http://www.nytimes.com/2010/01/05/your-money/credit-and-debit-cards/05visa.html?pagewanted=all&_r=0
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“What we witnessed was truly a perverse form of competition,” said Ronald Congemi, the former chief executive of Star Systems, one of the regional PIN-based networks that has struggled to compete with Visa. “They competed on the basis of raising prices. What other industry do you know that gets away with that?”
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Visa does not distribute credit or debit cards, nor does it provide credit so consumers can buy flat-screen televisions or a Starbucks latte. Those tasks are left to the banks, which owned Visa until it went public in 2008.
Instead, Visa provides an electronic network that acts like a tollbooth, processing the transaction between merchants and banks and collecting a fee that averages 5 or 6 cents every time. For the financial year ended in June, Visa handled 40 billion transactions. Banks that issue Visa cards also pay a separate licensing fee, based on payment volume. MasterCard, which is roughly half the size of Visa, uses a similar model.
Instead, Visa provides an electronic network that acts like a tollbooth, processing the transaction between merchants and banks and collecting a fee that averages 5 or 6 cents every time. For the financial year ended in June, Visa handled 40 billion transactions. Banks that issue Visa cards also pay a separate licensing fee, based on payment volume. MasterCard, which is roughly half the size of Visa, uses a similar model.
Assuming Bitcoin (or the decentralized cryptocurrency concept in general) is truly magnitudes more efficient than the current electronic payment systems (PIN debit, signature debit, signature credit, etc.), resulting in lower fees for merchants*, fees which the merchants would normally pass onto consumers and therefore a superior system. In time (years? decades?) it should rival, if not surpass, the current largest player in the payment network market, VISA. What would a Bitcoin network that could process 2,000 transactions per second as opposed to 7 transactions per second** look like, besides the dramatic price increase and subsequent stabilization?
Would the cost of running a full node exceed the budget or if not budget then the interest of the average user? If so then the majority of users must run SPV clients, yes? Or perhaps users will store their coins in datacenter "banks" with appropriate insurance running full nodes for them and also providing "trusted" nodes for SPV wallets. I would hope that do to the nature of bitcoins predictably decreasing inflation rate and its consensus based protocol, it would not be possible for these potential new "bitcoin banks" to make a new fractional reserve system or such token on top of Bitcoin. Instead use a business model such as setting contracts with large mining companies or pools for rights to processing users transactions.
What are the main limiting factors in the amount of transactions per second the bitcoin network can process? Is it only the current software limits in place and the need for more powerful nodes to process the blockchain?
Would it be safer accept zero confirmation transactions in such a robust network?
*Transaction fees as low as 0.1% - Bitpay founder Anthony Gallippi testimony on virtual currency senate hearing at 01:12:10. http://c-spanvideo.org/program/VirtualCu
**Transactions per second - https://en.bitcoin.it/wiki/Scalability