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Comment by chocolatebunny | Hacker News Reader

Bitcoin is definitely acting more like an asset than a medium of exchange, and yeah, I don't see why it would hold any value if it's treated like an asset. But as soon as people realize that then it should go back to being a medium of exchange and then it'll hold value again as an asset?

Either way, just because Bitcoin isn't functioning correctly doesn't mean that all cryptocurrencies are not. But I guess at the moment it seems like everyone would rather hoard cryptocurrencies than actually use them for their intended purpose.

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One side effect is that stores of value tend to have smaller and more expensive infrastructures than media of exchange.

People are hoarding, so there are fewer transactions. Miners still need to pay the bills somehow, so transaction fees are likely to increase.

With fewer transactions the price discovery mechanisms, i.e. exchanges, are now somewhat illusory due to thin trading volume (not like BTC exchanges were the paragon of transparency before). Unlike NYSE or Nasdaq, which support trading lithium or platinum ETFs but also make money from other sources (just in case precious metals themselves don't bring in much revenue today), Bitcoin exchanges are heavily concentrated on Bitcoin, and even the ones that support expansive lists of cryptocurrencies generally peg it to BTC, not USD.

So now that exchanges are not such a swell business, this will lead to a wave of consolidation, reduced price discovery and higher fees/commissions to transact.

your assertions about fees is exactly backwards. if there are fewer transactions, the fees go down. each block has a finite number of transactions it can include, so to get yours included you attach a fee. therefore, increased demand increases the fees and visa-versa.

> Bitcoin isn't functioning correctly

Please unpack this statement. Which part of the Bitcoin system is functioning incorrectly?

> Please unpack this statement. Which part of the Bitcoin system is functioning incorrectly?

The payment system part. One of the main reasons why Satoshi created Bitcoin in the first place. As someone who got into Bitcoin in early 2011 (but left when things got crazy around 2014), it's utterly laughable to me that Bitcoin now can't even be used as a payment system. And that the fees per transaction are roughly the same as international wire transfer fees.

The Bitcoin dev team well and good shot itself in the foot by refusing the raise the block size limit. The only good thing to come out of Bitcoin recently is the Bitcoin Cash fork, who showed that the sky doesn't fall when you raise the limit to a reasonable size, and that this does take care of the current scaling and fees issues (Bitcoin Cash transfers are both reasonably quick and affordable, like Bitcoin of old).

But isn't increasing the block size limit still just a temporary fix? Wouldn't Bitcoin Cash also be rendered useless as a payment system if it was handling a similar volume of transactions as bitcoin?

Arguably not. Based on testing, they're able to handle up to 25 tx/sec without any problems now, compared to Bitcoin struggling with only 5 to 10 tx/sec. And they have only a 8MB block limit currently, but are only using a small fraction of that on most blocks. And they have plenty of room to expand, given that a 10 terabyte hard drive is only a few hundred dollars now.

I'm still incredulous that Bitcoin has resisted changing to block size limit for so long, given that it was only a security measured Satoshi implemented a year into Bitcoin's life, not only kind of fundamental design feature. I rarely use Internet acronyms, but, smh....

Isn't 25 tx/sec extremely low for something aiming to be a global payment system? I am not bashing BCH...they tried -- it just seems like something not based off of BTC might be the answer.

Again, that's with only an 8MB block size. They're now doing research into 1 GB block size limits. Think about it, with 10 terabyte hard drive at $300, it's completely feasible to have 1GM blocks.

No. I'm not a BCH fan but it would be able to handle more transactions. It would still hit an upper bound, but it is higher than BTC, but lower than BTC lightning network. (It has some drawbacks too by not being on-chain).

The "Gigablock Initiative" has tested it to 7000 tx/s with larger blocks - about the same transaction throughput as VISA.

I have also been in Bitcoin since early 2011. I once thought as you did until I realized that the most important part of Bitcoin is censorship resistance. It's not about storing your latte payment on the immutable ledger forever.

> Bitcoin now can't even be used as a payment system

What about the part where the blocks are full of tons of payments?

The fork drama proved the most important part of Bitcoin: it's immutability even in the face of great pressure to change.

If the Bitcoin Cash blocks get full, then we'll see how things go. Until then, there is no comparison.

> If the Bitcoin Cash blocks get full, then we'll see how things go.

Yeah, then they'll raise the limit from 8MB to 16MB. With 10 terabyte hard drives at $300-$400, that's not a big deal for anyone running a full node.

One of my recent Bitcoin transactions took three weeks. That's not good.

Bitcoin is functioning exactly as designed. Satoshi planned for this; it's in the whitepaper.

Most people just don't like the idea of Satoshi's endgame vision. But it's working as intended.

Can you highlight the part of the white paper you're referring to?

https://bitcoin.org/bitcoin.pdf

"The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of the block containing the transaction. Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free."

It's the design, folks. Read the paper and think about what it's saying.

Satoshi was acutely aware that 1MB blocks could only encode a couple thousand transactions. So what do you think "the incentive can transition entirely to transaction fees" means in practice?

Not a <$100 fee, that's for sure.

Of legacy electronics payment systems and their need to be mediator, Satoshi says this:

> The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions

If enabling small casual transactions was one of the goals, then they've failed terribly on that point.

BS. Bitcoin had small casual transactions up until recently. It was one of its main selling points.

Again, people don't like Satoshi's endgame vision. This is working as designed. Bitcoin was designed to evolve into this. It was not intended to stay static; it's in the whitepaper.

Break out of the groupthink. It's worth realizing when everyone around you is being irrational.

Satoshi expected Bitcoin to scale to Visa-levels of 100 million transactions per day. He expected the cost of a transaction to be less than Visa forever, not just while nobody was using it.

Did Satoshi say this directly?

Try to find a quote and paste it. It's a useful exercise, because it forces you to constrain your thinking. Either from the whitepaper or from http://satoshi.nakamotoinstitute.org/

I don't think Satoshi said this, but I'll be happy to admit to being wrong.

In fact, here is Satoshi's clear and complete vision from the very beginning:

http://satoshi.nakamotoinstitute.org/emails/cryptography/16/

Total circulation will be 21,000,000 coins. It'll be distributed to network nodes when they make blocks, with the amount cut in half every 4 years.

first 4 years: 10,500,000 coins next 4 years: 5,250,000 coins next 4 years: 2,625,000 coins next 4 years: 1,312,500 coins etc...

When that runs out, the system can support transaction fees if needed. It's based on open market competition, and there will probably always be nodes willing to process transactions for free.

Satoshi Nakamoto

http://satoshi.nakamotoinstitute.org/emails/cryptography/2/

You can also find copies of an email Satoshi wrote to Mike Hearn where he said essentially the same thing.

> A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.

Is your argument that Stripe is acting as a financial institution or that their exit as a middle man is inches us closer to a peer-to-peer system?

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