In the matter of scaling bitcoin, we first need to decide what we need it for. If we need bitcoin to be used as a means of payment, then we need to increase the number of transactions that can be processed with its participation in a second. Moreover, it should be noted that this is exactly how bitcoin was originally conceived, that is, as a means of payment.
If we accept that it is enough to make only large transactions with Bitcoin, then it is not necessary to continue to scale it.
In my opinion, striving to increase the scaling of bitcoin is necessary, it must have a margin of safety in any case.
Topic: Does Bitcoin Need To Scale (Read 522 times)
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Older users are going to hold their coins until their targets are achieved.
If you look again at the numbers you'll realize that older people are going to hold their coin until death and that youngsters are going to sell them when they are sold.
Ok, let's use Bitcoin as an investment, what investment is that when only 200k poeple area able to buy and 200k are able to sell in a day? This assuming exchanges or banks will not have to combine their inputs when receiving coin and leave those coins like that till they send it to a buyer to minimize txs. Right now it's impossible for more than 1/3 of all Americans to receive a bitcoin transaction once a year.
Of course, this if we all deal with our own wallets and not with PoP (promise of payment) coins that are just a number on some website.
Bitcoin will have to scale for world usage, even if its investments or daily purchases, it's a must. How will this be done? This I'm starting to wonder myself.
There is a very limited amount of bitcoin to be mined, so miners are really working towards making a small amount of money each time and they are spending a ton of money to make that bitcoin, hence why they are trying to make their profit from the miner fee's which is causing all of this.
Miners can't set fees.
What needs to be done is not the transactions getting cheaper because that would basically be the result but not the solution, but to make sure that difficulty drops a ton and in order to drop difficulty this many people shouldn't be mining.
It's the other way around, difficulty drops when people stop mining, if you drop the difficulty now to 1 what you will achieve will simply be that all blocks will be mined in a few seconds till the difficulty adjustment when things will go back to normal.
If there was only a few places mining with few equipment, it would be actually faster, not because it is faster to calculate, but because there is no difficulty at all which means you constantly mine blocks back to back. In order to do that we need to make sure miners lose money and quit mostly.
Great idea, let's fuck everything!!!
In order to do that we need to make sure miners lose money and quit mostly.
No, the idea is that no one can "make sure" of anything. The moment anyone had enough influence to do what you're suggesting, the whole thing would blow up in your face. Allow the system to regulate itself.
Also, what you're suggesting sounds wrong anyway. But the first point is the important one.
There is a very limited amount of bitcoin to be mined, so miners are really working towards making a small amount of money each time and they are spending a ton of money to make that bitcoin, hence why they are trying to make their profit from the miner fee's which is causing all of this.
What needs to be done is not the transactions getting cheaper because that would basically be the result but not the solution, but to make sure that difficulty drops a ton and in order to drop difficulty this many people shouldn't be mining. If there was only a few places mining with few equipment, it would be actually faster, not because it is faster to calculate, but because there is no difficulty at all which means you constantly mine blocks back to back. In order to do that we need to make sure miners lose money and quit mostly.
What needs to be done is not the transactions getting cheaper because that would basically be the result but not the solution, but to make sure that difficulty drops a ton and in order to drop difficulty this many people shouldn't be mining. If there was only a few places mining with few equipment, it would be actually faster, not because it is faster to calculate, but because there is no difficulty at all which means you constantly mine blocks back to back. In order to do that we need to make sure miners lose money and quit mostly.
There may be a fundamental conflict between being a high volume day traded asset which can be utilized to purchase daily goods and services. And being an optimized HODL asset. Which in traditional finance is geared towards lower volatility, less volume and reduced access. A conflict which is seldom acknowledged
It is not acknowledged because it is irrelevant
These days no one is trying to buy a cup of coffee (a generic phrase or term for daily goods and services) with gold or other tangible assets. It is only with cryptocurrencies which are often considered and referred to as competitors to fiat money in this capacity but which can't actually play such a role that the conflict comes to surface. In other words, if they were not called currencies, and no one referred to them as such, there would be no conflict. It only exists in our mind as an instance of some vague cognitive dissonance
I think that scalability must be oriented to satisfy all users. Regardless of particular needs or usage trends.
Okay, but what does that actually mean in practice? I sincerely doubt there's a specific amount of scaling which can please everyone. Someone is always going to moan that the balance is wrong somehow. People talk about it like it's the simplest thing in the world, but it's actually a really complex issue.
Yes, it is. We have the "Blockchain Trilemma", according to Antonopoulos , when "we can't design for security, decentralization and scalability at the same time". If we want BTC to scale(and we definitely want that), we have to sacrifice some security or decentralization, or a bit of both. And although I personally believe that this problem will be solved by developers in the near future, I realize that it's surely not a simple one.
and the new investors may chose to buy very small amounts, say BTC0.01 or even BTC0.001.
If Bitcoin is still popular in 50 years and we've moved on to pricing things in μBTC, I suspect people at the time will find it amusing that anyone thought BTC0.01 was a small amount. It's possible the average person, whether they're hoarders or spenders, will likely have far fewer than that as scarcity increases.
