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Steam is no longer supporting Bitcoin (steamcommunity.com)
675 points by tsneed290 on Dec 6, 2017 | hide | past | web | favorite | 396 comments

It's for the same reason that no one wanted to touch zimbabwe dollar back in 2007, if the value of the medium of exchange differs from breakfast to lunch it's not really a good medium of exchange. Doesn't matter if value is appreciating or depreciating, currency needs to have a reasonably stable value to be useful.

The volatility alone wouldn't be a huge problem if the transactions were quick, apart from having to constantly re-price the goods (not a big deal with an automated system selling digital downloads, even though it is a real PITA for the accounting afterwards!).

However, getting the transaction confirmed can take many hours at the times of high demand and then it still fails because thanks to the volatility, the transaction fees have gone up in the meantime. That is creating unsustainable problems for the customer support and makes BTC unusable for actual payments.

I think this is what will ultimately bring Bitcoin down (and with it the entire cryptocurrency goldrush, even though the problems are mostly with BTC). Once the currency is impossible to exchange for actual goods or other currencies due to being more trouble to handle than it is worth, it stops being a currency. What good is that one BTC is $12k+ now if you can't actually buy anything with that? People pouring money into this today and talking about BTC being a "store of value" are being seriously nuts ...

Eh? The volatility is a HUGE problem for bitcoin as a currency.

If I run a small business, accepting payment in bitcoin just creates risk. The state of my business not only depends on the quality and success of my product/service but also on the volatility of bitcoin because by accepting bitcoin I am forced to effectively take a long position on BTC. The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem - struggling to pay wages and rent - even though my business is successful in that I made a profit on selling my products or services.

The purchaser of my services is effectively on the other side of this trade and is exposed to the opposite risk wrt to BTC/USD. The only way for the two parties to minimize this risk would be for the customer to convert fiat currency into bitcoin just before paying, and then for the vendor to convert the bitcoin back immediately on receipt. With high spreads and transaction costs, using bitcoin in this manner is incredibly expensive and makes no business sense.

Do many Bitcoin boosters even care about BTC becoming a currency any more? Seems it has achieved much more success as a frenzied medium of global speculation than it ever dreamed of as a stable digital currency.

If BTC isn't valuable as a currency, then it is in fact a speculative bubble that will suffer a dramatic collapse, just like the tulip mania in the Netherlands in the 17th century.

What about the new "digital gold" store of wealth narrative?

Yes, but gold has been used as a currency for thousands of years and it does not share many of the problems of Bitcoin — for example it isn't so volatile.

Of course, it's a finite resource and mining it involves dynamiting mountains and cyanide poisoning the environment, but then again Bitcoin mining currently consumes enormous amounts of energy and it can only grow from here. Also countries with no gold reserves have been at a disadvantage, but then Bitcoin mining will require enormous resources as well and countries without those resources will remain at a disadvantage. So personally I don't see any benefits whatsoever.

If I had wealth to store, I'd invest in property simply because properties have intrinsic value. And yes, I'd still buy gold before Bitcoin or any other currency for storing wealth long term.

Bitcoin is currently only useful for speculative gains and I don't see that changing.

Digital gold term is utter nonsense and nothing more than wishful thinking of those involved. Gold has huge value, be it national reserves, jewelry, industries etc. and has never, ever lost much of its value.

Bitcoin is a classical ponzi, you don't have more than few bytes of otherwise meaningless data, and only emotions are keeping the value so high. And as we know, emotions change.

Don't insult gold. It will be around long after Bitcoin will become just another part of history.

I think you could fairly easily rationalise to yourself that Bitcoin _will_ one day be money, and we haven't reached its true value yet, so nobody wants to miss their piece of the pie when that happens.

A few years ago the Winklevoss' said their target is $600,000 per coin. When I heard that, I thought they were insane. Now, I'm not so sure.

That would be the price it bitcoin was used in about 10% of all transactions worldwide.

It could get there even with far fewer transactions, right? If people keep buying bitcoin just to hold it, then the lack of sellers could drive the price to insane levels without much transaction activity.

I remember the 2013-14 hype cycle. That's when BTC hit $1k and a lot of merchants started accepting it, mostly as a PR gimmick. That's when I bought my BTC and even bought a few domains with them.

Since then, I almost never see BTC as a payment option.

You underestimate the dreams of BTC Boosters.

Exactly. Until we pay rent, wages & stock with Bitcoin, it's essentially just digital gold bullion.

You'd be an idiot to pay for any service with Bitcoin. A million dollar pizza makes for a great news story, but it would suck knowing that you effectively let go of millions of dollars just to buy a pizza.

Bitcoin holders are disincentivized from spending it.

It's almost like being inherently deflationary is a negative property for a currency to have...but that can't be true, because lots of cryptobugs have explained to me at great length why this is actually Good For Bitcoin.

If transactions were confirmed quickly with low fees, you could just turn around the Bitcoin in a few minutes in the exchange for dollars, all automatically. The price won't change that much on the timescale of minutes, so add in a small buffer percentage to make up the leftover difference and you're done.

That's where IOTA and/or Stellar Lumen come into play.

How does one take a short position in Bitcoin?

If the futures markets at the CBOT or CME attract volume, you could use those. Otherwise, you'd have to do it over-the-counter. Borrow a bitcoin from someone and turn it into real money. When you have to repay, if BTC is down, you'll buy back a BTC at a profit. If it's up, you'll have to buy back at a loss.

Note that this gives you a maximum gain of whatever BTC/USD is today (assuming you denominate in greenbacks), while upside risk is theoretically unlimited.

Of course the lender has to trust or be ensured (or insured) that you will repay.

There must be people using Ethereum contracts to make options on BTC, and maybe trying to minimize counterparty risk through the judicious use of open-sourced smart contracts and digital collateral? Anyone know of interesting cases?

http://www.cmegroup.com/trading/bitcoin-futures.html http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures

Apparently they will list on 18 Dec on CME, and 10 Dec on CBOE.

I get the feeling that there will be a fair bit of selling pressure as a result. That's usually the case on lockup expiries and it would make sense for the initiation of a volatile instrument that wasn't previously shortable on a listed basis.

I wonder how hedging transactions will affect the mechanics of the bitcoin market.

> I wonder how hedging transactions will affect the mechanics of the bitcoin market.

The bitcoin market is astonishingly shallow compared to most commodities and nearly unregulated, I assume hedge funds and other smart money can and will manipulate the price up and down to their own advantage.

Why would it be particularly easier to manipulate bitcoin pricing over other stocks/securities? Simply because the authorities don't understand it yet, or something to do with the nature of crypto-currency itself?

Because there are relatively few buyers and sellers in the market and the amounts of transactions are small, so one big mover can shift the price a lot.

According to some blockchain site[0] the average transaction volume for BTC is something like $2.25m USD equivalent

For comparison, on an average day, SPY[1], which is just one security (albeit a popular one) trades something around $17,160m (e.g. $17.16b).

[0] https://blockchain.info/charts/estimated-transaction-volume-...

[1] https://finance.yahoo.com/quote/SPY

Because there's fundamental value behind most traditional securities, even if it's well below the current market price. If you hold a bond, it will (usually) pay interest and principal. Equities carry the value of the cash holding of the company, plus the potential for future dividends. These cash flows act as an anchor on the value of those securities (in both directions, up and down.)

Couldn't you say the same about penny stocks? And won't this problem go away as BTC gets more popular?

> Couldn't you say the same about penny stocks?

Sure, but there are also laws and regulations that limit what you can do with stocks on a real exchange: https://en.wikipedia.org/wiki/Microcap_stock_fraud

> won't this problem go away as BTC gets more popular?

Maybe. It would have to get a lot more popular, and a lot more legitimate and regulated. At that point, it's lost all the cyberpunk appeal, and it's just another speculative asset.

Regarding penny stocks, this does happen all the time, although its expressly illegal (look up boiler room scams).

What you mean? You can short any crypto currency on many exchanges. Bitfinex and GDAX being the biggest right now.

And when bitcoin crashes, and the exchange "gets hacked", goes bankrupt, and the owners run away to some international destination, who do you claim your USD back from?

If you're shorting, you get the $ up front and have to supply the security when you "cover". Not having to "cover" the short would actually be better.

It would take some gut to do it.

I have the same thought myself sometimes, but then I remember this quote: "Markets can remain irrational a lot longer than you and I can remain solvent."

I think that's derriz's point. It's very difficult, and would be prohibitive for a small business to immediately convert bitcoin to cash.

Very soon (next week) bitcoin futures will start trading which will be an easy legitimate way to take a short position. You just need a futures account which you can get from regular financial institutions.

