Does Bitcoin Need To Scale

[Hydrogen]

Basic premise

• Bitcoin HODL may have no reason to scale
• For the same reasons 401ks, roth IRAs, precious metals and other HODL investment vehicles are not structured to accommodate thousands of ATM convenient fund transactions per second

....

High volatility, instability and price fluctuations are more strongly correlated with day traded FOREX assets which can be utilized to buy a cup of coffee. In contrast to the polar opposite.

Long term investment vehicles, tend to prefer lower average volatility coupled with balance locking virtually identical to crypto staking. Or limited options for withdrawal, with some time based penalties for early fund access.

There may be a fundamental conflict between being a high volume day traded asset which can be utilized to purchase daily goods and services. And being an optimized HODL asset. Which in traditional finance is geared towards lower volatility, less volume and reduced access. A conflict which is seldom acknowledged.

I think this is an interesting discussion topic for crypto. What do you think?  

[stompix]

In the last 24 hours, there were 341 000 transactions with around 900 000 outputs.

At this pace, assuming everyone would simply hodl and not move a coin, it will take 20 years for everyone on earth to get a bitcoin, if everyone would then want to move that coin to a different wallet it will take another 20 years if they would want to send it to an exchange and sell another 20 years.
So, between getting your coins, sending them to storage and then selling them to cash out you will have an average of 40 years.
That's some extreme holding, isn't it?



 

[Kakmakr]

Forex (Fiat currencies) are used for trading and daily use, why should Bitcoin be any different? The lightning Network is supposed to function as the high volume side-chain for daily transactions and the normal day trading are mostly done on internal exchange platforms and not on the actual Blockchain. (Only when you withdraw to BTC at the exchange or sending BTC to the exchange)

Nah... Bitcoin is very well developed to handle both the load from daily "currency" transactions and the smaller day trading and withdrawals from exchanges.  

[DooMAD]

The answer people provide to that question is going to depend primarily on their personal perspective.  Those who want to see Bitcoin closely resemble digital cash are likely going to lean more towards 'Yes'.  Those who use it as more of an asset class may naturally lean more towards 'No'.  In practice, there isn't a right or wrong answer.  Only an answer that will suit any given individual's preferences.

My thinking is, whether anyone thinks it needs to scale or not, those who believe Bitcoin does need to scale will focus their efforts on developing towards that goal.  So, given the nature of permissionless development, they are the ones with the impetus behind them.  I don't really see how anyone could develop towards the goal of preventing scaling, given that there are many ways to achieve it which don't necessarily require full consensus.

Essentially, the picture points to scaling happening regardless.

But if we're talking exclusively about the speculators who want to see Bitcoin as an "optimized HODL asset", I'd say there's too much of a dichotomy in Bitcoin for that to ever be practical.  You can certainly use Bitcoin in that manner if you wish, but I doubt that's ever going to be the only way it's used.  So it will never be "optimised" in that regard.  You're always going to have those people sharing this network with you who want to spend their BTC like a currency.

[davis196]

I think that there's no contradiction between the long term HODL investors and the short term crypto day traders.They both need each other.
The day traders provide market liquidity and can pump the price,creating bullish rallies and the possibility of reach a new ATH.On the other hand,the expectations for new bullish rallies and a new ATH are the main reasons the HODLers are buying and HODLing their bitcoins.
If we try to view this from another perspective,the HODLers are reducing the market supply of BTC,by holding their Bitcoins,therefore creating conditions for the Bitcoin price to go up(limited supply+increased demand=higher price+higher price volatility).
This is exactly what the day traders want.It's a win-win.

[exstasie]

High volatility, instability and price fluctuations are more strongly correlated with day traded FOREX assets which can be utilized to buy a cup of coffee. In contrast to the polar opposite.

Forex assets in your brokerage account can't be used to buy a cup of coffee. And that's mainly what we're talking about isn't it? Most people treat BTC like an investment asset, including Wall Street. That equates to lots of BTC locked up with custodians, and lots of HODLing, regardless of what investors can do with it in theory.

There may be a fundamental conflict between being a high volume day traded asset which can be utilized to purchase daily goods and services. And being an optimized HODL asset. Which in traditional finance is geared towards lower volatility, less volume and reduced access. A conflict which is seldom acknowledged.

What's the conflict exactly?

The potential reward associated with BTC investment greatly outweighs the volatility risk. Smart money can see that.

[RealMalatesta]

I believe bitcoin is a currency and because of that it should be able to scale to a lot of transactions per day.
If we are having trouble with times and prices of fee's right now, think about what would happen if bitcoin became a regular standard of payment method?

Like let's say you have a debit card but it is purely based on your bitcoin holdings, you go out to a restaurant and eat something and pay with bitcoin, then you go to movies and buy the ticket with bitcoin, and after the movie you go to a cafe to eat a desert and then you go home, all of which was paid with bitcoin which is awesome right? We all want bitcoin to be something like that right?

