks are used for settlement each day? Probably not a million. The transaction limit on Bitcoin is artificial, the result of a negotiation between the miners, who provide the security and the users, who implicitly demand that security, by choosing Bitcoin over any other cryptocurrency. Ethereum on the other hand already processes a million transactions per day on L1.