Most major exchanges offer margin trading.

You can lie to an exchange that supports it. Sign the paperwork making promises about things that aren't true.


Bitfinex offers this.

> The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem

Well, the parent comment said "if the transactions were quick", meaning that you would exchange the bitcoin for something else as soon as you received them (within a second or minute, say).

Wouldn't that cost a huge amount in transaction fees, making the whole thing moot?

For a large enough sales volume, the transaction fee might be negligible, but I don't know the numbers.

The volatility of Bitcoin has been decreasing over time.

Recent price jumps tell a different story.

Do you have any data to back it up?

It's still far too volatile to be a reasonable currency.

It's actually impossible to reliably get a transaction confirmed in the 15 minutes that BitPay (who they used) is willing to lock in an exchange rate for, regardless of load on the network. The earliest a transaction can confirm is on the next block, and there's about a 25% chance no block will be mined by then.

>However, getting the transaction confirmed can take many hours at the times of high demand and then it still fails because thanks to the volatility, the transaction fees have gone up in the meantime. That is creating unsustainable problems for the customer support and makes BTC unusable for actual payments.

This is precisely what Lightning aims to solve, and at least anecdotally so far, has done so in the case of LTC.

(Though its hard to compare LTC to a chain with a market cap of over $200b even if the former has a skyrocketing trade volume)

Having used bitcoins as money, I really want the confirmation times and transaction fees to go back to what they were a year or two ago. I keep hearing that this mythical lightning will fix things, and I sure hope it does.

I want internet money. I want to be able to send money to anyone, anywhere in the world, at the drop of a hat, as easy as email. I don't care about speculation or getting rich or avoiding taxes or sticking it to the man or anything like that. I just want to have a convenient way to get tipped on IRC by anyone at any time and to be able to repay in kind, to anyone at any time.

10 minutes isn't really the drop of a hat. But why do you need your first confirmation in approximately the next 10 minutes so badly anyway, especially when it shows up in the mempool pretty much immediately? I paid around 20 cents on an approximately $200 transaction a couple weekends ago, it got verified after about 4 hours but I was expecting longer, it would have been fine. In the last 24 hours, 36,332 transactions were verified with at most 30 cents in fees. (https://bitcoinfees.earn.com/) The estimated time bounds for a transaction in that pool are 25 minutes to 14 hours.

Just knowing it's in your mempool isn't a very strong guarantee that the payment will go through. Probably fine for reversible digital goods, but not much else. Some systems pay miners to look at their block templates to get a better assurance it will confirm (and that it won't be replaced), but it's still not very good, and given that Lightning is now running on mainnet there's little value in continuing in that direction.

We've mostly had this for years, in the form of PayPal. Your ID even is your email.

The issues with PayPal have mostly been interfacing with fiat currency, which any system will have to deal with, and transaction fees, which any system will have.

The real problem IMO is the lack of a de-facto service that everyone all around the world has, and we're kind of in this position: https://xkcd.com/927/

Paypal doesn't work well across international boundaries. It's not convenient for IRC tipping. It's not internet money. And it's not my money, it's their money which they usually will give to me at their pleasure.

Having family and friends in different countries who use different currencies, let me tell you, Paypal is not the solution I want.

I avoid using PayPal internationally because they make it hard for me to pay in foreign currency denominations (they "helpfully" insist on being my exchange) but I have used it, it was no "worse" really than paying domestically. What makes them bad for you for international?

I argue it's not convenient for IRC tipping simply because 1) software is not well-integrated for minimal clicks 2) the other person might not have PayPal.

Don't get me wrong, I don't love PayPal, but I don't think Bitcoin brings anything really fundamentally important & new to the table, except maybe the decentralized part. Though, I suppose you could argue the decentralized nature of email was key for its universal adoption today.

That "helpful" exchange also charges a 3% fee on all currency exchange, on top of their regular fees.

You can insist that they charge you in the same currency as you wish to pay with and your bank will do the exchange at an order of magnitude lower fee. Not everyone knows this. The user interface also doesn't make it very clear (which perhaps surprised no one).

It would be the "not my money" part that is fundamentally different with Paypal. Paypal can choose to withhold this money at any time for any reason, and they have done so in the past. A lot of the money isn't even FDIC insured in the event of bankruptcy etc.

It straight up didn't work with my Vietnamese friend

Have a look at Transferwise.

I transfer money to my mum in the UK once a month from my Australia debit card and its in her account within minutes, and the fees are far lower than a bank transfer.

PayPal is a US-based centralized corporation. They're an application with a single point of failure.

PayPal? Is it this strange service based in USA (of all countries) which requires me to send them a utility bill? Seriously?

Are there any Bitcoin exchanges that don't require photo ID?

Yes. Some only require that if you wish to withdraw or deposit fiat over some daily limit.

You can create a scarce token with all the qualities you desire in like 5 minutes. Creating 'internet money' with a stable value and network of potential transactees probably looks exactly like Bitcoin's development though.

Bitcoin is not set up to ever be "stable" by any definition.

Real currency has a federal reserve to balance supply against demand and keep the value steady.

BTC has entirely demand-driven value-- which is precisely as steady and predictable as the human mind.

I wonder how real currencies existed before central banks...

They weren't stable.

You mean stable like the US dollar which went from $35 per ounce of gold when Nixon closed the gold window to $668 ten years later? By contrast the aureus, the solidus, the fiorino and many other metal based currencies preserved their value over several centuries. What eventually destroyed those currencies was not the lack of a central bank but on the contrary eventual debasement by the central authority.

Actually, I'm glad you pointed to the failure of the gold standard. It's a great example of why commodity money is dangerous.

The gold standard was abolished because the economy was on the brink of collapse. A dollar grossly mismeasured the value of an ounce of gold, because there were far FAR mare dollars than gold to back them, and the mapping of gold to dollars was not adjusted at all (from $35/oz) despite the discrepancy growing and growing for decades. In a sense, each ounce of gold was being double-counted 100 times over by so many dollars floating around in the economy. That situation was horribly unstable, because it was at huge risk of a run on gold (You'd have a lot more wealth if you exchange your dollar for gold; because of the aforementioned double counting, an ounce of gold actually corresponds to a great many dollars. If everyone had realized that and done it, the economy would have been toast).

Disconnecting the dollar from gold allowed the value of an ounce of gold to be correctly measured. So while other prices in the economy remained stable, gold shot up, because now the market was free to price it accurately (reflecting that the economy had grown far faster than the supply of gold). That doesn't indicate inflation, it precisely illustrates how dangerously out of whack things were before the gold standard was lifted.

Looking at the Coinbase graphs reminds me of reading CPU charts, comparing resource use between 3 web servers. Sometimes one coin will spike or dip independently, indicating higher utilization of one coin over the other 2 - an arbitrage opportunity; other times all 3 coins see a matching dip or raise, likely indicating a systematic cause.

I'm mostly happy with bitcoins except for what I mentioned: transaction fees and waiting times. If those things can really be brought down by the lightning network, that's all I care about.

Financial stability seems like a secondary concern that cannot be solved via computer code but might instead require other kinds of human codification, perhaps legal.

>This is precisely what Lightning aims to solve, and at least anecdotally so far, has done so in the case of LTC.

Which LTC wallet support LN in production?

Serious question: even if a currency is only good for exchanging for other currencies, doesn't that still make it a currency?

In other words, even if you can't go buy clothing or games or hosting with BTC, doesn't the fact that you can exchange it for $LOCAL_CURRENCY (which can be used to buy those things) give it value?

Basically, a meta-currency or currency of currencies, if you will.

Edit: I realize we are saying the problem is a delay and pinning down the real value at a given time, but it sounds like that doesn't matter so much as the volatility itself, which should eventually settle. If delay were really a problem, then I would think stocks wouldn't be a thing.

That makes it a security. By definition, currency is something you can exchange for goods or services, while securities are financial instruments that hold value (i.e. can be exchanged for currency).

See also: the European Currency Unit. Not a currency, but sort of acted like one.


Stocks are a thing because no one thinks of them as liquid assets. Steam is making the same argument about bitcoin essentially.

It was eye-opening to realize people buy stocks for 2 reasons:

1. Dividend payments

2. The expectation that someone else will want the stock more in the future. (Often for reason #1.)

Financially, there is no other logical reason to possess stocks. It was part of the larger lesson that companies often perform irrational actions because they are made primarily out of people.

3. Voting rights.

Stocks are an order of magnitude more liquid than Bitcoin, though

That would depend entirely on the stock. I'm sure there are many, many companies whose stock trades at less daily volume than BTC. Actually, I'd think few companies' stock trades at BTC's volume.

