
Bitcoin is Eating Itself - okket
https://medium.com/@dgenr8/bitcoin-is-eating-itself-bda69493c938
======
txsh
Just a couple of years ago Bitcoin users were mocking Western Union for their
$5 fee:

[https://i.imgur.com/bjRILt4.png](https://i.imgur.com/bjRILt4.png)

Now, a mere mention of this will get you banned from /r/bitcoin. It's amazing
how quickly the anti-authoritarian spirit of Bitcoin turned on its head.

~~~
watty
Really? I've been pretty critical of Bitcoin on /r/bitcoin and haven't been
banned.

~~~
olalonde
I am bullish on Bitcoin's long term potential but it's true that /r/bitcoin is
heavily censored, I got banned myself for being mildly supportive of Segwit2x.
Luckily, it does not represent the entirety, or even a majority of the
community (I'm not sure we can even talk of a "community" these days).

------
nlperguiy
Bitcoin is an early stage technology that still hasn't solved its scaling
problem.

Bitcoin is also not governed as a product, so incremental scaling improvements
are left for the user to use, and not to forced by protocol.

Bitcoin is currently not usable as currency, and is of course, not store of
wealth - thing is not a liquid asset at all.

Proposed scaling solutions were scientific research years ago, and research is
still being done. The implementation obviously takes years to finetune and the
scaling solution might not work as well as research predicted.

All other coins are early stage tech and research too.

People were enjoying the tech when it was less popular and seemed like magic,
now when big numbers come into play it is obvious things where blown out of
proportion way too early.

~~~
0wing

      Bitcoin is an early stage technology that still hasn't 
      solved its scaling problem.
    

It's almost 10 years old, and they knew about blocksize bandwidth limitations
early on. Bitcoin used to have a variable blocksize that would accommodate
increased usage, but at a certain point they set a hard limit at 1MB. Petty
bickering and control of the main discussion forums by a very small group of
people (owners of bitcointalk, moderators of /r/bitcoin and blockstream
investors and marketing team) shifted the goal posts and gave talking points
to divert the concerns over technical limitations and possible solutions with
no real implementations for years.

The proposed lightening network is based on an unsolved problem in computer
science (routing optimization, LN thus maintains a map of all nodes be
broadcast to all nodes), not to mention the LN design would rely heavily on
centralized hubs of "liquidity providers" i.e. paypal style KYC payment
processors - completely antithetical to the concept of "A purely peer-to-peer
version of electronic cash allowing online payments to be sent directly from
one party to another without going through a financial institution". LN
conveniently favors large centralized liquidity provider payment hubs as the
siphon for fees, which only becomes palatable when the alternative is
excessive fees to miners on the underlying network.

[https://medium.com/@jonaldfyookball/mathematical-proof-
that-...](https://medium.com/@jonaldfyookball/mathematical-proof-that-the-
lightning-network-cannot-be-a-decentralized-bitcoin-scaling-
solution-1b8147650800)

and they've been claiming it's just around the corner since 2015:
[https://twitter.com/starkness/status/676599570898419712](https://twitter.com/starkness/status/676599570898419712)

    
    
      Bitcoin is also not governed as a product, so incremental 
      scaling improvements are left for the user to use, and not 
      to forced by protocol.
    

This is false.

Users are subject to the developers, the moderated discussion forums, and the
selfish incentive of miners/devs to extract financial value from users.

Bitcoin is suffering from a toxic cult like community, and questionable
developer team.

Other crypto-currencies are working on solving the issues while BTC is being
sold off to fund LN investors.

~~~
gizmo686
Lets say a bitcoin transaction takes 250 bytes on average. Visa processes
24,000 transactions per second. To scale to this level, the bitcoin blockchain
would need to grow at a rate of about 5.7mb/s. This is a blocksize of about
3.3 gigabytes.

Growing the blocksize is not a sustainable way to scale bitcoin. This is why
people are saying that Bitcoin is still not a mature technology; the problems
associated with scaling it are still unsolved problems of computer science.

~~~
CyberDildonics
First, the 24,000 /s is the maximum throughput. The real number from visa
themselves is about 2,000.

Second, the Bitcoin unlimited team has already tested and demonstrated
gigabyte blocks. That would be about 1.6MB per second. This is already
achievable with a $12 per month VPS, far less than a single btc transaction.

