5 ms·

The actual Bitcoin network (7 transactions per second maximum worldwide) is insufficiently fast enough to conduct settlement of one player of a stock market sim

by patio11 11y ago

The actual Bitcoin network (7 transactions per second maximum worldwide) is insufficiently fast enough to conduct settlement of one player of a stock market simulation trading with 5 bots in a tutorial level. Reports of Wall Street adopting it for settlement purposes seem slightly optimistic.

rattray 11y ago
> 7 transactions per second maximum worldwide What is the reason for this? Source?
- patio11 11y ago
  The Bitcoin "protocol" (for reasoning on the scare quotes search HN for me and that word) allows blocks to get up to 1 MB in size, currently. A block is mined once every ten minutes. The smallest transaction legal in the protocol is ~224 bytes. You can do the math from here. There's a contentious proposal in the community right now to raise the block size and hence the implicit maximum TPS of the network. Why is that contentious? Oh boy, long story.
  - TeMPOraL 11y ago
    I would be interested in hearing that story. Care to describe it, or point towards some reading material? :).
    - nemild 11y ago
      Start here: http://davidsterry.com/blog/2015/06/arguments-in-the-bitcoin-block-size-debate/ http://davidsterry.com/blog/2015/06/arguments-in-the-bitcoin... Also: https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-1-macro-block-trends https://tradeblock.com/blog/bitcoin-network-capacity-analysi... https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-2-macro-transaction-trends https://tradeblock.com/blog/bitcoin-network-capacity-analysi... https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-3-miner-incentives https://tradeblock.com/blog/bitcoin-network-capacity-analysi... https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-4-simulating-practical-capacity https://tradeblock.com/blog/bitcoin-network-capacity-analysi... https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-5-stress-test-analysis https://tradeblock.com/blog/bitcoin-network-capacity-analysi... Hit me up if you need more reading.
      - TeMPOraL 11y ago
        Thanks for the links!
- joosters 11y ago
  The blockchain generates one new block roughly every 10 minutes. Each block is currently limited to around 1MB (but for lots of reasons, the blocks might be smaller) Each transaction in a block takes up some amount of space. Depending on the number of inputs and outputs, a transaction can vary in size from around 200 bytes to several kilobytes. Assuming a 1024kb block and (say) 256 bytes per transaction, that's 4096 transactions every 600 seconds, or roughly 7 a second.
- abledon 11y ago
  https://imgur.com/SbOzKdJ https://imgur.com/SbOzKdJ
nissimk 11y ago
You are correct regarding the low tps and the incompatibility with stock market transactions, but the rest of wall street dwarfs the stock market in market capitalization. The bank debt market they discussed in the article is very low transaction volume but high value and it would most definitely benefit from bitcoin or 'blockchain' technology. Recording and transferring ownership of securities is really just the tip of the iceberg. If interest payments could be made through the ledger then default status would just be a query into the public database. With smart contracts you could also produce automated structured securities where the waterfall rules are encoded and executed in the network. The main difficulty is the border where the network interfaces with the real world. The network cannot enforce collateral transfers, foreclosures, seizures or similar transactions that occur on physical assets so you still need a system of courts and sheriff's.
- danbruc 11y ago
  The bank debt market [...] would most definitely benefit from bitcoin or 'blockchain' technology. Why?
  - nissimk 11y ago
    In the primary market, when debt is first issued through a syndicate of banks, there is not really much of a problem. There is a really great chapter about this process I think in the "The new Market Wizards" book by Schwager, though it might be in the first book, "Market Wizards." The banks call all of their customers and get commitments for dollar amounts towards the deal. Then they put together the paperwork and issue securities. It's kind of like a bond, but it's technically a loan. Each of those investors receive some sort of documentation that they own some piece of that loan and the bank (or some administrator) distributes interest payments to the holders. The problem arises in the secondary market where initial holders want to sell their piece prior to maturity. There is a long process by which they have to prove ownership and transfer ownership. It's kind of like the process of closing on a home where there is a title search and deed transfer. During this period the buyer and seller are both open to shenanigans from the other party trying to back out of the trade or change the terms. It's also very labor intensive and archaic. If title was stored and transfered through a public trusted distributed ledger system then it could be done instantaneously with minimal effort. As I said above, there is much more potential here, which makes bitcoin way more promising than just a system for recording and transfering ownership of assets.
williamcotton 11y ago
You can batch any number of signed transfers of digital assets in to a single hash that is embedded in the blockchain in a single transaction every 10 minutes.
blockchin 11y ago
>Reports of Wall Street adopting it for settlement purposes seem slightly optimistic Here is just one example: (and I'm aware of many more pilot programs) http://www.nasdaq.com/press-release/nasdaq-launches-enterprisewide-blockchain-technology-initiative-20150511-00485 http://www.nasdaq.com/press-release/nasdaq-launches-enterpri... the 1MB blocksize limits are rapidly being tested. However with some of the recent proposals, blocksize would double every 2 years, so something like this: 2016 8MB 0.1Mb/s 26Tx/s 2018 16MB 0.2Mb/s 53Tx/s 2020 32MB 0.4Mb/s 106Tx/s 2022 64MB 0.9Mb/s 213Tx/s 2024 128MB 1.7Mb/s 426Tx/s Right now there is a theoretical ceiling of 604,800 bitcoin transactions that could be undertaken every day. By 2016 that could be 2.2 million, by 2018 4.57 million, 2020 9 million , and 2024, 36 million. There's a lot of space to grow and a lot of time to pass in which numerous innovations could come to existance, sidechains, lightning networks are a few 'transaction offloading schemes we've seen recently. In addition, the blockchain proper only needs to be used as a periodic settlement platform, where tx's are farmed together into blocks. and not as a trading engine. (non PoW-based permissioned ledgers are a better fit for that)

by patio11 11y ago

rattray 11y ago

> 7 transactions per second maximum worldwide What is the reason for this? Source?

