However, getting the transaction confirmed can take many hours at the times of high demand and then it still fails because thanks to the volatility, the transaction fees have gone up in the meantime. That is creating unsustainable problems for the customer support and makes BTC unusable for actual payments.
I think this is what will ultimately bring Bitcoin down (and with it the entire cryptocurrency goldrush, even though the problems are mostly with BTC). Once the currency is impossible to exchange for actual goods or other currencies due to being more trouble to handle than it is worth, it stops being a currency. What good is that one BTC is $12k+ now if you can't actually buy anything with that? People pouring money into this today and talking about BTC being a "store of value" are being seriously nuts ...
If I run a small business, accepting payment in bitcoin just creates risk. The state of my business not only depends on the quality and success of my product/service but also on the volatility of bitcoin because by accepting bitcoin I am forced to effectively take a long position on BTC. The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem - struggling to pay wages and rent - even though my business is successful in that I made a profit on selling my products or services.
The purchaser of my services is effectively on the other side of this trade and is exposed to the opposite risk wrt to BTC/USD. The only way for the two parties to minimize this risk would be for the customer to convert fiat currency into bitcoin just before paying, and then for the vendor to convert the bitcoin back immediately on receipt. With high spreads and transaction costs, using bitcoin in this manner is incredibly expensive and makes no business sense.
Of course, it's a finite resource and mining it involves dynamiting mountains and cyanide poisoning the environment, but then again Bitcoin mining currently consumes enormous amounts of energy and it can only grow from here. Also countries with no gold reserves have been at a disadvantage, but then Bitcoin mining will require enormous resources as well and countries without those resources will remain at a disadvantage. So personally I don't see any benefits whatsoever.
If I had wealth to store, I'd invest in property simply because properties have intrinsic value. And yes, I'd still buy gold before Bitcoin or any other currency for storing wealth long term.
Bitcoin is currently only useful for speculative gains and I don't see that changing.
Bitcoin is a classical ponzi, you don't have more than few bytes of otherwise meaningless data, and only emotions are keeping the value so high. And as we know, emotions change.
Don't insult gold. It will be around long after Bitcoin will become just another part of history.
Since then, I almost never see BTC as a payment option.
You'd be an idiot to pay for any service with Bitcoin. A million dollar pizza makes for a great news story, but it would suck knowing that you effectively let go of millions of dollars just to buy a pizza.
Bitcoin holders are disincentivized from spending it.
Note that this gives you a maximum gain of whatever BTC/USD is today (assuming you denominate in greenbacks), while upside risk is theoretically unlimited.
Of course the lender has to trust or be ensured (or insured) that you will repay.
There must be people using Ethereum contracts to make options on BTC, and maybe trying to minimize counterparty risk through the judicious use of open-sourced smart contracts and digital collateral? Anyone know of interesting cases?
Apparently they will list on 18 Dec on CME, and 10 Dec on CBOE.
I get the feeling that there will be a fair bit of selling pressure as a result. That's usually the case on lockup expiries and it would make sense for the initiation of a volatile instrument that wasn't previously shortable on a listed basis.
I wonder how hedging transactions will affect the mechanics of the bitcoin market.
The bitcoin market is astonishingly shallow compared to most commodities and nearly unregulated, I assume hedge funds and other smart money can and will manipulate the price up and down to their own advantage.
According to some blockchain site[0] the average transaction volume for BTC is something like $2.25m USD equivalent
For comparison, on an average day, SPY[1], which is just one security (albeit a popular one) trades something around $17,160m (e.g. $17.16b).
[0] https://blockchain.info/charts/estimated-transaction-volume-...
Sure, but there are also laws and regulations that limit what you can do with stocks on a real exchange: https://en.wikipedia.org/wiki/Microcap_stock_fraud
> won't this problem go away as BTC gets more popular?
Maybe. It would have to get a lot more popular, and a lot more legitimate and regulated. At that point, it's lost all the cyberpunk appeal, and it's just another speculative asset.
Well, the parent comment said "if the transactions were quick", meaning that you would exchange the bitcoin for something else as soon as you received them (within a second or minute, say).
Do you have any data to back it up?
This is precisely what Lightning aims to solve, and at least anecdotally so far, has done so in the case of LTC.
(Though its hard to compare LTC to a chain with a market cap of over $200b even if the former has a skyrocketing trade volume)
I want internet money. I want to be able to send money to anyone, anywhere in the world, at the drop of a hat, as easy as email. I don't care about speculation or getting rich or avoiding taxes or sticking it to the man or anything like that. I just want to have a convenient way to get tipped on IRC by anyone at any time and to be able to repay in kind, to anyone at any time.