~~~
gizmo686
Cool project. I found this [0] talk on the matter.

I am still working through it, but it seems that with (somewhat optimized)
current software they hit 10 minute propagation time at 1GB blocksize, with
about 500tx/s (t=4549).

EDIT: This experient is also still young. As of the November 2017 talk I
linked, they were using 4-6 miner nodes, and a UTXO pool simmilar to the
current network (to the point where the presented would not even give numbers
for memory and disk IO because he viewed them as not relevent to what would
really be seen).

I submitted the linked talk to HN. Comments at [1]

[0]
[https://www.youtube.com/watch?v=LDF8bOEqXt4&feature=youtu.be...](https://www.youtube.com/watch?v=LDF8bOEqXt4&feature=youtu.be&t=4079)

[1]
[https://news.ycombinator.com/item?id=16012746](https://news.ycombinator.com/item?id=16012746)

------
rednerrus
How useful is a currency where the transaction fee is $6 at the current price?
This is much cheaper than last week when it was $25/transactions? Gone are the
days of gambling on Satoshi Dice and buying things on Silk Road. Now we are to
believe that Bitcoin is an inherent store of wealth?!?

Edit: The fees are above $20 now.

~~~
delbel
Tried to send bitcoin yesterday ($120) to an online retailer, the fee was
$31.50 which I did not have. So I went to buy more bitcoin and realized it
would cost additional $31.50 to transfer the new bitcoins just to cover the
other network fees. Had to do it, then for whatever reason my account was put
on 72 hour hold. So I just gave up, literally out $200 with nothing to show.
Bitcoin is a complete joke if you can't actually use it.

~~~
StavrosK
You can set your own fees. I paid $3 for a transaction today (but it obviously
still hasn't verified, and I don't know when it will). That's kind of the
tradeoff, unfortunately.

These days, I find Bitcoin completely unsuitable for sending money. I use
Bitcoin Cash, which verifies in ten minutes for something like one cent of
fees (first block), but I guess that's because nobody uses it. Still, Bitcoin
itself is out of the question for me personally, I'm not paying $30 for a
transaction for anything.

~~~
dannyw
Bitcoin cash doesn’t have artificially low constraints on capacity. 10 years
ago, it was 1MB.

Despite all the advancements of storage and networking, it’s still essentially
1MB to a maximum of 1.8MB if everyone implements a complicated and costly to
develop system called SegWit, and to fully use SegWit you have to use
backwards incompatible addresses.

------
thefreeman
Ok, every time they refer to "coins" in this article they really mean wallet
addresses right? Is this a common way to refer to them now? It really took
away from the point of the article for me.

~~~
olalonde
Technically, they're (or should be) referring to "txouts" or "outputs". An
address with a large balance could still be unspendable if it is composed of
many small outputs.

A single address can be the recipient of multiple payments (outputs) and a
transaction spends those outputs. Since each output must be referenced in a
transaction, each output takes up some space and fees are calculated based on
the size of the transaction in bytes, not its value in BTC. This diagram I
made a few years ago might help visualise:
[https://github.com/olalonde/bitcoin-
notes/blob/master/svg/tr...](https://github.com/olalonde/bitcoin-
notes/blob/master/svg/transaction.svg)

~~~
konschubert
So we're going to run into some sort of fragmentation problem? Ever-growing
transaction size coupled with already-to-small block size.

I knew the scaling problem was bad, but I didn't realize it gets worse as
Bitcoin ages!

~~~
Dylan16807
It doesn't really get worse over time. The amount of fragmentation is
generally going to be proportional to the average transaction size.

In general, expect transactions to have two outputs. The payment, and the
extra. And since outputs become inputs, transactions will average about two
inputs too.

A few shavings might get orphaned here or there, but that doesn't have a huge
effect on the operation of the rest of the coins.

~~~
konschubert
Ah, okay, I somehow thought that a transaction with multiple inputs creates at
least the same number of outputs.

------
olalonde
> Over 3000 BTC, worth over $4M

3000 BTC is worth over $40M, not $4M.

edit: oops, article dates from April.

~~~
ivanbakel
This article was written in April. Besides which, making up-to-date
corrections on such volatile prices is a pedant's joy: you might be corrected
next week, but you wouldn't have been wrong today.

