In his piece titled
“Why Bitcoin Will Never Be the Currency of the Future”, he talks about Bitcoin’s scalability issues. He says that the Bitcoin network doesn’t have the capacity to handle the transaction load of an entire economy.
Bitcoin’s block time is 10 mins on average, and the blockchain can handle 3-7 transactions per second. As a comparison, the throughput of credit cards is several 1000 transactions per second.
What Derek doesn’t realize is that bitcoin doesn’t have to become the world’s premier currency or payment method that you will take with you and pay with everywhere you go. Maybe one day it will, but it isn’t a priority in my opinion.
Bitcoin is an extraordinary store of value. Political figures and elected governors are starting to realize that. Take Cynthia Lummis, a Wyoming Senator as a great example of that. She is an advocate for Bitcoin and has
plans to introduce the US Congress to the benefits of bitcoin. Cynthia has a background in Finance. She worked as a State Treasurer and recognized Bitcoin’s capability of being a great store of value. Mainly because Bitcoin doesn’t inflate, compared to the US$. You can watch a quick video of her talking about that
here. Sooner or later, more elected officials will begin to share her views and understand the benefits of what bitcoin is.
Another point that Bitcoin is a great store of value can be observed on the graph below. It shows that the number of wallets holding 1.000 BTC or more has been on the rise throughout 2020. We begun at above 1.700, and that number has increased to about 1.900 now.
Derek Sorensen goes on to mention that the Lightning Network has improved the scalability problem, it can handle a bigger quantity of transactions, but it compromises other elements of the Bitcoin blockchain. Namely:
decentralization, trustlessness, and peer-to-peer interactions (i.e., no third party).
While transacting over the LN, you open payment channels to another party or connect to other nodes to route your payment. The opening and closing of the channel are done on-chain, all transactions in between are done off-chain.
Seems interesting, but Derek says that is not the way most people shop:
If I had one grocery store, one pharmacy, one restaurant, one movie theater, and one gas station where I bought everything from, it might make sense for me to have running tabs, put money in them every month, and draw from that sum each time I go to the store. The problem is that this isn’t how it works. I constantly transact with a variety of business, both online and in person. It wouldn’t make any sense at all for me to put money into these sorts of charge accounts with individual grocery stores, gas stations, online retailers, etc. because the stores I transact with are constantly changing. Tying up money that way is a hassle. It’s impractical and highly inefficient.
But to take advantage of the Lightning Network, you don’t have to open your own channels. There are custodial wallets, like
Bluewallet where you don’t have to maintain your own node or provide liquidity. You will be able to receive coins and the liquidity is provided by others. Thanks to Rath and Loyce for explaining that
here and
here. He continues by comparing the LN liquidity providers to banks, and says that they have connections to stores and services you want to purchase. You use their routes to get your bitcoin to the correct recipient. It is a similar approach to what banks do, but he says that:
Lightning Network “banks” are unregulated, and this is a serious problem.
His opinion is that those liquidity providers introduce more centralization. He expresses concerns that:
If we aren’t careful about the market forces we introduce into our currency system, we will allow agents to freely extort other members of the network without repercussions. Banks, historically, have been one of these kinds of bodies — regulations on them exist for good reason.
What are your thoughts on all this and what would you like to say to Derek?
Quotes and basis for the discussion were taken from
https://medium.com/pyrofex/why-bitcoin-will-never-be-the-currency-of-the-future-4b63415a1dfd