Oh sure, Berkshire Hathaway is less liquid. There are lots of stocks designed via various tricks (usually just share price) to be held and not traded.

Nonetheless, for any of the "commonly traded and indexed investment securities we all talk about colloquially as 'stocks'", the daily trade to capitalization ratio is routinely an order of magnitude higher than bitcoin.

No, it becomes an asset, like gold.

The thing with gold is that it's been valued for thousands of years all around the world and you can show it off, and we're pretty sure that we won't find a pure gold asteroid hurling towards us.

BC has none of those advantages.

Wait, has a pure Bitcoin asteroid been detected already?

Where then, would you draw the line between a currency and a non-currency asset?

When it hits all of:


If you can't spend it easily, it's not a (functioning) currency.

If it spoils or decays within your lifetime it's not a currency.

If it's not something you can divide in order to make payments of a more-or-less arbitrary amount, it's not a currency.

If you can't predict how much of the asset you will need to pay your bills next month, it's not a currency

If you can't bring it with you to the place where the exchange takes place, it's not a currency.

If you can't obtain capital investment in a currency because the currency itself is more valuable than anything you could produce, then it's not a (good long term) currency. This last one is in parens because it one only matters in a growing economy. A deflationary currency can still otherwise function as a viable medium of exchange, but eventually, lack of availability for new entrants will mean that entrepreneurs will begin looking to do business in alternate currencies.

> If you can't predict how much of the asset you will need to pay your bills next month, it's not a currency

Back in the hyperinflation days, we couldn't predict how many Cr$ we would need to pay our bills in the next month. That didn't keep it from being a currency.

That period did not last. Yes, if you try hard enough and look narrowly enough you can find exceptions to any of these rules, but it holds as a general guideline. If hyperinflation had continued indefinitely, it's probable some other commodity would have supplanted it as a de facto currency.

Are you missing fungibility or is that covered?

Missed it. In my mind I think I lumped it in with divisibility, which is related but not quite the same thing.

Nice. In that case, I wonder if you've ever heard of Monero? :)

Liquidity, probably - how fast can you exchange how much of it.

Though I do personally think there's a lot more to a currency than that.

Everything is a currency, if you barter hard enough.

Barter is, by definition, an exchange of goods without using money. In other words if you have to barter to get rid of it, it's not currency.

Does Valve really needs more than 0 confirmations? double-spending doesn't seems like a big issue for them since Steam is DRM and they have some level of control over the software people have in their libraries (and total control in the case of online games). If the concern is whether some people would just download games, double-spend before getting one confirmation and then keep Steam offline forever (or copy the game files from the steam folder), I think people can already do something similar as they let users "return" games during the firsts 24 hours after the purchase.

The problem with zero conf now is that the transaction may never get through. Blocks are full so often that if the fee isn't high enough the tx might stay stuck in the mempool for weeks until the machine is rebooted and the tx is lost forever.

Extremely low tx fees may never get into a block, but I just checked the the current price for a target of 24hs max (the same window time that fiat users currently have for returns) and it shouldn't be more than $0.35 USD for a simple 1 to 1 transaction (14 sat/byte). I know that this still isn't good, specially when you may be sending just $5 for some cheap game, but it's not that terrible either in my opinion...

Problem is that the minimum fee for 24hr target could change a lot in an hour or less because some news story happened or simply when enough people noticed a lull in fees and decided to move their fees when it's still cheap. In that event 24hrs coild easily turn to days.

Wallet developers and payment portals gets a lot of flak for overcharging fees, but ultimately it is still preferrable to using a conservative estimate and deal with the likely support call when the payment fails to confirm, and there is nothing they can do but watch it get bounced between nodes.

If the transactions were quick and Bitcoin were usable, I'd argue that the price wouldn't be fluctuating

Right, that is really the other side of what I didn't say. I don't expect Steam to be holding onto bitcoin for very long but if even for the short amount of time they're holding it the price is fluctuating and doesn't offer an equivalent price in USD from the time the user presses pay to the time the transaction is processed, on top of what can amount to a 20% fee it's simply not currency. They'd be better off allowing people to pay them in stocks sold on the NYSE and NASDAQ.

Steam does not hold onto BTC, BitPay collect the user's payment, tells Steam to release the order and writes a USD.cheque to Valve once in a while after taking their cut. The system worked until network congestion and market volatility made it impractical.

The only major online retailer that actually keep their own BTC is Overstock.

I wish someone invented a currency that was a percentage of the stock market index. Maybe blockchain could help with this...

That's more or less what ETFs do.

I know what an ETF and an Index Fund is (and that is where most of my money is held). My point was that would be great if had such a currency (i.e. is fungible, commonly accepted as a medium of exchange, and is easy to carry & transact) as opposed to something stuck in your brokerage account.

ETFs are not currency...

> The volatility wouldn't be a huge problem

I am having trouble fathoming why you think that.

The possibility of goods or services being returned or disputed at a later date creates risk even when the initial transactions are instant.

> and makes BTC unusable for actual payments

How ironic..

If you treat it like gold(store of value) then having a service that makes it liquid is just a bonus. Is like expecting to be able to purchase something using stock.

The point of a store of value is to have a stable, well, value. Either because the value is entirely intrinsic or because the demand is very stable.

Bitcoin is no more a store of value than tulips were. Bitcoin is a speculative product, not a store of value.

A store of value is something which you can be sort-of sure that people will want it in X years (with the longer the X, the better).

Gold has been valued since, I don't know, before the Greeks. What are the chances that tomorrow gold will go completely out of style (say gold will be worth no more than copper)? What about BitCoin? Can you put money in BC and hide it away?

It's just a sign that there are technical challenges. This can be solved with adaptations in the protocol (forks) I guess.

My biggest issue with BTC and the reason why I've never been bullish on them, despite owning a couple early on

People seem to forget Bitcoin is still in early "alpha" stages. Transaction times, fees, and even stable price will come IF it proves to be a long lasting means of exchange. This time next year tx times and fees will be solved with the lightning network - today the first text was done on chain. This is still early times

> I think this is what will ultimately bring Bitcoin down

People have been saying that for years. It serves purposes other than buying and selling goods, and in fact almost no one uses it to buy things.

That’s an entirely different narrative about Bitcoin, though, then what was presented to us when it was seeking adoption. The messaging was literally: use this to buy things. Maybe we all got it wrong, but a lot of people did, then; we must never forget the infamous Bitcoin pizzas.


I’ve noticed this trend lately of rewriting what Bitcoin is for because I assure you, it was presented as the new cash for a long, long time. We were supposed to see Bitcoin ATMs and paying for daily sundries with Bitcoin. Then that became difficult, we are starting to see the brave adopters drop out of using it that way, and suddenly it’s an investment vehicle and store of value and nobody really buys anything with it and that’s been the intent all along.

People were saying those things for years because Bitcoin proponents were telling us. It’s not like people arrived at that conclusion erroneously.

Huge numbers of people still believe in the idea of "electronic cash" (as set out in the original Bitcoin white paper.)

Right now the core Bitcoin dev team have gone one way, so the "currency" side of the debate have largely moved to alternatives like Bitcoin Cash, Litecoin etc.

The current backlog of transactions on the main Bitcoin chain is down to the artificial block size limit. How far on-chain scaling will stretch is unclear, but the core Bitcoin network could easily process more transactions if the block limit was increased.

The truth is user adoption surpassed the development of the tech. I honestly believe a year from now these issues (tx times and high fees) will be solved vis the lightning network.

People who have been involved with Bitcoin from the beginning are not trying to change it's definition. It will 100% be digital cash in due time. The reason it's taking so "long" is because the dev team cares about keeping it decentralized and doesn't throw sloppy code out and end up forking it later like many other alt coins

I don't think most reputable proponents have been saying that for years though.

In any case, the internet was designed as a communication medium that could survive nuclear war. That's how it was sold by its proponents. So what.

> I don't think most reputable proponents have been saying that for years though.

Define reputable.

> Announcing the first release of Bitcoin, a new electronic cash system


> Instant transactions for points-of-sale


(That verbiage lasted most of 2013, but was removed a couple days after this capture, presumably because payments were starting to become less "instant.")

> Bitcoin is a new payment system, independent from the traditional financial sector, and this could provide resilience to the economy in case of a crisis, as it creates a parallel payment system.

Understanding Bitcoin: Cryptography, Engineering, and Economics by Pedro Franco, 2010, pp. 26.

> You can purchase video games, gifts, books, servers, and alpaca socks. [...] Bitcoins are a great way for small businesses and freelancers to get noticed. It doesn't cost anything to start accepting them [...] and you'll get additional business from the Bitcoin economy.