But, if we can't even handle the current situation how are we going to make it work for the days we could spend like that?

[pixie85]

Without some scaling solutions like segwit and the lightning network Bitcoin would have bottlenecked long ago.
If you were trying to send a transaction in January of 2018 you knew how painful a bottleneck can be.

I suspect that this situation would only grow and make people unable to process a transaction without waiting a week or paying $200 in fees.

[Rengga Jati]

Will this thing depend on each person or holder of the BTC and other assets whether they want to scale or not?
Bitcoin is interesting asset not only for hodl but also for trading. Let set aside the trading in this case and focus on hodl.
So far, Personally, I only have target of holding my BTC safely in the wallet. It depends son how I manage the asset so far. But importantly, they must be diversified.
1. For long term holding or investment, I think I need some ways to scale in what times or years I will hold the bitcoin, how many years, at least it should be more than 4 years, Why? I have no exact reason for this. 
2. Holding to get the target of reaching a certain amount of the BTC price. It may be safe enough and I need to disversify the selling tme of this BTC asset.

However, if it is discussed generally, we may not have any exact scales that can be the guidance for the price and also period. 

[alani123]

Define scale... People usually use that word talking about something completely different with bitcoin.

Anyway, I think the point trying to be made here is that BTC doesn't generate a stable positive cash flow as for example QQQ or S&P500 would do long term.

Well, my take would be that with BTC a positive cash flow isn't important. BTC is cash money, but completely disconnected from any systemic risks as modern finance defines them. There's absolutely no possibility of bank collapse, hyperinflation, government or state failure etc. People that hold BTC already must have their means to survive otherwise with their everyday transactions.

Frankly, BTC is a better instrument of facilitating every day transactions only in places where inflation is crazy high and government can't easily support its citizens. In such occasions there are some edge cases that could see more utility from BTC than their local cash. But most people in let's say Venezuela where there is a lot of inflation don't even have regular access to good computers or Internet.

Long term investment vehicles, tend to prefer lower average volatility coupled with balance locking virtually identical to crypto staking. Or limited options for withdrawal, with some time based penalties for early fund access.

That sounds much like term deposits and government bonds. Well, these options aren't real investments. They bear no risk. They merely let you beat part of the projected annual inflation but not much more.

There may be a fundamental conflict between being a high volume day traded asset which can be utilized to purchase daily goods and services. And being an optimized HODL asset. Which in traditional finance is geared towards lower volatility, less volume and reduced access. A conflict which is seldom acknowledged.

This is a topic that has been widely discussed. There's an inverse relation between bitcoin's utility as a payment tool and its price for example. Because when prices skyrocket, so do the fees. So when bitcoin goes up in price, it's not so useful for payments anymore because you have strong counter incentives to use it for everyday payments due to fees consisting of an evergrowing part of your transactions as prices rise.

[TitanGEL]

Will this thing depend on each person or holder of the BTC and other assets whether they want to scale or not?
Bitcoin is interesting asset not only for hodl but also for trading. Let set aside the trading in this case and focus on hodl.
So far, Personally, I only have target of holding my BTC safely in the wallet. It depends son how I manage the asset so far. But importantly, they must be diversified.
1. For long term holding or investment, I think I need some ways to scale in what times or years I will hold the bitcoin, how many years, at least it should be more than 4 years, Why? I have no exact reason for this. 
2. Holding to get the target of reaching a certain amount of the BTC price. It may be safe enough and I need to disversify the selling tme of this BTC asset.

However, if it is discussed generally, we may not have any exact scales that can be the guidance for the price and also period. 

I saw a lot of posts that have a problem in terms of holding, why you will hold your bitcoins when the trend is in bearish where it keep making lower lows and lower highs. It is sounds crazy but you are holding in order to lose money if you do it if the trend is bearish. There is also no risk management that I see for those who keep do HODL where they just hold and they do not have stop loss levels that can help them to minimize their losses. There is nothing wrong in doing HODL, the wrong is if you do HODL where the trend in downtrend and if you do not have proper risk management about it.

[Naida_BR]

It is very doubtful what people think about bitcoin.
Some think that Bitcoin needs to be utilized as an asset that is going to be used for the daily transactions and some others that is a digital asset that gains value in long term.
Personally, I believe that Bitcoin is the second option. If we want a crypto to be used in daily transactions we must use another coin but not BTC.

[hatshepsut93]

High volatility, instability and price fluctuations are more strongly correlated with day traded FOREX assets which can be utilized to buy a cup of coffee. In contrast to the polar opposite.

Fiat currencies change by a fraction of percent per day, and a few percent movements generally happen only a few times per year. This volatility is nothing compared to Bitcoin.

More consumer transactions would mean less volatility for Bitcoin, because the current speculation is based on uncertainty whether Bitcoin will succeed as a widespread payment method or not. If it will, then there will be less reason to speculate.

