Comment by fidelramos | Hacker News Reader

Comment by fidelramos | Hacker News Reader

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My take on this [0] is that Bitcoin price was growing exponentially with demand, or more exactly with the expected future demand. Cryptocurrency always have had a lot of speculation behind them, not unlike any startup, and that is OK.

As shown by the graph [0], adoption slowed down after 2016 when BTC blocks got consistently full and transaction fees rose to $50 and more. I believe if BTC had scaled to support more transactions the price would be much higher today, as Bitcoin would likely be used as a means of payment across the Internet and in many physical stores at well.

Discussions regarding the decentralization of larger blocks aside, something that is not clear to many people is that scaling a blockchain to handle more transactions doesn't mean a linear increase in energy use. In the case of BTC its Proof-of-Work algorithm operates over the root of the last block's Merkle tree, which is a hash of all the transactions in the block. Being a fixed-size hash it doesn't matter if the block contains 1,000, 1 million or 1 billion transactions. Arguably a more popular Bitcoin would be more valuable and therefore would attract more miners, increasing its energy consumption, but that just reinforces my original point.

[0] https://x.com/ampajaro/status/1782850107529973990

I think you're describing Bitcoin Cash, but AFAIK it's worth less than original BTC. What you're not considering is the brand value of BTC being the first and most famous crypto currency.

I agree with part of what you say but not with the implication. Yes, Bitcoin Cash [0] is the Bitcoin that chose to scale on-chain. The split happened in 2017 and since then it has decreased in price both compared to BTC and USD.

What I strongly disagree with is that a Bitcoin with bigger blocks and hence larger transaction capacity is inherently less valuable. That is an unfair comparison because Bitcoin Cash, when the split happened in Aug 2017, could have been recognized as Bitcoin by the ecosystem, but it wasn't, and Bitcoin Core retained the BTC ticker. Because of that Bitcoin Cash had to start adoption from the beginning, losing Bitcoin's established network effects.

My original argument was that if Bitcoin had increased its blocksize before 2016 as Satoshi Nakamoto originally intended [1], then the Bitcoin Cash split wouldn't have happened, Bitcoin adoption would have continued growing (remember that back in the day big players like Microsoft, Dell, Steam and Newegg started accepting Bitcoin payments) and miners would progressively see more of their rewards coming from transaction fees and less from the block rewards.

This last point is one of the big problems with BTC right now: the network security will decrease in the face of dwindling block rewards unless transaction fees rise. I argue that Bitcoin was always supposed to scale in number of transactions, so the aggregate of transaction fees, even if individually inexpensive (roughly 1 cent), would become larger than the block reward. In other words: the block reward was just an economic incentive to kick-start the Bitcoin network, to attract miners that would secure it, but the transaction volume was meant to keep increasing to replace it.

[0] https://bitcoincash.org/

[1] https://bitcointalk.org/index.php?topic=1347.msg15366#msg153...

I didn't say that having larger blocks makes a crypocurrency hinerently less valuable, my point was that it's not enough to obtain the widespread adoption and the consequent increase in value you were talking about. But I also see your point on having those improvements baked in BTC at the right moment vs having a new crypocurrency. But afaik Ethereum is able to handle many more payments than BTC (not sure if transaction fees are reasonable though) and is one of the most popular crypocurrencies. But still, my impression is that it's adoption as actual currency to pay for goods is similar to BTC, despite these improvements.

In my opinion there are two main issues that prevent crypocurrencies from being actually used as currency:

1. How many transactions per seconds can be handled 2. Their extremely high volatility compared to fiat currency

While blockchains can scale to fix point 1, point 2 is driven by forces outside the technology.

Blockchain scalability while keeping decentralization is now a solved problem, you can research how sharding is implemented in cryptocurrencies such as XTZ or EGLD, or read this rationale [0] for terabyte blocks in Bitcoin Cash. Why do blockchains such as BTC or ETH refuse to scale on-chain then? That's a separate debate, but I believe there are vested interests in them not scaling.

Regarding volatility I agree that it's currently an issue, but not an insurmountable problem in my opinion:

1. Payment gateways can offer automatic asset conversion to minimize volatility risk for payment takers. This means I could pay in whichever cryptocurrency the payment gateway would take and the receiver would get whatever currency they have set up in their account. They might want to keep some currencies and convert others, so the payment gateway could offer an option to decide that, and in which amounts (e.g. "keep 10% of each BTC payment, convert the rest to USD").

2. Price volatility should reduce as a cryptocurrency is more widely used. In the alternate universe where BTC scaled to be larger than all credit card networks combined its price could be more stable than many fiat currencies.

[0] https://blog.vermorel.com/journal/2017/12/17/terabyte-blocks...

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