Bitcoin has literally been presented as a replacement for cash payments since day 1. I could go on, and on. That history is now being rewritten, and I think it’s important to understand why. Bitcoin set out to do one thing, is failing at that one thing, and I’m discouraged to see people rewrite the narrative rather than own it and say it didn’t work for that.

And you've mixed up your history: the research grants into the Internet were funded for that purpose, but it quickly morphed into an alternative usage once the new abilities were seen. Nobody went out and pulled out full page newspaper ads with that intent for its design, or otherwise heralded the Internet as such.

Are you of the opinion bitcoins development is done? User adoption has skyrocketed and far surpassed expectation. The first ever Lightning Network transaction happened today. Bitcoin is still early technology and it will take time to developers a p2p secure digital form if cash.

Ethereum, the supposed answer to bitcoins problem has just recently began to see the exact same problem. Why? Because of a dumb kitten game - what happens once even a single ICO finds an moderate amount of user base?

These are early times friend

"The first ever Lightning Network transaction happened today". Do you have a source for this where I can read more?

Did my own research. They're further along than I thought.

“Lightning Protocol 1.0: Compatibility Achieved ” https://medium.com/@lightning_network/lightning-protocol-1-0...

But the Internet accomplishes that. The fact that it also accomplishes everything else is a bonus.

BTC doesn't do its original job, and the current value on it, aside from idiots looking for a get-rich-quick scheme, seems to be that it will eventually do its original job.

What other purposes is it used for?

Right now it's only use apart from being an investment medium is to convert currency to alt coins, alt coins is where the innovation is and where the real use of distributed ledgers come into play.


gambling is a good, a bad good, mostly, but nevertheless.

International money transfer and store of value that can't be meddled with by another entity.

Various governments have done a pretty good job of meddling with it thus far.

How exactly have they meddled with it?

By threatening to send people who trade Bitcoin to jail: https://www.coindesk.com/bangladesh-outlaw-bitcoin-jail/

That's meddling with the person, not the transaction. The protocol is unassailable. Anyway, if you really want there are mechanisms for anonymous transactions over BTC.

Buying drugs and ransomware.

It seems like the main issue is transaction fees are close to $20, so even simple operations like refunding users for a incorrect or incomplete transaction is infeasible.

The "$20 transaction fee" was an absolute top, and when that happened it was the single most congested the bitcoin network has ever been.

It's nowhere near that right now. The total cost for your "median" transaction right now (at 226 bytes) is about $4.30 USD (at 150 sat/byte). Even if you double that to 300 sat/byte you are still at ~$9.

Edit: I'm not saying even $4 fees are okay, just pointing out that it's not $20. I agree with steam's decision here, and it's something that Bitcoin needs to solve before it can really be useful as a payment system.

When did $4.30 transaction fees become even close to acceptable. I thought high TX fees was one of the things Bitcoin was purported to solve.

My bank charges nothing for instant transfers of up to £10,000.

That's both cheaper than and faster than bitcoin.

(And this isn't a cost hidden in a perk of a monthly fee, there's no monthly account fee either.)

I'm pretty sure if Satoshi re-appeared "he" would be lamenting those artificially keeping the blocksize small. The 2MB limit was put in as a temporary solution to a problem of too many worthless transactions. Bitcoin has the opposite problem now.

Does that stand for transfers over (nation) state borders as well?

Yes, at least in the SEPA area (EU, plus countries in the EU orbit):


As a means of payment in the SEPA region, Bitcoin is far worse on cost (free vs $5-10 in my experience), and sometimes worse on speed (1 - 1.5 business days for SEPA to clear).

So in this geographic area, Bitcoin is literally losing to a combination of the legacy banking system, and a huge, multi country, multi lingual, somewhat unwieldy bureaucracy.

That is still an EU payment system, which has improved a lot since the start of Bitcoin. I just need to transfer money to strange places and banks are pretty often crappy at that stuff, best solution I have is to send my credit card around the world.

> That is still an EU payment system, which has improved a lot since the start of Bitcoin.

Which shows how pathetic the main development team behind Bitcoin is (the core team). The fact that they haven't managed to fix problems that are years old and steadily getting worse is inexcusable. It should be a walk in the park for them to out compete a massive, political entity like the EU and the traditional banking sector.

I hear you on the "strange places", that was where BTC was supposed to shine. It hasn't made any inroads into underserved markets that I'm aware of, e.g. less well-off countries and unbanked people. That is a pipe dream as long as the fees are so high to move funds around.

I'm not saying they are acceptable, i'm saying that $20 fees per average transaction isn't true in all cases except once in the history of bitcoin.

Is there reason to believe that sort of congestion won't reoccur?

There is zero reason to believe that, and I'd even go so far as to say it WILL happen again, and probably soon.

There are solutions being worked on, but they are not ready for primetime yet.

Every major blockchain is working on scalability (sharding, offchain transactions, and various other solutions are in the works)

So ideally there will be more traffic but less congestion

I think Bitcoin has maneuvered itself into a corner where the remaining dev team doesn't dare to do any hardforks in the future even if they are important to keep Bitcoin competitive.

It will certainly be interesting if bitcoin fails because it is less efficient than humans.

Meanwhile, Visa is about 1.5-2% plus $0.10 flat interchange. To break even with BTC against Visa, we're talking an average transaction of over $200. That's not feasible for the vast majority of merchants.

Not to mention that the currency's extreme volatility means that when you sell it to convert it to greenbacks (the currency your investors actually care about) it probably won't be the same amount you were paid for.

Yes, but at the same time Visa requires you to hand over your payment information to each and every merchant you transact with, and they are able to pull as much money from your card as they want, and they are able to charge you multiple times at any point in the future.

But there are some really cool solutions being worked on right now for this problem in bitcoin that can make it scale to a similar way to Visa. But they aren't here yet (and some might turn out to be nonviable). Lightning network would allow Visa levels of transactions per second, at basically zero or next to zero fees per transaction for the majority of them.

It’s possible that merchants could charge you whatever they like for however much they want. But it’s unlikely. And if they did, you would get all your money back and the merchant would pay a fine.

The privacy info is valid, but BTC isn’t private either and people are connecting identities to purchases all the time. Not to mention 99% of the time I must give my info to the merchant so they can mail me whatever I purchased.

It's not the privacy info that's the problem, it's that credit card are "pull" by nature. You give your information to a merchant, and they decide how much and when to charge you.

Vs with bitcoin it's push. You decide how much you are sending to the merchant, and if it's not enough, they don't deliver the goods/services.

But this has completely gotten away from the issue I was talking about (i'm in a shitty mood today and let myself get sucked into internet arguments).

Bitcoin has problems, and those problems aren't going to be easy to solve, but it's ability to change over time means they can be solved, and I really believe that it's a better way of sending money online.

The "pull" method that banks have used for years is a mess, and I truly believe that the core of bitcoin is valuable and useful over the traditional system.

with pin + chip cards debit/credit cards are 100% push for physical transactions. for online transactions almost every single provider offers one time use card numbers

the push/pull problem has been solved for a decade, and not by bitcoin

If there is an option for pull transactions, it will be abused.

Even if I push my money to you, you have my address that you can pull from later if you want.

Two problems with this line of argument:

A one-time use CC# by nature can't be abused. And any merchant that attempts to issue fraudulent charges starts to run into legal and regulatory frameworks that issue punishments to anyone who has repeat violations. Punishments that range from being kicked off of a payment processing system all the way up to jail time.

With newer payment systems such as EMV, your entire payment information is not handed to the merchant. You're just signing the single transaction.

That said, I can't currently put my EMV card into a card reader on my computer and purchase things online. However, many credit card networks have created tokenized payment systems, where the merchant redirects you to your bank, the bank authorizes you and validates the single transaction, and then redirects you back to the merchant with the signed transaction information. Not many merchants use these systems yet though.

cardholders are not liable for unauthorised transactions by merchants

any merchant that commits that sort of fraud repeatedly will have their account terminated

>cardholders are not liable for unauthorised transactions by merchants

Assuming they are really fraud and aren't just a "free trial" expiring, aren't a contractually-agreed upon price increase hidden in fine print, or that the cardholder saw the fraud and reported it within 60 days.