The issues with PayPal have mostly been interfacing with fiat currency, which any system will have to deal with, and transaction fees, which any system will have.
The real problem IMO is the lack of a de-facto service that everyone all around the world has, and we're kind of in this position: https://xkcd.com/927/
Having family and friends in different countries who use different currencies, let me tell you, Paypal is not the solution I want.
I argue it's not convenient for IRC tipping simply because 1) software is not well-integrated for minimal clicks 2) the other person might not have PayPal.
Don't get me wrong, I don't love PayPal, but I don't think Bitcoin brings anything really fundamentally important & new to the table, except maybe the decentralized part. Though, I suppose you could argue the decentralized nature of email was key for its universal adoption today.
You can insist that they charge you in the same currency as you wish to pay with and your bank will do the exchange at an order of magnitude lower fee. Not everyone knows this. The user interface also doesn't make it very clear (which perhaps surprised no one).
I transfer money to my mum in the UK once a month from my Australia debit card and its in her account within minutes, and the fees are far lower than a bank transfer.
Real currency has a federal reserve to balance supply against demand and keep the value steady.
BTC has entirely demand-driven value-- which is precisely as steady and predictable as the human mind.
The gold standard was abolished because the economy was on the brink of collapse. A dollar grossly mismeasured the value of an ounce of gold, because there were far FAR mare dollars than gold to back them, and the mapping of gold to dollars was not adjusted at all (from $35/oz) despite the discrepancy growing and growing for decades. In a sense, each ounce of gold was being double-counted 100 times over by so many dollars floating around in the economy. That situation was horribly unstable, because it was at huge risk of a run on gold (You'd have a lot more wealth if you exchange your dollar for gold; because of the aforementioned double counting, an ounce of gold actually corresponds to a great many dollars. If everyone had realized that and done it, the economy would have been toast).
Disconnecting the dollar from gold allowed the value of an ounce of gold to be correctly measured. So while other prices in the economy remained stable, gold shot up, because now the market was free to price it accurately (reflecting that the economy had grown far faster than the supply of gold). That doesn't indicate inflation, it precisely illustrates how dangerously out of whack things were before the gold standard was lifted.
Financial stability seems like a secondary concern that cannot be solved via computer code but might instead require other kinds of human codification, perhaps legal.
Which LTC wallet support LN in production?
In other words, even if you can't go buy clothing or games or hosting with BTC, doesn't the fact that you can exchange it for $LOCAL_CURRENCY (which can be used to buy those things) give it value?
Basically, a meta-currency or currency of currencies, if you will.
Edit: I realize we are saying the problem is a delay and pinning down the real value at a given time, but it sounds like that doesn't matter so much as the volatility itself, which should eventually settle. If delay were really a problem, then I would think stocks wouldn't be a thing.
1. Dividend payments
2. The expectation that someone else will want the stock more in the future. (Often for reason #1.)
Financially, there is no other logical reason to possess stocks. It was part of the larger lesson that companies often perform irrational actions because they are made primarily out of people.
Nonetheless, for any of the "commonly traded and indexed investment securities we all talk about colloquially as 'stocks'", the daily trade to capitalization ratio is routinely an order of magnitude higher than bitcoin.
BC has none of those advantages.
Acceptability
Durability
Divisibility
Stability
Portability
(Elasticity)
If it spoils or decays within your lifetime it's not a currency.
If it's not something you can divide in order to make payments of a more-or-less arbitrary amount, it's not a currency.
If you can't predict how much of the asset you will need to pay your bills next month, it's not a currency
If you can't bring it with you to the place where the exchange takes place, it's not a currency.
If you can't obtain capital investment in a currency because the currency itself is more valuable than anything you could produce, then it's not a (good long term) currency. This last one is in parens because it one only matters in a growing economy. A deflationary currency can still otherwise function as a viable medium of exchange, but eventually, lack of availability for new entrants will mean that entrepreneurs will begin looking to do business in alternate currencies.
Back in the hyperinflation days, we couldn't predict how many Cr$ we would need to pay our bills in the next month. That didn't keep it from being a currency.
Though I do personally think there's a lot more to a currency than that.
Wallet developers and payment portals gets a lot of flak for overcharging fees, but ultimately it is still preferrable to using a conservative estimate and deal with the likely support call when the payment fails to confirm, and there is nothing they can do but watch it get bounced between nodes.
The only major online retailer that actually keep their own BTC is Overstock.
