
The Fifth Protocol (2014) - IA21
https://startupboy.com/2014/04/01/the-fifth-protocol/
======
mechanical_berk
> Cryptocurrencies like Bitcoin are already trustless – any machine can accept
> it from any other, securely. They are (nearly) free.

I believe it currently costs ~$1.50 in fees for a single Bitcoin transaction,
assuming you want it confirmed reasonably quickly. Not what I would call
nearly free!

~~~
hdhzy
Could you tell where did you get that fee from?

According to this thread [0] the recommended fee is 0.0001 BTC that'd be
$0.20. Of course if you have a non standard transaction the recommended fee
will vary.

[0]:
[https://bitcointalk.org/index.php?topic=245552.msg2618635#ms...](https://bitcointalk.org/index.php?topic=245552.msg2618635#msg2618635)

> assuming you want it confirmed reasonably quickly

Generally it takes 10 minutes to mine a block so even with a very high fee you
won't have it accepted in seconds (except for a pure luck situation where you
send a transaction, miner takes it and immediately finds a block).

Personally I wouldn't think fees are a big deal now that miners rely mainly on
coinbase transactions (getting BTC just for mining a block). Fees will play a
big role when miners stop creating BTC out of thin air and will have to
survive on fees only.

~~~
mechanical_berk
I got it from [https://bitcoinfees.21.com](https://bitcoinfees.21.com) "The
fastest and cheapest transaction fee is currently 330 satoshis/byte, shown in
green at the top. For the median transaction size of 226 bytes, this results
in a fee of 74,580 satoshis." 74,580 satoshis is currently ~$1.50.

As you and b1daly point out the majority of the cost of running Bitcoin is
currently paid for by mining rewards, but even so the fees are still crazy!

I don't know what will happen when the mining reward disappears. There will
surely be far fewer miners, which will decrease the real-world cost of mining
a block (and also decrease the security of the system!)

If proof-of-stake or something like it is ever adopted then presumably the
cost of running the system will plummet but I'm not familiar enough with that
stuff to say much more.

~~~
hdhzy
> There will surely be far fewer miners, which will decrease the real-world
> cost of mining a block (and also decrease the security of the system!)

Maybe it'll end up with bigger amount of smaller miners. Now the cost of
entering mining is high but when the incentives will be smaller Bitcoin mining
may end up where it begun - on small hardware. If fees sky rocket nobody would
be using it. One way or another that'll be interesting times...

~~~
mechanical_berk
So I've thought about this a bit.

Assume there are a fixed number of transactions per block (N), but a greater
number of potential transactions that people would like to do. Also assume
that there is a maximum percentage (of transaction amount) that people will be
willing to pay as a fee (F).

Then I think the transaction fee should tend to F * average amount of Nth
largest potential transaction in a block window.

The cost of mining a block ought to tend to just less than the average block
payout (reward + fees). When the reward disappears, this will happen as miners
shut down due to not being able to make a profit and the mining difficulty
decreases.

Only the most efficient miners will survive. I think this means a few big
miners, rather than many small miners, as big miners are almost certainly more
efficient.

------
bascule
What I would like to see is an openly federated payments network that
functions more like the Internet (and runs on top of the Internet):

[https://interledger.org/](https://interledger.org/)

------
lerie
It's in the app layer, we dont need a "fifth" layer.

~~~
uiri
There are seven layers according to the OSI model. The TCP/IP model simplifies
this into "above layer 4", layer 4, layer 3, and "below layer 3". In practice,
TLS/SSL is an implementation of the session layer (layer 5) with other
protocols run on top in the application layer. The data link and physical
layers don't map particularly well to LLC, MAC, and physical transmission
technologies but they serve as a reasonable approximation. The presentation
layer (layer 6) doesn't really exist but neither did the session layer until a
need for encryption inside of TCP came along. Onion routing could be argued to
be another session layer technology. The real world is messy and simplifying
it into four (or five) layers of nested protocols puts TCP/IP on a pedestal.
So take the title with a grain of salt.

The original article argues that cryptocurrencies are a layer of protocol,
wrapping those above it. Looking at NameCoin, it isn't an argument that should
be dismissed out of hand.

~~~
smoyer
While the OSI model is commonly referenced it's pretty rare to see the
Internet Protocol Suite. In this case, I'd argue the author could have said we
need an alternate transport protocol but with his argument I don't think you
can say that crypto-currencies aren't just another application (as noted
elsewhere).

Bonus points for the Snow Crash quote though - one of my favorite authors!

------
b1daly
I can't see how this squares with the scalability problems of proof-of-work
systems.

Given the big problems with these limits currently happening with bitcoin,
this seems impossible to use in a high bandwidth system. Already bitcoin
transactions are shockingly expensive, with the bulk of the cost hidden from
the user by the payout of coins to the miners.

------
bmcusick
Basically still correct it's just taken longer to get scaling solutions like
SegWit/Lightning into production. One the Lightning Network is up you just pay
one BTC transaction to establish a channel with the network, then all
subsequent LN transactions are cheap and instantaneous.

------
moomin
This sounded like a good idea, until I remembered most spam bandwidth was
stolen.

------
neilk
I agree with the part where he calls cryptocurrencies a religion.

~~~
normalocity
Right? The author seems to take the matrix way too seriously. You're not
Morpheus trying to convince everyone to see the truth of the currency savior.
You're just a little over enthusiastic.

------
kurthr
Of course there will be DOS attacks on the currency protocol too... unless we
design it just so.

------
johnnydoebk
Do we have a week of cryptocurrencies on HN?