patio11 11y ago
The Bitcoin "protocol" (for reasoning on the scare quotes search HN for me and that word) allows blocks to get up to 1 MB in size, currently. A block is mined once every ten minutes. The smallest transaction legal in the protocol is ~224 bytes. You can do the math from here. There's a contentious proposal in the community right now to raise the block size and hence the implicit maximum TPS of the network. Why is that contentious? Oh boy, long story.
- TeMPOraL 11y ago
  I would be interested in hearing that story. Care to describe it, or point towards some reading material? :).
  - nemild 11y ago
    Start here: http://davidsterry.com/blog/2015/06/arguments-in-the-bitcoin-block-size-debate/ http://davidsterry.com/blog/2015/06/arguments-in-the-bitcoin... Also: https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-1-macro-block-trends https://tradeblock.com/blog/bitcoin-network-capacity-analysi... https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-2-macro-transaction-trends https://tradeblock.com/blog/bitcoin-network-capacity-analysi... https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-3-miner-incentives https://tradeblock.com/blog/bitcoin-network-capacity-analysi... https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-4-simulating-practical-capacity https://tradeblock.com/blog/bitcoin-network-capacity-analysi... https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-5-stress-test-analysis https://tradeblock.com/blog/bitcoin-network-capacity-analysi... Hit me up if you need more reading.
    - TeMPOraL 11y ago
      Thanks for the links!
joosters 11y ago
The blockchain generates one new block roughly every 10 minutes. Each block is currently limited to around 1MB (but for lots of reasons, the blocks might be smaller) Each transaction in a block takes up some amount of space. Depending on the number of inputs and outputs, a transaction can vary in size from around 200 bytes to several kilobytes. Assuming a 1024kb block and (say) 256 bytes per transaction, that's 4096 transactions every 600 seconds, or roughly 7 a second.
abledon 11y ago
https://imgur.com/SbOzKdJ https://imgur.com/SbOzKdJ

nissimk 11y ago

You are correct regarding the low tps and the incompatibility with stock market transactions, but the rest of wall street dwarfs the stock market in market capitalization. The bank debt market they discussed in the article is very low transaction volume but high value and it would most definitely benefit from bitcoin or 'blockchain' technology. Recording and transferring ownership of securities is really just the tip of the iceberg. If interest payments could be made through the ledger then default status would just be a query into the public database. With smart contracts you could also produce automated structured securities where the waterfall rules are encoded and executed in the network. The main difficulty is the border where the network interfaces with the real world. The network cannot enforce collateral transfers, foreclosures, seizures or similar transactions that occur on physical assets so you still need a system of courts and sheriff's.

danbruc 11y ago
The bank debt market [...] would most definitely benefit from bitcoin or 'blockchain' technology. Why?
- nissimk 11y ago
  In the primary market, when debt is first issued through a syndicate of banks, there is not really much of a problem. There is a really great chapter about this process I think in the "The new Market Wizards" book by Schwager, though it might be in the first book, "Market Wizards." The banks call all of their customers and get commitments for dollar amounts towards the deal. Then they put together the paperwork and issue securities. It's kind of like a bond, but it's technically a loan. Each of those investors receive some sort of documentation that they own some piece of that loan and the bank (or some administrator) distributes interest payments to the holders. The problem arises in the secondary market where initial holders want to sell their piece prior to maturity. There is a long process by which they have to prove ownership and transfer ownership. It's kind of like the process of closing on a home where there is a title search and deed transfer. During this period the buyer and seller are both open to shenanigans from the other party trying to back out of the trade or change the terms. It's also very labor intensive and archaic. If title was stored and transfered through a public trusted distributed ledger system then it could be done instantaneously with minimal effort. As I said above, there is much more potential here, which makes bitcoin way more promising than just a system for recording and transfering ownership of assets.

williamcotton 11y ago

You can batch any number of signed transfers of digital assets in to a single hash that is embedded in the blockchain in a single transaction every 10 minutes.

blockchin 11y ago

>Reports of Wall Street adopting it for settlement purposes seem slightly optimistic Here is just one example: (and I'm aware of many more pilot programs) http://www.nasdaq.com/press-release/nasdaq-launches-enterprisewide-blockchain-technology-initiative-20150511-00485 http://www.nasdaq.com/press-release/nasdaq-launches-enterpri... the 1MB blocksize limits are rapidly being tested. However with some of the recent proposals, blocksize would double every 2 years, so something like this: 2016 8MB 0.1Mb/s 26Tx/s 2018 16MB 0.2Mb/s 53Tx/s 2020 32MB 0.4Mb/s 106Tx/s 2022 64MB 0.9Mb/s 213Tx/s 2024 128MB 1.7Mb/s 426Tx/s Right now there is a theoretical ceiling of 604,800 bitcoin transactions that could be undertaken every day. By 2016 that could be 2.2 million, by 2018 4.57 million, 2020 9 million , and 2024, 36 million. There's a lot of space to grow and a lot of time to pass in which numerous innovations could come to existance, sidechains, lightning networks are a few 'transaction offloading schemes we've seen recently. In addition, the blockchain proper only needs to be used as a periodic settlement platform, where tx's are farmed together into blocks. and not as a trading engine. (non PoW-based permissioned ledgers are a better fit for that)