Not to mention now the cardholder is now unable to use the card if fraud is found, and needs to wait for a new one to be sent via mail. It would suck if the credit card thought getting gas out of state was fraud, and they canceled your credit card on the first day of a week long trip (happened to me, I had to borrow thousands from a friend for the length of the trip...).

in most civilised countries small print like that would treated as sharp practice and you'd easily be able to force a refund under consumer protection law

in the UK I can walk into my bank branch and have my card replaced on the spot, so I don't really see that as a problem, unless you're abroad (and if you're abroad with only one card you should probably know better)

We have 2 different definitions of "easily". At the very least I need to identify that the charge happened or happened differently (if small, it could take a while). Then I need to make sure that it wasn't a real transaction (both me and my wife use the same cardnumber, so I need to check with her to make sure that "0239-ONLN-PMT-GR" wasn't from something she bought).

Then I can call the bank, tell them I didn't make that transaction, or I didn't agree to it, and if i'm lucky they will refund it right away, then investigate. I then need to follow up on that investigation because if they find for some reason it's not "fraud", then they will recharge me that at a later date, so I need to keep up on it until resolved.

And no matter how easy it is to get a card replaced, it's work that I shouldn't need to do.

I'm not saying that Visa is "broken", or that Bitcoin is the only way forward. But I am saying that I think Bitcoin's core values are better than the current system. And that one day Bitcoin will be easier, more secure, more private, and just as usable as Visa.

Hopefully one day we will look back on the way current payment processes are run and it will seem as terrifying and stupid as if you were required to leave a copy of your car keys at every single parking lot you parked in.

Thankfully we have nice companies like equifax which help secure our details /s.

Online wallets and exchanges are similar points of failure. Many users have uploaded their picture IDs, banking and tax information to sites like LocalBitcoins.

But you can choose your online wallet or exchange, you can't choose your "equifax" (you can't even opt out of equifax)

>Yes, but at the same time Visa requires you to hand over your payment information to each and every merchant you transact with, and they are able to pull as much money from your card as they want, and they are able to charge you multiple times at any point in the future.

Sure but that is Visa's problem not mine.

How are these transaction fee amounts even determined? With something like credit cards, PayPal, or EFT the fees are deterministic.

With Bitcoin it seems fees are both ridiculously high, plus I can't even tell what I am going to be charged?

When you make a bitcoin transaction, it gets put into a "mempool". Basically you send your TX to a node, that shares it with other nodes on the network, and they all hold it in memory. Once a block is found, the miner that found the block will pull as many transactions as possible from the mempool and put them into that block and sign it on the blockchain forever.

Since TX fees go to miners, they are incentivized to pick the transactions with the largest "fee per size" to include first to maximize their profit (though they aren't required to do so).

So basically you can envision all transactions as a stack, with the highest fees at the top. Once a block is found, it takes the top ~1MB worth of transactions, and the cycle repeats. [0] is a good visual representation of this.

Unfortunately this means there isn't an easy way to determine what fee will absolutely get you included in a block before it's mined, since if thousands of transactions show up with higher fees than yours after you (but before a block is mined) yours might not make it in the next block (even if your fee was the highest when you made the transaction).

It's a tough problem to solve, but there are some solutions being worked on to help solve this problem for the vast majority of bitcoin transactions.


> Once a block is found, the miner that found the block will pull as many transactions as possible from the mempool and put them into that block and sign it on the blockchain forever.

Might be a nitpick, but you mean the miner puts as many high value transactions as they can fit into a block and then searches for a valid hash?

Yeah that's more correct.

Technically the miner needs to know what they are going to be including in a block when they begin trying to find a valid hash, but for the sake of explanation I generally switch it around for simplicity.

So how does one make money as a miner via processing these fees? Is this money being taken by pools, individual miners? Who is the middle-man that is actually taking this profit?

It's pretty clever.

Whenever you make a transaction in bitcoin, you point to the previous balance you have from a previous transaction, then you say how much you are sending to what address.

The "fee" is the difference between the amounts.

So if I have 1 Bitcoin, and I send .9 to you, the fee is .1

If you want to make sure you keep some Bitcoin, you just send it to yourself.

So 1 have one, and I send .1 to you, and .8 back to me, the fee is .1

Then when a miner mines a block, any unspent money is now theirs, and they claim it via the address they liked for.

I don’t understand why miners wouldn’t include all pending transactions in their block. Seeing as how pow is a guessing game, there are plenty of permutations of the Merkle tree to generate plenty of roots. I guess to dissencentivize free loaders so miners can continue to make money once Coinbase txns are no longer a thing? It’s certainly not free to mine!

As the other commenter said, there is about 1 MB of room in each block, and almost always >1 MB worth of transactions in the "mempool" (actually it's often >12MB for the most part, because people will make tons and tons of transactions at 1sat/byte and not really care if they take forever to go through).

And you are correct that bitcoin's ultimate goal is to have mining income come solely from transaction fees eventually. But by that point the hope is that "second layer" systems will take the brunt of the transactions and the actual core blockchain will only be a settlement layer where a $500 fee is no big deal for 2 banks settling hundreds of millions of dollars directly on the blockchain.

So are fees a percentage (.05bc a transaction) or a Flat fee (.05bc a transaction)?

Fees are set as a "flat rate" per transaction, but normally expressed as a fraction of "price over size"

So if a fee is 150 "sat/byte" or satoshi's per byte. A satoshi is 0.00000001 of a bitcoin.

So if your transaction is 250 bytes (which is average for a single transaction to a single person), then you will pay (250 * 150) satoshis (37500 sat), which is about $5.

If your transaction is larger, you'll pay more, if it's smaller, you'll pay less.

But they are "ranked" in terms of who is picked first by "sat/byte" since the amount of room in the block is only 1MB.

So a 500 byte transaction with 37500 sats in fees is worth less than a 250 byte transaction with 37500 sats in fees, because the 500 byte transaction takes up more room that other higher paying transactions could fit in.

Thanks for the explanation. Why do transactions vary so much in relative size?

A transaction can have many inputs and many outputs. These are all Bitcoin addresses.

Sally and Bob each have 1 Bitcoin. Sally received her bitcoin to a single address. If Sally wants to send that 1 Bitcoin to Charlie, that transaction would have 1 input (the address she received it on) and one output (the address Charlie wants to receive it to). Bob has 1 Bitcoin total, but his 1 Bitcoin came from 4 x 0.25 transactions. Bob didn't want to reuse addresses, so for him to send 1 Bitcoin to Charlie he has a transaction with 4 inputs (each address which contains 0.25 BTC) and 1 output. Thus, Bob's transaction is much bigger than Alice's, despite the same amount of Bitcoin being sent.

Thanks, that makes a lot of sense now.

If they could, miners probably would put all the pending transactions into a block. That's why the block size limit exists; every other node in the network has to process all those transactions and they're not paid for it in any way, so without the size limit miners would be likely to act in a way that hurts the rest of the network.

The number of transactions that can be included in a block is limited. A block is generated on average 10 minutes (a bit quicker due to increasing hash rate) so the number of transactions in an hour is also limited. Naturally the transactions that pay most to the miners are getting selected by them and included in these blocks.

I think it's easiest to think of Bitcoin TX fees as a bribe to the miners to include your transaction in a block sooner then other transactions that have a lower fee attached. You get to choose the fee that you provide to the miner.

The problem is that there are now so many transactions that are attempting to get through (And there is a maximum number of transactions that can be placed in a single block) that miners can be more selective. At this point your transaction is unlikely to get through without a minimum fee/bribe being provided because there are enough transactions with fees already at or above that level.

Stupid question.... What sort of compression is used on the block ? I.e If you use a better compression or re-align the transaction in the block can you not get more transactions per block ?

There is no compression at that level.

There is some compression at a storage level after blocks have been created, but it's not all that important. Pretty much all the data in Bitcoin is very difficult to compress with most of it being signatures, transactions, and addresses all stored in a binary format. The random nature of encryption makes it difficult to compress, and the formats have already been "hand tuned" for minimum size in many cases.

Looks like we need some form of "block neutrality".

Not really, this is an intended feature of Bitcoin, not a bug.

Every so many blocks, the number of new Bitcoin handed to the miners is halved, and eventually it will drop to zero. When that happens, the only incentive for miners to continue mining (And thus keep Bitcoin going) is the fees collected from the transactions. So required fees are only going to go up.

> How are these transaction fee amounts even determined?

The number of transactions that can fit into a block (ie. "clear") is roughly fixed. The rate at which new blocks are added (ie. "clearing rate") is roughly fixed. Traders effectively bid for clearing via the transaction fee, and the highest bidding transactions are accepted.

In order words: supply of transactions is effectively fixed, and demand for transactions determines the fee.

There is work going on to enable external clearinghouses called the lightning network that will fix this problem, but that work isn't ready yet.

You can pick the fee with most Bitcoin wallets - the amount will determine how fast it confirms. This site gives guidance as to amount:


The fee is chosen by the person making by the transaction.