There's a joke going around at the moment: "Dad, can I borrow a Bitcoin?"
"$15000? Why should I give you $14000? What do you need $16000 for?"

------
avenoir
I personally think that Bitcoin will eventually be taken out by Ethereum,
which will then give way to the likes of Cardano or something similar that
will figure out issues with scaling, sustainability, governance (ie civil
resolution of conflicts and end of hard-forks) and interoperability with
legacy financial systems (ie Banks). It's really quite amazing to follow the
innovation in this space, once you get through all the shit coins and ICO
scams that is.

------
okket
Previous discussion:
[https://news.ycombinator.com/item?id=14241065](https://news.ycombinator.com/item?id=14241065)

------
fortythirteen
I bought into cloud mining a few years ago and my micro deposits are worthless
because of the cost to consolidate the wallet.

Really glad I didn’t sink too much into it, but I’m still pissed when it’s
several grand worth of coin that I can’t ever withdraw.

------
JepZ
Isn't layer two supposed to solve the fee problem? Anybody knows if thats
right and when we can expect to see layer two in the wild?

~~~
anonymous5133
It is, yes, but we aren't sure exactly how it will go implementation wise.
layer two is a little more complicated to use compared to bitcoin which is
somewhat user friendly in comparison.

~~~
notsrg
Even with wallets using Bitcoin is not user friendly in any sense of the word.
If you already use PGP, sure. If not, good luck securing those keys. Oh and
hope you made backups.

~~~
JepZ
Well, Bitcoin doesn't have to be so complicated to use.

In fact, once you set up an account, sending and receiving money with coinbase
is pretty simple. But yes, setting up an account with all the verification
stuff isn't neat in the first place and storing your keys at an online
provider is unacceptable for any sane person.

On the other hand, there are some very easy to use desktop wallets like Exodus
and making offline backups of your keys by writing down a few words (BIP-39)
is pretty simple too. Sadly, not all wallets support BIP-39 (for various
reasons), and e.g. Exodus complicates the matter by asking you for a password
before telling you the words which is completely unrelated to BIP-39.

So Bitcoin itself could be very easy to use. In my eyes the only real problem
is obtaining them. I mean for everything else you just need to download some
software and off you go. But to buy bitcoins you still need to register
yourself with some institution which takes a few hours at least. It would be
so much simpler if you could just buy some bitcoins at ebay/amazon/steam/...

------
DenisM
Exchange fees go up:

\- when the prices shoot up, attracting speculators

\- when the prices crash down, spooking speculators

\- when bigger players move in and pay for quicker transaction clearance

\- when time passes

Exchange fees go down:

\- when it's calm and quiet, and there is no frenzy

So a bit like a fishhook, then?

------
dannyw
This article is fairly outdated. According to bitcoinfees.earn.com, the
fastest and cheapest fee is 690 Satoshi per byte. 3.5x what it was in May.

------
noncoml
Bitcoin is a ponzy scheme at the moment, but the block chain and the
eCurrencies is the perfect platform for a Universal Income experiment.

All we need is a way so that the “coins” do not go to the one with the most
computing power, or the one who got in first, but distributed equally among
the population.

~~~
gizmo686
Ponzy scheme has a technical meaning, and Bitcoin is not it. Bubble is the
word you are looking for.

>but distributed equally among the population.

I am aware of no blockchain based technology that offers a solution to this
problem. Central to the problem that blockchains are intended to solve is that
there is no good way of identifying individuals. That is to say, there is
nothing to stop me from opening a million accounts in the system and acting as
if I was a million different people. The insight behind POW style blockchains
is that it does not matter if I claim to be a million people, because that
would not give me any more compute power, and so will not allow for an attack
on the system.

If we could come up with a way of providing some sort of proof of
individuality we would solve alot of problems.

~~~
konschubert
> If we could come up with a way of providing some sort of proof of
> individuality we would solve alot of problems.

I've been thinking about this in the past weeks because I find the energy
consumption hard to justify.

Proof of individuality still would allow people of power to use an army of
identity soldiers... but the same people can buy hash rate today, so that
would not be a regression.

~~~
gitgud
It could also provide people in power with a reason to control or enslave
other individuals to acquire control of the network.

~~~
konschubert
At the risk of sounding like a teenager:

How different is that from powerful people controlling or enslaving
individuals to make money which they can then use to acquire control over the
network?

