Bitcoin usage and misaligned expectations

[jseverson]

-snip-

Then would you truly believe that the best path forward would be to risk the whole network to do the hard fork to bigger blocks to lower fees? How big?

Fees will be the main source of income for the miners. Bitcoin Cash will soon see that Bitcoin's model is the correct path forward. Wait for the next halvings next year.

No clue yet, and I already did say that network security should be prioritized. If we had any idea what the appropriate size should be, then people would already be talking about it. I might be misreading you, but if you think a hard fork for bigger blocks isn't in the pipeline already, you're incorrect. Even the Lightning Network white paper calls it necessary:

While it may appear as though this system will mitigate the block size increases in the short term, if it achieves global scale, it will necessitate a block size increase in the long term. Creating a credible tool to help prevent blockchain spam designed to encourage transactions to timeout becomes imperative.
[...]
If all transactions using Bitcoin were conducted inside a network of micropayment channels, to enable 7 billion people to make two channels per year with unlimited transactions inside the channel, it would require 133 MB blocks (presuming 500 bytes per transaction and 52560 blocks per year). Current generation desktop computers will be able to run a full node with old blocks pruned out on 2TB of storage.

I believe in side chain solutions, but I also believe those side chain solutions should be within reach of the general public. As pooya87 said earlier in the thread, if it costs $50 to open a LN channel, then it probably won't work as intended. It's all well and dandy that miners are getting their share, but I am of the opinion that we need to find a sweet spot where everyone's happy enough with what they're paying/getting.

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[squatter]

I agree that cheap fees will have to take a back seat to network security, but shouldn't be neglected at the same time. The network could be the most secure on the planet, but if only a handful can comfortably use it, I'd say it has failed.

Hopefully we'll find some middle ground between here and there.

Do you remember that post from Hal Finney, where he predicted the emergence of Bitcoin banks because Bitcoin couldn't scale to all the world's transactions? I think he was onto something there. I think we're going to see a multitude of off-chain solutions -- some of which are custodial and trust-based, as antithetical as that is to "being your own bank." Some of these options will make interfacing with Bitcoin affordable for those who can't afford on-chain transactions.

[Vinalians]

Absolutely no. There is no perfect in this world we all know that and also in the crypto world for sure.  Bitcoin and other cryptocurrencies will always have flaws but we still manage to provide a solution into it.
Those people who still don't believe in bitcoin, they will regret not buying any crypto.

[phamminhtan]

In my opinion bitcoin for many is still very new, and many people who still don't believe in bitcoin don't even know what bitcoin is, programs need to be made to make everyone aware of the true value. The economics of bitcoin. Then bitcoin is really valuable and easy to use.

[Wind_FURY]

-snip-

Then would you truly believe that the best path forward would be to risk the whole network to do the hard fork to bigger blocks to lower fees? How big?

Fees will be the main source of income for the miners. Bitcoin Cash will soon see that Bitcoin's model is the correct path forward. Wait for the next halvings next year.

No clue yet[/b_2, and I already did say that network security should be prioritized. If we had any idea what the appropriate size should be, then people would already be talking about it. I might be misreading you, but if you think a hard fork for bigger blocks isn't in the pipeline already, you're incorrect. Even the Lightning Network white paper calls it necessary:

No one has a clue, that's the point. Hard forks are dangerous because they are not inclusive. Plus Bitcoin Cash developers thought they had a clue, then why are their blocks almost empty? Why did some people in that community thought a split to Bitcoin Cash SV was a good idea? It set a bad precedent.

[CBANX2]

With Bitcoin, there are misaligned expectation and misaligned usage as well which led to the scam, therefore, to understand BTC usage in an appropriate manner is important.