In the last 24 hours, there were 341 000 transactions with around 900 000 outputs.
At this pace, assuming everyone would simply hodl and not move a coin, it will take 20 years for everyone on earth to get a bitcoin, if everyone would then want to move that coin to a different wallet it will take another 20 years if they would want to send it to an exchange and sell another 20 years.
So, between getting your coins, sending them to storage and then selling them to cash out you will have an average of 40 years.
That's some extreme holding, isn't it?
At this pace, assuming everyone would simply hodl and not move a coin, it will take 20 years for everyone on earth to get a bitcoin, if everyone would then want to move that coin to a different wallet it will take another 20 years if they would want to send it to an exchange and sell another 20 years.
So, between getting your coins, sending them to storage and then selling them to cash out you will have an average of 40 years.
That's some extreme holding, isn't it?
Older users are going to hold their coins until their targets are achieved. Now these targets can vary from user to user. For some, it may be $100,000 per coin. For someone else, it may be $250,000 per coin. And for a different set of people, it can be $1,000,000 per coin. But that doesn't mean that the new users can't get the coins. They can purchased the coins if they want. But the prices have gone up by so much and the new investors may chose to buy very small amounts, say BTC0.01 or even BTC0.001.
This assumption and narrative of Bitcoin being a long-term store of value has never felt cool to me. I understand that the security, cost of ownership and ease of transaction make it a very good candidate similar to Gold. Yet, bitcoin is also supposed to be the mainstay of a decentralized economy.
It's not supposed to be anything. Bitcoin is whatever the market (users) says it is. If the market mostly uses it as a speculative gold-like asset, so be it.
I also think the decentralization and store of value narratives go hand in hand. To be a store of value, we need a sustainable mining incentive. That means fee revenue needs to rise over time. The only way to reliably do that is to limit block space. Conveniently, this is also what needs to be done to maintain decentralization of nodes and miners.
This assumption and narrative of Bitcoin being a long-term store of value has never felt cool to me. I understand that the security, cost of ownership and ease of transaction make it a very good candidate similar to Gold. Yet, bitcoin is also supposed to be the mainstay of a decentralized economy.
It's not supposed to be anything. Bitcoin is whatever the market (users) says it is. If the market mostly uses it as a speculative gold-like asset, so be it.
I also think the decentralization and store of value narratives go hand in hand. To be a store of value, we need a sustainable mining incentive. That means fee revenue needs to rise over time. The only way to reliably do that is to limit block space. Conveniently, this is also what needs to be done to maintain decentralization of nodes and miners.
The reason why volatility would get lower and lower is the fact that there will be more people buying and selling while there is less to be sold and bought, those are two different things. Just because there is more right now on the market doesn't mean it is bought and sold a lot, liquidity was low just a month ago (now that there is bull it went up again) but as you can see since it has good amount of it on the market it still had low liquidity.
With same reasoning, you can remove millions of bitcoin from the market, but as long as there are 100x more people buying and selling what is left, that means the liquidity will be high and when the liquidity is high big movements like selling 10k bitcoins or buying 100 million dollars worth of bitcoins will not really change the price all that much.
With same reasoning, you can remove millions of bitcoin from the market, but as long as there are 100x more people buying and selling what is left, that means the liquidity will be high and when the liquidity is high big movements like selling 10k bitcoins or buying 100 million dollars worth of bitcoins will not really change the price all that much.
This assumption and narrative of Bitcoin being a long-term store of value has never felt cool to me. I understand that the security, cost of ownership and ease of transaction make it a very good candidate similar to Gold. Yet, bitcoin is also supposed to be the mainstay of a decentralized economy. The major hurdles in that path are regulatory as well as the apprehension about exploitation of its pseudonymous nature by maleficent entities. That is the hurdle that the community needs to cross to build confidence about this transaction medium which is decentralized, borderless and allows people to earn a new form of money not being eaten away by inflation.
To get there, scaling, in terms of transaction speed and capacity is wholly important.
To get there, scaling, in terms of transaction speed and capacity is wholly important.
Bitcoin dont need to scale if we will assume bitcoin as store of value. However, we need much higher TPS if btc will be payment method
That's likely too simplistic an overview. If BTC couldn't be used as a payment method, would that have a negative impact on the value? If a 2.5g gold bar could be spent as a currency at your local supermarket, would gold then potentially have a greater value as a commodity? Until we know the answers to those questions (and we likely never will), then it's potentially wrong to assume that Bitcoin doesn't need to scale to remain a store of value.
My take is it's not one or the other, store of value vs. payment method. Any form of money is both, to differing degrees.
Without some minimum level of transaction liquidity (spending and acceptance as payment) Bitcoin can't really have value. Anything that effectively can't be bought or sold (liquidated) is worthless.
Now, what that minimum level is, I really don't know. What I do know is we can't plan for a "network" where no is transacting, and I am very thankful that not every BTC user is a hoarder.
