Comment by pixie_ | Hacker News Reader

Comment by pixie_ | Hacker News Reader

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Bitcoin still has some technical problems to figure out. Currently the blockchain is over 2gb and will get larger, faster as more people use it.

Also the transaction speed is really low - usually like 10 minutes to really confirm payment and at least half an hour to really confirm (around 10 mins a new block is created, and to ensure that block will stay in the chain you want some more blocks on top of that as well.)

Also.. the transaction rate isn't even 1 per second, if Bitcoin replaced visa for instance it'd be 2000/s, which means new blocks might contain 2000/s over 10 minutes of transactions, so new blocks are going to get huge.

All in all, bitcoin is going to need some big central bitcoin banks to speed transactions, and store the blockchain which isn't necessarily bad. Your bitcoins can still be stored locally under your private key, but banks will provide processing, while multiple banks provide verification of each other's stored blockchains.

And then these banks get together to form a banking system, and then this banking system decides it needs a central governing authority to be able to make important collective decisions efficient and implement them effectively and seamlessly.

And then they decide to call it the Federal Reserve Bitcoin Bank

Periodically there are proposed protocol changes. A while back I saw a proposal on creating a set of rules that allowed for crowdsourcing-style transactions. (You could send bitcoin to an address, but the transaction did not become valid until the amount at the address reached a certain amount.) I didn't hang around long enough to see the outcome of this proposal, but what I did notice was that only the major bitcoin mining pools got to vote on it.

This is a factor of bitcoin being "decentralized" that I don't think many people fully internalize. Anybody could change the protocol, and all that will count toward acceptance is the number of nodes acknowledging their transactions. If a change is unpopular or made without widespread consensus, the blockchains split and now you've got two mutually incompatible currencies. In practice this will probably just mean that you're always under threat of a split unless everybody accedes to the changes that mining pools propose, since they control so many transactions. Alternately, new mining pools could be created that let members vote proportionally to the work they've done for the pool. It's both scary and interesting.

Bitcoin shows you why we need the banking system (and lessons learned many many years ago).

It's why we don't store all of our money in a mattress underneath our bed.

For most small/medium value transactions, you can simply listen for a double-spend transaction for a few seconds. If you see none then you can assume all miners saw the same transaction as you did first and that is what you can assume will be included in the blockchain.

There are already thin client wallets. These connect to "blockchain servers" and grab the relevant transactions for your accounts from those. You still maintain control of your address(es) and thus your funds. No need to download the whole blockchain. That is really only needed for those that _want_ to or those that run services. The point is that you _can_ be a full participant in the network if you want.

The blockchain servers are what I'd call future banks. Hopefully in the future they would create 'unused output trees' periodically that clients would download and verify the validity by asking multiple independent banks.

I don't really think of them as banks since they don't have access to your private keys (and thus your coins).

A bank to me is a trusted institution that facilitates financial transactions. Having your private key would not be a requirement for a bitcoin bank.

I was going by the actual definition of a bank. Things like swipe facilitate transactions but are not banks. Facilitating a transaction does not make it a bank.

My understanding was that the blockchain itself contains a Merkle tree. Thus while users currently store the entire blockchain, they only need to store log(n) blocks locally to validate the entire chain.

Of course, analysis of transaction history will require the full chain, but this isn't necessary for the average bitcoin user.

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