[aad140386]

If the commission is so insignificant that the buyer can not even think about the purchases made, then of course the use of Bitcoin will increase significantly. But did you ask yourself whether miners will be satisfied with such commissions for mining blocks? I think not. Mining will become unprofitable and then the existence of bitcoins will be under threat. Of course, if they come up with a solution that can reduce the cost of transactions and miners do not suffer, then this will resolve the issue and everyone will be satisfied

[Betwrong]

If the commission is so insignificant that the buyer can not even think about the purchases made, then of course the use of Bitcoin will increase significantly. But did you ask yourself whether miners will be satisfied with such commissions for mining blocks? I think not. Mining will become unprofitable and then the existence of bitcoins will be under threat. Of course, if they come up with a solution that can reduce the cost of transactions and miners do not suffer, then this will resolve the issue and everyone will be satisfied

Maybe I'm missing something, but I still can't understand why do people pay so much attention to transaction fees in regards to miners' reward, forgetting about the block reward?

The block reward is 12.5 BTC currently and right now it is the equivalent of 98,500 USD. Now, since recently, the Average Number Of Transactions Per Block is around 2,400, and you can pay $1.34 for a fast transaction, but not everyone pays that amount, and I think we can safely assume that it's $1 per transaction, on average, and that means that miners are getting around $2,400 per block in transaction fees. Now, compare $98,500 and $2,400, and tell me isn't the latter amount kind of insignificant? $2,400 is still a big amount, no doubt about that, but, theoretically, miners would accept even txs with zero fee in order to just get the block reward, right?

[Upgate]

If you can make huge profit, store up assets, transact money online and been your own boss. What other success do you want to get with bitcoin? No more expectations from bitcoin because it has been providing and giving me all I ever needed.

[Apes]

the bitcoin usage projection is widening which was originally intended for electronic transactions now goes beyond the expectations of its creators to become an investment tool. I am sure the creators did not think so far if the transaction fee burden became large when the market capitalization was high. as the end user a large fee always a complaint at this time, this is not a bitcoin failure design if fees are expensive when the market demands are large. because the miners' do a transactions are also quite high, and we cannot continue to reduce costs to zero they also need a life ecosystem.

[blue_nexus15]

A misconception may hinder the desire to use and find that bitcoin is really special. The regulations are increasingly expanding, amplifying models of payment since there is bitcoin. Many places accept bitcoin and it confirms the superior advantages of bitcoin / crypto for the future. And it's amazing, you'll realize when there's bitcoin, life becomes more sparkling and attractive.

[TIDOVEE]

i will agree that bitcoin has failed if everyone now reject it especially for another successful coin. but by now i believe it is the users that has failed in their appropriate use of it.if you say bitcoin has fail,OK which coin has succeeded?

[TheUltraElite]

If you can make huge profit, store up assets, transact money online and been your own boss. What other success do you want to get with bitcoin? No more expectations from bitcoin because it has been providing and giving me all I ever needed.

At first you have to make that huge profit. The problem with this generation is that they spend too much time thinking on what they will do when they become rich and in doing so waste time which they could have used to become successful. We talk about bitcoin governance forgetting the basics of how crypto works. Dreaming of huge volumes of money being made in your name is possible but its not something that will happen with just buying some bitcoin.

Whales made money because they had money already at hand, fiat indeed. They used it to manipulate markets and then make money from them.

[Eraldo Coil]

They probably didn't do the right thing in cryptocurrency world that is why they kept on saying that it is a failure and having some expectations. I don't see a bitcoin as a failure because there is a great technology behind it and you can profit a lot from it if you just do the right thing to earn profit. By not having enough research, you can also lose a lot of money.

[th3nolo]

I guess everything does make sense though, considering the fact that we're looking into off-chain solutions for scaling. I just thought that the game plan was always to keep on-chain transactions relatively cheap (i.e. still very viable for people who prefer on-chain transactions), though that does defeat the purpose of trying to move bulk of the transactions off-chain.

as for second layer, in order for it to work the underlying layer (meaning the on-chain transactions) need to be cheap otherwise nobody can open up a channel if it costs $50 to do so.