But it still happened, and there's really nothing in place to stop it from happening again. And Valve would have no control over it.

I've had to pay tx fees of ~$5 twice recently. The second $5 fee was to move my coins to a segwit address. Now the fees are under $1 again, i.e. actually viable for many real world txs again.

BitPay handles the volatility for them by guaranteeing the conversion to dollars, so it's not an issue for Valve directly.

Volatility wouldn't be a big issue for payments if transactions were instant and free. The addition of slow transactions and high fees on top of volatility is what's causing problems for Valve's customers, which ultimately comes back to Valve as customer service issues. And there's nothing a retailer hates more than customer service issues.

That's what bitcoin futures can be used for, to hedge your BTC position, and you don't have to wait for 10 minutes for your trade to complete.

For example, if you own 5 BTC and want to hedge the USD value of your portfolio against BTCUSD fluctuation, you can short 1 CME bitcoin contract (http://www.cmegroup.com/trading/equity-index/us-index/bitcoi...). If BTCUSD decreases, the USD value of your 5 BTC decreases while you gain the same amount of USD on the short futures position, so you have no net profit or loss in terms of USD. If you acquire a bigger BTC position, you can maintain your hedge by increasing your futures short position.

For a big merchant like Steam, at least theoretically, they could accept BTC directly and hedge their BTC position using the futures. Although the granularity of 5 BTC is rather high, for a high-volume merchant that can increase or decrease their BTC holdings relatively quickly, hedging like this should be quite feasible. For example at BTCUSD=15000, 5BTC=75000USD. That means while waiting to accumulate an additional 5BTC=75000USD of revenue so that they can hedge with another BTC futures contract, they are exposed to exchange rate risk. How long does it take Steam to accumulate 75000USD of sales? Their 2016 revenue is said to be 3.5bn (https://www.statista.com/statistics/547025/steam-game-sales-...). That amounts to about 5 hours per 5BTC. BTCUSD could change a lot in 5 hours, but if you're a payment processor with 10x larger scale than Steam or think that the up and down fluctuation should roughly even out over the long run, maybe it's still not too risky to accept BTC.

It's a good option and it's sure used in stocks and commodities but do they want all that extra work? Managing that is a pain and what is the upside of doing it? depending on the amount of bitcoins they handled against fiat currency it probably didn't make sense.

And that feeds into the wider question of whether bitcoin is a medium of exchange or a commodity. At this point in time it is clearly the latter. You wouldn't swap a lump of copper for a game on Steam, so it makes no sense to swap a lump of bitcoin either

Doesn't matter if value is appreciating or depreciating

I'd say it does, but the thing is that if the value is rapidly appreciating today, it might as well be rapidly depreciating tomorrow.

The claim is that (1) if the value of a currency is unstable, it won't be useful as a medium of exchange, and that (2) whether it's unstable because it's rising or because it's falling does not affect the validity of (1).

The reason for (2) is that an exchange has two parties. If the value of your currency is cratering, it won't work as a medium of exchange because vendors won't accept it, which prevents trade from happening.

If, on the other hand, the value of your currency is rocketing, it still won't work as a medium of exchange because customers won't spend it. That prevents trade just as effectively.

It doesn't prevent trade just as effectively. Trips to Seoul don't pay for themselves. What do I care if my BTC might be worth more later? In the long run, we're all dead. I want to go on a vacation NOW.

What does a vendor care if your BTC might be worth less later? He's hungry NOW.

So if Bitcoin is unusable as currency (i.e. for exchange), what's its use-case then? Hoarding?

Putting aside all the nefarious ways bitcoin can be exchanged, I still see it as a great way to transfer huge sums of money without a typical chain of custody.

For example, suppose you need to transfer $10M from the US to China, you'll need a prominent and trustworthy bank on each side of the transaction that will ensure it gets from point A to B. Transfers of this nature often take several days, and each bank will take a nice cut for that peace of mind.

Bitcoin can potentially allow that same money to be transferred in minutes without huge banks on either side.

I agree, but one has to consider that in this example, since Bitcoin acceptance in businesses isn't that widespread, the receiving side would still need a gateway to convert that money back into fiat currency, and would also incur some sort of fee.

So essentially in these use cases you are just offsetting the chain of custody a few steps later.

You're removing a huge link in the chain of custody, on that is likely the most fraught with fraud and security: the cross-border transaction part. It does not solve the problem all together, but it makes moving large sums around far easier and faster.

Wasting electricity.

People didn’t want to touch the ZWD because it was going down, not because it was changing.

But this was true when Steam decided to start accepting bitcoin. There has to be some kind of profit motive behind making this decision at this point in time. I could only guess that they've forecasted a significant decline in bitcoin's value, whether it be the value of the coin itself or the costs of doing business with it.

They don't hold the bitcoin, they use a payment gateway who processes it into dollars instantly.

They stay clearly why they're not supporting bitcoin, it's because the time that it takes to mine the blocks means that often the transaction is processed after the payment gateway times out. And the mining fee is too high to make it viable for consumers.

It could be as simple as “the hassle was not worth the benefits”

There’s just a lot more steps in converting bitcoins into something they can pay their bills with.

I'm here to say the problems in selling games for Bitcoin are not the same for microtransactions.

I'm the original developer of Bitquest[1], where we used to process hundreds of micropayments smaller than 1 cent each day using 0 fee Bitcoin transactions.

When the blocks started to fill up we had to move all transactions off-chain except when players send money to the game and cashing out.

From the player's perspective, it's hard to justify paying $2 each time get Bitcoin in/out of the game. On the other side, there's no cut for Apple, Google, et al. who charge for as much as 30% cut for micro transactions.

I'm now working on a similar game[2] that will take advantage of Segwit and Lightning Network. There's still miner fees involved to send money in and opening a payment channel, however there's no cut to a payment processor and the associated problems of compliance.

I'm not saying it's perfect but there's still important advantages on Cryptocurrency for game transactions and I'm confident that Steam and others will get back to it after it's infancy.

[1] https://github.com/bitquest/bitquest [2] https://hammerco.in

Indeed there are clearing protocols on top of Bitcoin, which can reduce fee-paying to only occur upon depositing and redemption. But the Bitcoin blockchain is still limited to ~20 million of such transactions per month[1].

Only if we remove the withdrawal transactions from the equation, and start trading unconfirmed transactions as regular bitcoins (confirmed transactions), can we get around this limitation (such that only the number of new users joining is limited to 20M per month). I’m somewhat skeptical this can work, though, since recipients of funds usually have suppliers to pay, so I assume that we need to settle on the blockchain at least monthly.

[1] https://runeksvendsen.github.io/blog/posts/2017-10-08-no-bit...

A Lightning Network transaction results in one of two things - a proof that a certain amount of bitcoins can be withdrawn at any time (minus some delay), or a proof of cheating. Surely a proof that you can withdraw a certain amount of bitcoins is more-or-less equivalent to that many bitcoins, and therefore any rational actor - including your suppliers - should accept it as such?

This isn't equivalent to unconfirmed transactions - it's tokens of exchange which directly and provably represent bitcoins. Settling on the blockchain shouldn't even have to happen monthly.

One of the other interesting things is that Lightning Network allows for payment in one cryptocurrency while you hold another by channeling it through a very simple, provable currency exchange. This could behave similarly to, for example, paying for something in USD when you hold GBP - practically automatically. So the lack of scalability in Bitcoin's blockchain might not matter so much - if something else turns up that's better for a given person holding money, they can start using it while still continuing to trade with all the people using Bitcoin.

IMHO, cross-chain transactions like this are one of the most important parts of Lightning Network - suddenly, network effects around a specific currency don't matter so much, people can hold whatever they like - Bitcoin people can trade with Litecoin people who can trade with Ethereum scripts, and when something new that solves more problems turns up, people holding that can still buy VPSes with bitcoin.

In Japan, because debit/credit cards have historically not been readily available, a payment system around transit cards has been built up. People put money on to their transit cards and then can use those cards to pay for a variety of things from items in vending machines to MacDonald's, etc. In usage it basically works pretty similar to how the Lightning network will work and it's relatively popular.

However, I think the OP is correct that if it becomes mainstream, 20M transactions a month will not be enough. Lightning requires 2 transactions -- one to reserve the funds and one to settle up at the end of the period. The transactions cancel if you do not settle up, so setting that period of time is vital. If you set it to a month (probably reasonable), then you are basically limiting the service to 10M users (assuming the OP's estimate of 20M transactions a month is correct -- I haven't checked).