Bitcoin dont need to scale if we will assume bitcoin as store of value. However, we need much higher TPS if btc will be payment method
That's likely too simplistic an overview. If BTC couldn't be used as a payment method, would that have a negative impact on the value? If a 2.5g gold bar could be spent as a currency at your local supermarket, would gold then potentially have a greater value as a commodity? Until we know the answers to those questions (and we likely never will), then it's potentially wrong to assume that Bitcoin doesn't need to scale to remain a store of value.
Bitcoin dont need to scale if we will assume bitcoin as store of value. However, we need much higher TPS if btc will be payment method
One of the questions with bitcoin volatility is to what degree mining dumps cause it. Miners have a steady stream of crypto which could allow them to set price. If they coordinated to dump high or dump low they could move the price and determine volatility. Crypto mining being centralized in china, could give them some control in determining not only price but also its relative stability over time.
Reward halvings could diminish this capacity, which could reduce volatility as mining dumps gradually became smaller in scope.
Reward halvings could diminish this capacity, which could reduce volatility as mining dumps gradually became smaller in scope.
Newly mined BTC, especially after this last halving, has a much smaller effect on the market than existing holders. There are more than 18.5 million BTC in existence and 2.6+ million BTC deposited on exchanges right now. 27K BTC per month from miners pales in comparison.
I agree that miners have less and less effect on price over time. The fundamental issue of volatility though has more to do with the lack of available BTC and fiat on spot exchange order books.
Over a period of time and due to a high transaction of bitcoins there will be a difference in it of course and it will need bitcoin to scale to get back to its original supply. Some were possibly losses and this made bitcoin market price too high. Due to transaction which left little amount of bitcoin in wallet and the numbers holding bitcoin arou d the world then this could be a mere reason for bringing bitcoin to scale. In case of transactions there are miners that collect some of it as transaction fee but it will be accumulated and then it will depend on the miners if to sell bitcoin back or not.
Bitcoin's deflationary model causes hoarding, I get that, but why would it cause lower volatility? If anything, I would think the opposite, since Bitcoin's relative scarcity produces thin, illiquid markets that are easily moved by big buys and sells.
Imagine if the US mint reduced fiat production capacity by 50% today. And by another 50% four years from now. Similar to bitcoin's halving reducing rewards for miners. Halving introduces scarcity which could promote long term HODL growth.
One of the questions with bitcoin volatility is to what degree mining dumps cause it. Miners have a steady stream of crypto which could allow them to set price. If they coordinated to dump high or dump low they could move the price and determine volatility. Crypto mining being centralized in china, could give them some control in determining not only price but also its relative stability over time.
Reward halvings could diminish this capacity, which could reduce volatility as mining dumps gradually became smaller in scope.
When looking at the fees right now it needs to scale and definitely looks like there needs to be scaled. Look at the exchanges, they are right now doing around 0.0005 on average and that is about 6-7 dollars and that is just way too much and takes about 30-60 minutes as well. That is why I believe there needs to be some sort of situation where people should be able to pay a lot less.
Scaling doesn't guarantee the cost of fees will decline.
In the past, miners produced blocks that were only 10% to 50% full to create artificial scarcity in transaction capacity. To drive the cost of transactions up. Similar to how metals industries like aluminum manipulate supply in markets. They also create artificial scarcity to drive prices up.
Bitcoin charges "6-7 dollars" for transactions, that banks and others would charge $20 to $50+ for BTW.
When looking at the fees right now it needs to scale and definitely looks like there needs to be scaled. Look at the exchanges, they are right now doing around 0.0005 on average and that is about 6-7 dollars and that is just way too much and takes about 30-60 minutes as well. That is why I believe there needs to be some sort of situation where people should be able to pay a lot less.
If they could find a way to drop that to something like 0.00005 and add another zero there, that would be around 60-70 cents instead of 6-7 dollars and even though that is still not "cheap" at least it prevents it from being expensive.
People may think dropping the price to 10% of what it is right now could be hard but remember we have also dropped it a ton with segwit as well, so why not do the same once more to drop it again?
If they could find a way to drop that to something like 0.00005 and add another zero there, that would be around 60-70 cents instead of 6-7 dollars and even though that is still not "cheap" at least it prevents it from being expensive.
People may think dropping the price to 10% of what it is right now could be hard but remember we have also dropped it a ton with segwit as well, so why not do the same once more to drop it again?
Most long term investments are defined in terms of low daily volatility and incremental long term growth.
What kind of assets are you talking about? Stocks? Gold?
Gold seems comparable to BTC in terms of supply dynamics and speculative nature. It's also known to be quite volatile. In a similar manner, I see Bitcoin retaining high volatility while also enjoying long term growth.
Bitcoin's deflationary model however could be better suited towards producing value through lower volatility and a lower transactional volume. Which could be more appealing to long term investors who prefer investing their capital in safer markets defined by lower volatility rates.
Bitcoin's deflationary model causes hoarding, I get that, but why would it cause lower volatility? If anything, I would think the opposite, since Bitcoin's relative scarcity produces thin, illiquid markets that are easily moved by big buys and sells.
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