[DoublerHunter]

^ There is no right or wrong answer to this question for bitcoins are similar to fiat currency it depends on the personal perspective if they will treat them as a long term investment or be used in a daily transaction. Both of these has it's own role in the stock market for they can bring a pump and dump to the value of cryptocurrency but making bitcoins on a day trading will be great besides it is also the reason why we will hodl bitcoins and earn as much as we could for we could use it somehow on our necessities. On my own, I prefer seeing my bitcoins as a form of payment replacing the fiat currency and not being governed by any banks globally.

[DooMAD]

Define scale... People usually use that word talking about something completely different with bitcoin.

Exactly.  There are several varieties.  It's difficult to ascertain whether the OP was referring to all, or only some, of these:

• A decent amount of scaling can come from optimisations and efficiency savings - squeezing a larger quantity of transactions into the space we currently have available.  This is generally considered to be the least contentious option.  We'll hopefully see a few of these in the not-too-distant future.
  
  
• Willing users can opt to send smaller transactions off-chain, sacrificing some security for speed and cost-effectiveness - leaving more space in blocks for significant sums that require the greater security provided by on-chain transactions.  Contentious to some, but it's a moot point.  Still in a fairly early developmental stage.  Currently more suitable for the tech-savvy "power users", rather than less experienced ones.  If successful, it could have the largest impact of all.
  
  
• We can increase blockweight if absolutely necessary - a potential sacrifice to the decentralisation of the network in order to achieve greater throughput.  Highly contentious to many.  Difficult to achieve consensus on.  Generally considered a last resort.
  
  

[BrewMaster]

but bitcoin is not an investment, it is not stock, ... it is a currency. in fact without bitcoin being a currency it becomes worthless and things like HODL lose all meaning. you see everything has a value according to its utility. if bitcoin was only an investment then there would not be any reason for it to exist. if you think about it a little you can see that it would mean that we created a blockchain to store wealth and gain wealth and nothing else! and that makes no sense and is not a utility. not to mention it won't grow at all.

the only reason why bitcoin has grown in the past decade is because it is a decentralized payment system. and a good one at that.
coming back to your question the answer is obviously yes bitcoin needs to scale to become a better payment system.
why do you think hundreds of thousands of hours have gone into developing scaling solutions? why would they even bother with LN if bitcoin was only an investment and didn't need to scale?

[exstasie]

but bitcoin is not an investment, it is not stock, ... it is a currency. in fact without bitcoin being a currency it becomes worthless and things like HODL lose all meaning. you see everything has a value according to its utility.

Bitcoin requires a base level of transaction liquidity (spending and reciprocal acceptance) to have any value, that's true. So does anything else that is used as a store of value.

However, I think it would be very wrong to say its value is based on its utility. The past hype cycles alone sort of prove that. Bitcoin's value is still mostly speculative. The market is pricing in the future likelihood of adoption. In my opinion, adoption means people buying BTC (whether to use or hold) because that's what defines market demand, not utility.

If nobody were willing to spend BTC, it would be worth nothing. If the mining security model failed, it would be worth nothing. But assuming these conditions are met, speculators take them as a given. In other words, these metrics are not what the market price is based on.

[yhiaali3]

For me, I just don't want to see bitcoin as an "optimized HODL asset" but I hope to see it spread like Fiat currencies around the world and you can then use Bitcoin to speculate or as a currency to buy the things you need.
I hope (and I think that this will become reality one day) that I see Bitcoin as a global currency used in the whole world without restrictions and without the need to exchange it for another currency such as the dollar or other, where you can buy online or from the store located near your house or use it on the stock exchange.
So for me, I don’t care much about holding bitcoin until the price goes up and I don’t care if it goes down because you can work in either case but what matters most to me is the spread of bitcoin.

[DooMAD]

but bitcoin is not an investment, it is not stock, ... it is a currency. in fact without bitcoin being a currency it becomes worthless and things like HODL lose all meaning. you see everything has a value according to its utility.

Bitcoin requires a base level of transaction liquidity (spending and reciprocal acceptance) to have any value, that's true. So does anything else that is used as a store of value.

However, I think it would be very wrong to say its value is based on its utility. The past hype cycles alone sort of prove that. Bitcoin's value is still mostly speculative. The market is pricing in the future likelihood of adoption. In my opinion, adoption means people buying BTC (whether to use or hold) because that's what defines market demand, not utility.

I've often suspected that any attempt to define the value through a single aspect is going to land wide of the mark.  It seems more like a combination of factors that result in the value.  Also missing from that linked post is the production cost of mining and probably a few more facets besides those that I haven't yet considered.

[Febo]

Does Bitcoin Need To Scale

It dont. But will be way more valuable and useful if it scale a lot. It is simple as that. Bitcoin can stay exactly as it is right now and both Lightning and Liquid can fail and any other scaling solution. That dont mean suddenly no one will use Bitcoin anymore. We will. But that add on of use case and value that more transactions would bring will not be here.