So I think it's pretty obvious that you are going to have to do something else

I think it is worth pointing out that it is not exactly equivalent, in the sense that if you pay Steam via a payment channel (for simplicity, a one-directional payment channel, so they don't need to lock up any cryptocurrency themselves), they don't need to settle on-chain, but if they don't do so they cannot use the "money" the received from you to pay someone else (eg their lawyer).

In the very long term, if we get to a point where most people's and organization's income is roughly equal to their expenditure, then this won't be a problem, but until then there is still pressure to settle on-chain because of this.

> if they don't do so they cannot use the "money" the received from you to pay someone else (eg their lawyer).

They certainly can if their lawyer is also on the Lightning Network.

Eventually all Bitcoin wallets should support on-chain and Lightning Network transactions, and seamlessly pick one or the other depending on the transaction amount.

No, they really can't. They have to open a payment channel with their lawyer (or open it with someone who has a path of channels to their lawyer), and that requires them to own cryptocurrency on-chain to use as stake (what LN calls the funding transaction)

Hence “if their lawyer is also on the Lightning Network“

No, even if their lawyer is on the LN, Steam cannot pay their lawyer via payment channel, unless Steam owns some cryptocurrency on-chain to use as deposit

> Surely a proof that you can withdraw a certain amount of bitcoins is more-or-less equivalent to that many bitcoins, and therefore any rational actor - including your suppliers - should accept it as such?

The problem is fees. If this rational actor has 10,000 proofs of payment from as many different people, then the settlement transaction might require the redemption of up to 10,000 inputs, which would make payments prohibitively expensive. It may even be impossible to settle in a single block, since the transaction (including dependencies) might exceed the maximum block size.

A proof that 0.001 BTC can be withdrawn at any time isn’t very useful if the cost of withdrawal is 0.001 BTC.

In other words, LN surely has the value transfer part solved. But I don’t see how it solves the clearing part, that is: grouping multiple payments from different clients into a single, low-fee Bitcoin transaction. I understand how fees are saved on multiple payments from the same client (that’s what a payment channel does), but not how it would work with payments from many different clients (which is what merchants need to handle).

I tried a few times to read about the Lightning Network and it seems complicated to understand and implement. I'm not an expert at all but it seems like a flaw in the Bitcoin protocol that you have to build something like this on top.

Are there other cryptocoins that are built on protocols that avoid having to have this extra layer on top to make them scalable? I imagine the more complexity that is added, the more scope there is for security, implementation and scalability issues so you want to keep things simple.

FYI today the first Lightning transaction was completed on the main net.

It's really not that complicated, especially from the average end users perspective.

I agree that Payment Channels is a good step forward but there's the hard limit on how many channels can be open. I'm confident that there will be proposals similar to Poon et al. [1] to create a third layer for networks of payment channels where a Blockchain tx can be used only in case of uncooperative channel counterparties.

[1] https://www.tik.ee.ethz.ch/file/a20a865ce40d40c8f942cf206a7c...

I’ve read that paper, and I don’t quite understand how it would work when you need multiple clients to cooperate for a single client to make a payment. I.e. if the funds of 100 clients is at some multi-sig address, you’d save blockchain space, but payment from any of these 100 clients would require simultaneous cooperation from the remaining 99 clients. I have a hard time seeing how this would work in practice.

Have you thought about trying Ripple?


Could also try IOTA (https://iota.org), even though it's early days

For something like microtransactions, why would you need to use Bitcoin? Can't you just make your own blockchain and track BTC/USD?

do you know of any current implementations of lightning on the actual blockchain and not testnet (BTC or LTC)? thanks!

Looks like the first mainnet transaction went through today?


  "As developers of the Lightning Network protocol, we’re 
  excited to announce version 1.0 RC of the Lightning 
  protocol specification along with a successful cross-
  implementation test on Bitcoin mainnet!"

I believe some tests have been done on the mainnet: https://www.coindesk.com/lightning-last-test-shows-bitcoin-s...

Ha you considered using GAME coin instead? https://gamecredits.com I is leading solution for gaming ecosystem Disclosure: I am part of the GameCredits team

Makes business and technological sense. Even the true believers have largely switched to advocating the store-of-value/digital gold model of bitcoin.

We're absolutely in a bitcoin/cryptocurrency mania. Unfortunately, stating that is much easier than predicting what will happen next.

I've been hearing this a lot, but what does it actually mean?

Isn't the most important thing you want from a store of value stability? Ie, that it'll store the value that you put into it? Bitcoin certainly doesn't have that property.

And if that's not the desired property implied by "store of value", what is?

Main source of instability is price manipulation by big players and market inefficiency (not easy enough to arbitrage between exchanges). It would be interesting to see them do the same thing if BTC market cap is in couple of trillions.

For example, if you're on any exchange that lists the total amount of orders in BTC, you can easily catch when the manipulation starts by seeing out of the ordinary sums (triple the amount of usual) for open positions.

Not to mention insane bot activity that is equivalent to a DDOS attack on the exchange.

During the last several hours of IOTA pump, exchanges, even the IOTA tangle were, and still are unstable.

Right, but given that that's true today, what makes BTC a store of value?

Or should I be parsing the phrase to mean "It's not anything today, but in the long term, once the market cap is large enough, it'll be a store of value"?

(I'm not being snarky; I'm legitimately confused by what people mean by the phrase.)

> I'm not being snarky; I'm legitimately confused by what people mean by the phrase.

I am being snarky: They mean "you better hurry up and buy some bitcoin quick, so I can have some new bagholders"

>not easy enough to arbitrage between exchanges

doesn't tether fix this?

for arbitrage you want to move all currencies, not just one.


for example, bitcoin is now huge on bithumb, I'd buy it at bitstamp and sell it for 10% more, and repeat. given the slow transaction times, huge fees, large mempool, this is impossible to do.

exchanges also ban you for trying to do arbitrage too, so there's a risk of losing all the funds.

Exchanges don't ban users for exploiting arbitrage, every trade is money to the exchange and it benefits them to enable arbitrage to take place. No idea where you pulled that claim from.

It's also not impossible to trade via bitstamp and bitthumb, sure it may take an hour or so to get your btc from bitstamp to bitthumb but that's not the bottleneck. Once you sell on bitthumb for USD you need to get that USD back to bitstamp. So you have to get it from a Korean Bank to your own account and then to bitstamps European bank account. Best case scenario that route takes 5-10 working days so the BTC network taking an hour or so to confirm is the least if your problems.

Some exchanges offer fee-less withdrawals (like Bitstamp), which makes arbitrage more profitable. I'm pretty sure they'd ban you ASAP if you're withdrawing like crazy (they are paying your fees in BTC).

As for transfer times for BTC not being a problem, 1 hour is a gamble in cryptocurrency world.

They won't ban you for withdrawing. If you withdraw lots then you have purchased lots, the exchange makes a cut each time you buy. BTC fees are minimal and exchanges can craft more efficient transactions too, so they are not going to ban anyone for making too many withdrawals.

They've printed a billion dollars worth of tether in the past few months with nothing backing it. They fixed something anyway.

The argument I hear by people like Ari Paul of Blocktower Capital, is that many emerging market currencies are already less stable, so you can use bitcoin as a way to escape inflation/government control in those markets.

Stores of value are normally viewed from a long term perspective. For most investors these are viewed as a hedge, even if the underlying store can be used for other purposes (think industrial and ornamental uses for silver, or the enjoyment of a renowned art piece), and so the short term fluctuation is not really an issue.

That said, if the trend of wild volatility were to continue into the long term it would indeed prove to be a poor store of value, but market speculation would indicate as such long before we were to get there (assuming we pick now as the period delta starting point for a "long term").

I think most people are perfectly fine with the instability as long as the price doesn't go _down_.

I'm not - I don't want to buy bitcoin at the moment because I keep waiting for a bit of a dip, I don't want to buy it at a record high. Likewise I don't want to use my bitcoin because it keeps massively "growing" in value.

A stable currency is far more usable to me. Bitcoin is very similar to gold at the moment, in that I'm as likely to use it as I am to carry around bricks of gold in my pocket. For different reasons, sure, but the net result is the same.

We've been seeing record highs for the past 4-6 months though. The likelihood of any dip going below the past 6 month low is pretty low in my opinion. Especially with Lightning network, NASDAQ, other large players getting on board. This may be the last time we see $13K.

In your opinion, great. It may be last time we see $13k. Or it may not...

So if something has been rising for 6 months, it cannot dip below that point, because of your opinion.

Too bad we did not have your opinion in 1929 or 2008 or 2013 (Mt Gox). Would've saved us.

How about businesses like Steam ditching Bitcoin support?

How about Bitfinex not backing up their fake currency called tether?

