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Comment by MereInterest | Hacker News Reader

If Bitcoin were used by everybody on the planet, the current max of 10 transactions/second means that each person could be part of a transaction once every 13 years (4 billion pairs of people / 10 Hz). Boosting the rate up to 100 transactions per second reduces that down to 15 months. Just think, receive you paycheck this week, and over a year later you can use it to buy groceries.

Bitcoin's throughout is absolutely pathetic, by several orders of magnitude. I think the only reason that aspect hasn't gotten more attention is because the energy efficiency is even worse.

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I don't know how Bitcoin transactions work, but can a company (like Paypal) buy bunch of bitcoins (10000), and then proceed to do all transaction internally with their own ledger mechanism without depending on other networks?, wouldn't this allow anybody within paypal network to send/receive super fast?

Yeah that's how all centralized crypto exchanges do it

What if there's a run on the exchange?

they suddenly have a 'technical issue' and suspend trading until it is 'fixed.' sometimes its never fixed and the exchange founder mysteriously disappears to Thailand or dies, or claims to start an orphanage in india. sometimes all three.

If the blockchain gets backed up it would take a few days to get money in/out of exchanges.

I don't think there can theoretically be a run on the exchange because in theory all the deposits are there, in the exchange, in theory, unlike a bank which only had a fraction of the deposited money in reserve. A run on a crypto exchange would be great for them considering they usually charge a withdrawal fee.

Those aren't withdrawal fees, those are transaction fees for the network. Most cryptocurrencies cost next to nothing for each transaction, while bitcoin and ethereum cost from $20 - $60 USD for the average transaction.

No I'm not confusing it. My exchange and all other exchanges charge a fee to withdrawal money. Its usually quite large.

Again, that fee is not something the exchange is charging you. The fee doesn't go to them.

If it is bitcoin or ethereum there are very high fees for each transaction. The exchange is showing you those fees in your native currency. They aren't getting that money, it is going to the miners.

No you still are misunderstanding what I'm saying. The text on the exchange for me is like "We charge 0.05% fee on all withdrawals NOT INCLUDING the transaction fee to send to your wallet".

If you are not talking about the spread between exchanging two currencies, that should be a GIANT red flag to not use that exchange.

They pause withdrawals while they get their coins out of cold storage.

Or if the exchange isn't fully collateralized, it's a scam and goes under.

Just in case you aren't catching on here, cryptocurrencies are not the future. They are just digital tulips - beautiful to look at and comprehend, but separate from any meaningful contribution to the economic system. You can still get rich from them by hyping and selling them before people catch on more broadly.

Civilization works because of laws that are interpreted by courts and norms which are broadly accepted but not often checked/enforced. Crypto is trying to create a "trustless" future where you do not need society to coordinate and regulate. Our modern financial system needs that squishiness/trust which you get from the legal system to operate at full capacity.

Picture the suspension of a car. In our modern financial world, the legal system and regulatory institutions serve as the shocks and struts of your car. It allows you to drive fast while not having to worry about every imperfection on the road. Cryptocurency is like driving a car where your wheels are attached directly to the axel - yes it's perfectly efficient and there's nothing between you and the road, but that also means you have to be exceptionally careful where you are driving, and you can't do it fast.

There's a reason all cars come with suspensions.

This is basically the principle behind a tech on top of bitcoin called lighning network: https://lightning.network

That’s how traditional financial systems work.

Correct. This adds a point of centralization, which defeats the entire purpose of cryptocurrency. As far as I can tell, cryptocurrency is based on wanting (1) a shared database that (2) can be updated by anyone within specific rules and (3) doesn't require anybody to trust anybody else. In the same way that low-trust societies have a much bigger overhead as a result of the lack of trust, I do not think cryptocurrencies are feasible while holding to (3) without massive, massive expenditure as a result.

> without massive, massive expenditure as a result.

Could you elaborate on this?

The problem I foresee is that having someone you have to trust is not a bad thing because at least you're able to identify that entity's traits and act accordingly. If that entity is, for example, the world's largest military power, I might feel like I have a lot less to worry about than if they're, as another example, a publicly traded company about half the size of the average major U.S. bank.

Is this what you're alluding to?

In general, the more people cooperate, the better the results are overall. The downside is that the more people cooperate, the more they can be taken advantage of by defectors, by bad actors who decide to harm the public good in exchange for personal benefit. I absolutely agree that being able to trust particular actors is a huge benefit.

Part of the problem is language. "Trust" isn't just trust in a particular actor's intent, but also in their capabilities to carry through on a promise. In order to trust somebody to carry out a promise, you need to indirectly trust on others not to interfere with that promise. In this case, if you don't trust the US government to handle currency, then you certainly can't trust a publicly traded company that is beholding to work within and has assets that can be seized by the US government. If you assume ill-intent on the part of the government, then there's no reason to assume that a smaller actor wouldn't be influenced by the government.

In this case, I trust the US government to manage currency well, because it is in its best interest to do so.

> This adds a point of centralization, which defeats the entire purpose of cryptocurrency.