What constitutes "cheap"?

Once we establish that, I guess we can talk about the economic implications and how it affects the design. I strongly believe that the sustainability of the system has to be the top priority, much more important than cheap fees.

All manner of economic and scaling designs should be tested. If cheap fees (with regard to "the masses") are truly important, there's an abundance of Bitcoin copycats with bigger blocks and cheaper fees. I suspect that Bitcoin's value stems from elsewhere than cheap fees though, and that there will be strong demand for Bitcoin's block space even at orders of magnitude higher fees than seen today.

It's hard to talk about the economics of the system when everybody is focusing on cheap fees or looking at the price.

I agree with you, sustainability is the top matter on Bitcoin, just look what happened with this bear market it lasted only 522 days and a lot of retailers stopped mining bitcoin.

That could lead to losing our byzantine fault tolerance, thank god that didn't happen, but what could happen in a different scenario with less reward per block?

[CryptoCraze11]

I believe there are some people in the community who are in the standpoint that "Bitcoin isn't successful" unless they can use it for "almost-zero fee" coffee transactions. But is it truly a failure?

A piece of code that is currently trading at 10,000 USD is surely not a failure. I agree with members saying here that we have to wait for a while for BTC adoption rate to go up and with that surely its fee will also go down.

[hatshepsut93]

I don't think that Bitcoin should be considered a failure just because fees are high, but what is worrying me is that userbase grows so slowly, that speculation/hodling is still the biggest use-case. We like to talk how Bitcoin is going to be a store of value, but people don't even use it as store of value in any significant volume, everyone wants to just get rich quick, but to maintain growth we need strong fundamentals, and while we have good theoretical fundamentals, they for some reason don't translate well into userbase growth.

[figmentofmyass]

I don't think that Bitcoin should be considered a failure just because fees are high, but what is worrying me is that userbase grows so slowly, that speculation/hodling is still the biggest use-case.

how fast would you expect the userbase to grow? by some metrics, it doubled in the first 3 quarters of 2018. and that's during a bear market.

speculation/hodling is inevitable given bitcoin's scarcity and potential utility. people are gonna hoard bitcoin the same way they hoard gold. there's no way around it.

[hatshepsut93]

I don't think that Bitcoin should be considered a failure just because fees are high, but what is worrying me is that userbase grows so slowly, that speculation/hodling is still the biggest use-case.

how fast would you expect the userbase to grow? by some metrics, it doubled in the first 3 quarters of 2018. and that's during a bear market.

Pokemon Go reached 1 billion downloads in two years, Facebook, which is only 4 years older than Bitcoin, has 2.4 billion active users, Twitter, which is the same age as Bitcoin has 330 million active users.
Bitcoin needs to have exponential user growth to get on par with those mass products, which it actually might do at some point.

speculation/hodling is inevitable given bitcoin's scarcity and potential utility. people are gonna hoard bitcoin the same way they hoard gold. there's no way around it.

I don't have anything against speculation and hoarding, but the "money" use-case, which is the goal of Bitcoin, is in minority compared to speculation, which is not a good thing.

[TastyChillySauce00]

If we just think at the fact that bitcoin can be used to send transactions worldwide and almost instant then this fees wouldn't seem so high. Think about what fees do banks charge for a worldwide transfer. Most of them around $15-$25 but it could go up to $50. Besides that you also have to wait at least a few hours in best case because usually it takes a few days to be processed. Now compare that with bitcoin. It's enough to pay a maximum of $5 in fees and your transactions will surely receive 6+ confirmations in less than 2-3 hours. And this is just one advantage because there are others more.

Paid $3 for a transaction recently and confirmed within <10 minutes although the fee varies depending on how crowded the blockchain but it's quite affordable if we take into an account the fact that the fee will stays that much if the transaction size is not too big regardless the amount of money we send. With bank, well be ready to be charged so much.