And to be clear, I'm not even holding out for a massive dip. I just can't fathom buying it during a clear spike. I want to buy it going down, even if it just goes down from 16k to 10k or 12k, whatever. Normal fluctuations in Bitcoin, really - I just don't want to buy it on the upswing, on principle alone lol.

Unless they're trading, in which case they're selling on perceived ups and downs, and in some cases making a killing - at least for now! The bullish trend with periodic pullbacks means profit for the bold / greedy.

Right, but the Bitcoin evangelists have changed their rhetoric in the last few months, claiming that the current price is justified because Bitcoin is a good store of value, since it's obvious to everyone that the transaction infrastructure is a total dumpster fire at the moment and it's difficult to argue that it's so useful as a currency that $12,000/BTC is reasonable.

Bitcoin will fail to scale, until it doesn't any more. There is far too much economic incentive to scale BTC as a payments network for the assorted parties not to work it out eventually. Could one of the other cryptos overtake BTC? Only if they can overcome BTC's network effects. Right now, BTC has 9 years of history and a huge first mover advantage.

Nothing has that value if you look at a long enough time span. Gold, a traditional store of value, gained >100% and then lost >50% in the course of a decade.

Obviously this is not even noise compared to bitcoin; but my point is that bitcoin has shown to be an exceptional store of value for a long term hold.

Beyond that, I think most people who believe in bitcoin as a long term store of value expect that when it reaches a mature global-level market cap; the swings should be less severe.

The term gets used to contrast with 'medium of exchange', as the reality is that for most people, most of the time, bitcoin is not very liquid.

Store at least the value you put in. Falling in value would be bad. But rising in value is a bonus.

>Even the true believers have largely switched to advocating the store-of-value/digital gold model of bitcoin.

Which is absolutely insane. What's the point of a currency if you can't use it for transactions? Store-of-value? What value?

You exchange it for whatever currency you desire to make smaller transactions with. Even with slow scaling, it should remain suitable for large transactions.

As a store of value, it has many desirable properties. There is a fixed supply, it can be used anywhere with internet access, it is secure, and it is very inexpensive to hold. Gold, for instance, has a large potential supply, is very difficult to move and secure (e.g. vaults, armed guards), and typically requires you to trust a 3rd party (most hold gold IOUs, not the physical bars).

If you accept that there is a demand for such a store of value, then you must recognize the value of cryptocurrencies. There is also a great deal of potential value as technological solutions to the scaling problem are found, as well as new uses for Nakamoto-style networks.

>You exchange it for whatever currency you desire

Exchange how? Your entire argument assumes a functional BTC eco-system (and exchanges with willing counter-parties).

Without usefulness in transactions BTC's only value is whatever is agreed on. And in the absence of a use that is worse than fiat currency - at least that has legal backing rather than just agreeing that BTC has value as a value store.

It's the essence of circular logic: BTC has value since it is a store of value and since it's a store of value it has value...

>If you accept that there is a demand for such a store of value, then you must recognize the value of cryptocurrencies.

I do - just not BTC. Anyone sane will store their value in something that has an actual shot of being grounded in real world transactions. So ETH or whatever is a far better bet.

> it is secure, and it is very inexpensive to hold


> What value?

$13K of value, and counting.

All of which is speculative & counting on a future where BTC usage will be more prevalent.

And how exactly will it become more prevalent when it can't be used for transactions.

> All of which is speculative

Just like Gold, coloured beads, or stocks

> can't be used for transactions.

Gold is a pain to use for transactions, and so are shares, but they still store value and people continue to speculate on their future worth?

Gold is tangible and definitely has real world applications. Shares are backed a legal system tying them back to the real world corporation and it's assets.

BTC in the absence of transactions has not tie-back to anything.

Here's a question: if a single bitcoin can be infinitely divided, does the price of a single bitcoin actually mean anything? If I spend $13 on .001 of a Bitcoin, I've, in essence, bought a $13k BTC, have I not, but without any real skin in that figure...

If you buy a cent/penny, you don't own a dollar. You have a particular fraction of that dollar.

If you're speaking of stock dilution, there is a hard-cap on the number of BTC in the wild and a hard-coded granularity (as I understand it) where a satoshi is a hundred millionth of a Bitcoin.

No you've bought .001 as you state yourself. The component parts of a bitcoin can be allocated. (I think the minimal is 1 "satoshi")

It's a bit like buying one pen out of a very large pack of pens. You don't own the pack if you only buy one.

I think dclowd9901 was getting at a different question, which I'll present by analogy:

I incorporate with 1,000,000,000 shares of stock. I sell 20 shares of stock to my good friend for $50. Is my company now worth 2.5 billion dollars?

The answer to this worry is that the value of the good (bitcoins or stock shares, or anything else) is reliable in proportion to the total trading volume, not in proportion to the amount one person typically buys in a single transaction, or even the amount that one eccentric rich guy bought that one time when he was drunk.

Thank you; you explained this much much better than I did.

But your answer, I don't think is sufficient. Just because total trading volume supports the figure doesn't mean that it's valid. If I've invested a small amount of money into the currency (as I suspect most of its buyers have), I've essentially bought into an insane price for little or no "skin". In other words, the price could be high simply because there's no risk to it being that high for most of its investors.

By "total trading volume" I meant to total across buyers and sellers, not to total across history.

Going back to the analogy, suppose I incorporate with 1,000,000,000 shares of stock and sell 20 shares to my friend for $50. He forgets about them, because after all the whole thing was just a joke.

My company has a market capitalization of $2.5 billion, of which I own $2,499,999,950. That paper wealth is worthless, because the daily (or whatever) trading volume of stock in the company is $0, suggesting that if I tried to realize my immense wealth, I wouldn't be able to.

Suppose instead that I sold 500,000 shares to my friends for $50 (total - 10,000 shares to the dollar), and that they sold the shares on to the public, and that now 10,000 shares trade per day at $2.50 per share.

My company has the same market capitalization of $2.5 billion. I own $2,498,750,000 of that (plus $50 of cash!) -- not as much as I had in the first example, but still pretty good. Just as in the first example, the daily trading volume suggests that this wealth is mostly illusory -- the tiny $25k / day market will be quickly overwhelmed if I try to sell $1 million worth of stock, and the trading price will plummet. However, unlike in the first example, my wealth is not entirely illusory. If I try to pick up an extra $5,000, I'll probably have to sell more than 2,000 shares of stock, but the trading volume can support that amount.

As long as there is active trading at a price, that price is real. There is no such concept as trading enough of a bitcoin for the price of "a bitcoin" to be "real"; what matters is whether you're trading enough of the market to move the price single-handedly. If the amount that you want to trade is much less than trading volume, you can more or less rely on the market price. If you want to trade an amount which is noticeable relative to trading volume, you're going to change the market price.

Put another way, if bitcoin trade volume is 100,000 bitcoins per day, you can sell one bitcoin at the market price even if nobody ever buys or sells more than .00001 bitcoin in a single transaction.

Well, that's what it is today. But if BTC has no fundamental value, you might argue the price fluctuations are the price-discovery function of markets screaming "there is no correct price because there is no actual value", or something like that.

All other fiat currencies have some fundamental value. In the past they were backed by gold. Most common today, you have to pay your taxes using them, which means for example everybody who owes US taxes needs USD.

> You might argue the price fluctuations are the price-discovery function of markets screaming "there is no correct price because there is no actual value"

That makes no sense. If the market were really 'screaming there is no actual value', the price would be around $0, not $14K.

It makes sense to me in a divide-by-zero sort of way. I'm not saying the market confidently believes bitcoin has no value. But such wild fluctuations might suggest that even after five years, the price discovery function still has no idea what bitcoin is worth. Now what does that mean? We can only speculate, of course. But to me I wonder if 1) there is no identified fundamental value today and 2) no one knows what the fundamental value will turn out to be

enron had a lot of 'value' too.

Now US$14k. ;)

I've always been told gold isn't a good place to put your money so proponents of bitcoin comparing it to gold is concerning to me

Maybe it's a cultural thing, but I've always been told that gold is a great investment.

The "digital gold" argument doesn't make sense to me at all. Human beings aren't rational spenders. Gold, if nothing else, looks good. I can buy a $10,000 bar of gold and even if its value crashes by 20% tomorrow, I at least have an aesthetic metal that feels nice to touch.

BTC doesn't even give me that satisfaction

Check out the ratio of gold price to Dow Jones index for last 100 years:


In 1917 it was about 5, now it's about 15. So threefold increase in a century.

Plus the Dow pays around 2% dividend per year which is 7-fold increase in a century.

So US stocks outperformed gold by 21 times between 1917 and 2017.

Looking at the chart, there are very few long-term periods when gold has outperformed US stocks.

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