I don't think you get to declare what "the entire purpose of cryptocurrency" is! People tend to get confused about what "trustlessness" actually means. It certainly doesn't mean that every single aspect of every transaction involving cryptocurrency must not require any party to place any trust in another party. If you're using cryptocurrency to buy bread you still need to trust that the baker hasn't poisoned your bread, and that need for trust must be addressed by some mechanism unrelated to cryptocurrency (like the baker's reputation, or laws against poisoning people). That doesn't illustrate some absurdity in the idea of cryptocurrency or "defeat the entire purpose of cryptocurrency."

We're in agreement that trust is needed at some point in the system. Cryptocurrencies can be completely internally consistent, but have no relationship to the real world. The only way for that relationship to be formed is by trust.

But, there is not a single thing in cryptocurrencies that make sense if you are willing to allow for centralization. If you have a centralized system, then you have a limited number of actors allowed to make changes to the ledger. You can establish trust out-of-band, whether that means by passing around gpg keys, by investigating previous banking practices, or by establishing common rules for auditing. After that, there's no need for Proof of Work/Stake/Space/etc, because you can trust the updates coming from the rest of the network.

The reason I say that the point of cryptocurrency is trustlessness and decentralization is because the only other alternative is that all the implementers of cryptocurrencies are utter fools not to see the simpler solution. I don't think that is the case. I think they have seen the simpler solution of trusted validators, and have dismissed it out of a fundamental difference in priorities from mine, but I don't think they are fools.

I’m not sure what you mean. The centralization being discussed here is out of band and thus the trust is also out of band. It’s no different than your local bar opening a tab for you, or using an escrow service for a construction contract.

Because once that centralization occurs, the remaining trustlessness doesn't serve a purpose. All that's happened is switching from one centralized system to another, but with a much, much greater overhead.

Mind you, I don't mind centralized systems, but the entire marketing of cryptocurrencies for the past decade has been how it is decentralized and outside of the the reach of any entity. We knew this wasn't the case in 2014, when Mt Gox folded and all signs pointed to fraud. We knew this wasn't the case in 2016, when the Dao smart contract was reversed by general appeal. We know it now as mining pools continue to rise. The decentralization is the main selling point of cryptocurrencies, and yet at every turn it is proven false.

The whole selling point of bitcoin is that it's a decentralised ledger that isn't owned by anybody. If the transactions are managed by a central entity, then that's no longer true. For example, what's to stop such an entity from creating bitcoins out of nothing and thus debasing the bitcoin currency?

Absolutely nothing is preventing it. Depending on your viewpoint, it happened back in 2014, and somehow the cryptocurrency community just sort of shrugged and got back to wildly speculating.

https://en.wikipedia.org/wiki/Mt._Gox

Paypal already does this with bitcoin.

This is not really true, for several reasons. One simple reason is that a bitcoin transaction can have multiple outputs, while your analysis assumes each transaction is between two people.

It hasn't gotten attention because they just re-centralized using exchanges and off-chain transactions. Just the latest episode of the fugazicoin clown show.

If the transactions are off the chain and to centralized and networked banks I wonder if the 21M coins will hold true for very long... And what happens when bank-run is attempted... As I don't see people staying away from all the fun things they can do with fiat currencies... As at that point the currency on exchanges and between them is fiat.

This is what the lightning network is for. It would be somewhat reasonable to withdraw or deposit to/from your lightning channel a couple times a year. Some other solutions would be needed to get the rest of the way, but improvement is improvement right? Why be so negative about it?

Are there any cryptocurrencies that are attempting to solve this issue?

Basically all (hardly even an exaggeration!) other cryptocurrencies are attempting to improve upon the throughput issue. Solana is a particularly prominent one with 50k/s

https://solana.com/

I'm interested in how all these other chains deal with people writing tons of junk transactions per second to bloat up the chain.

Having a transaction fee de-incentivizes most people who want to do this

Every junk transaction costs them money

From what I’ve seen they don’t

NANO actually just went through a pretty big spam attack and it crippled the network for awhile, but they supposedly came up with a pretty novel solution in the latest version. I haven't dug into it yet though. But NANO is fee-less, so it is (was?) more prone to these types of attacks. Having a fee increases the cost of a spam attack.

I don't know about other chains, but for ethereum you get money for destroying/freeing up block space. This is how the Chi gas tokens work: they write 0s to the chain when gas is cheap and destroy the blocks when gas is expensive.

I looked into it and Solana requires "Validator" nodes to be specially blessed by them to get rewards for running their software, so this isn't particularly de-centralized.

Algorand looks like a promising proof of stake altcoin in my opinion.

https://www.algorand.com/

I agree, and I can't believe more people haven't mentioned it here. I am not going to rehash what anyone can read at the linked site, but it seems like an absolutely great project, and seems to be flying under everyone's radar.

Except that it's fairly centralized

That's going to change this fall: https://algorand.foundation/the-algo/algo-governance

I don't agree.

If you said 2+2=4 and I said I don't agree, that doesn't change reality

It is only an issue in the first place because of bitcoin's purposely meniscule throughput. Monero's throughput adapts while bitcoin cash has 32x the max blocksize.

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