I am having trouble fathoming why you think that.
How ironic..
Bitcoin is no more a store of value than tulips were. Bitcoin is a speculative product, not a store of value.
Gold has been valued since, I don't know, before the Greeks. What are the chances that tomorrow gold will go completely out of style (say gold will be worth no more than copper)? What about BitCoin? Can you put money in BC and hide it away?
People have been saying that for years. It serves purposes other than buying and selling goods, and in fact almost no one uses it to buy things.
https://twitter.com/bitcoin_pizza
I’ve noticed this trend lately of rewriting what Bitcoin is for because I assure you, it was presented as the new cash for a long, long time. We were supposed to see Bitcoin ATMs and paying for daily sundries with Bitcoin. Then that became difficult, we are starting to see the brave adopters drop out of using it that way, and suddenly it’s an investment vehicle and store of value and nobody really buys anything with it and that’s been the intent all along.
People were saying those things for years because Bitcoin proponents were telling us. It’s not like people arrived at that conclusion erroneously.
Right now the core Bitcoin dev team have gone one way, so the "currency" side of the debate have largely moved to alternatives like Bitcoin Cash, Litecoin etc.
The current backlog of transactions on the main Bitcoin chain is down to the artificial block size limit. How far on-chain scaling will stretch is unclear, but the core Bitcoin network could easily process more transactions if the block limit was increased.
People who have been involved with Bitcoin from the beginning are not trying to change it's definition. It will 100% be digital cash in due time. The reason it's taking so "long" is because the dev team cares about keeping it decentralized and doesn't throw sloppy code out and end up forking it later like many other alt coins
In any case, the internet was designed as a communication medium that could survive nuclear war. That's how it was sold by its proponents. So what.
Define reputable.
> Announcing the first release of Bitcoin, a new electronic cash system
http://web.archive.org/web/20090131115053/http://bitcoin.org...
> Instant transactions for points-of-sale
http://web.archive.org/web/20130805223235/http://bitcoin.org...
(That verbiage lasted most of 2013, but was removed a couple days after this capture, presumably because payments were starting to become less "instant.")
> Bitcoin is a new payment system, independent from the traditional financial sector, and this could provide resilience to the economy in case of a crisis, as it creates a parallel payment system.
Understanding Bitcoin: Cryptography, Engineering, and Economics by Pedro Franco, 2010, pp. 26.
> You can purchase video games, gifts, books, servers, and alpaca socks. [...] Bitcoins are a great way for small businesses and freelancers to get noticed. It doesn't cost anything to start accepting them [...] and you'll get additional business from the Bitcoin economy.
https://www.youtube.com/watch?v=Um63OQz3bjo
Bitcoin has literally been presented as a replacement for cash payments since day 1. I could go on, and on. That history is now being rewritten, and I think it’s important to understand why. Bitcoin set out to do one thing, is failing at that one thing, and I’m discouraged to see people rewrite the narrative rather than own it and say it didn’t work for that.
And you've mixed up your history: the research grants into the Internet were funded for that purpose, but it quickly morphed into an alternative usage once the new abilities were seen. Nobody went out and pulled out full page newspaper ads with that intent for its design, or otherwise heralded the Internet as such.
Ethereum, the supposed answer to bitcoins problem has just recently began to see the exact same problem. Why? Because of a dumb kitten game - what happens once even a single ICO finds an moderate amount of user base?
These are early times friend
“Lightning Protocol 1.0: Compatibility Achieved ” https://medium.com/@lightning_network/lightning-protocol-1-0...
BTC doesn't do its original job, and the current value on it, aside from idiots looking for a get-rich-quick scheme, seems to be that it will eventually do its original job.
It's nowhere near that right now. The total cost for your "median" transaction right now (at 226 bytes) is about $4.30 USD (at 150 sat/byte). Even if you double that to 300 sat/byte you are still at ~$9.
Edit: I'm not saying even $4 fees are okay, just pointing out that it's not $20. I agree with steam's decision here, and it's something that Bitcoin needs to solve before it can really be useful as a payment system.
That's both cheaper than and faster than bitcoin.
(And this isn't a cost hidden in a perk of a monthly fee, there's no monthly account fee either.)
I'm pretty sure if Satoshi re-appeared "he" would be lamenting those artificially keeping the blocksize small. The 2MB limit was put in as a temporary solution to a problem of too many worthless transactions. Bitcoin has the opposite problem now.
https://en.wikipedia.org/wiki/Single_Euro_Payments_Area#Cove...
As a means of payment in the SEPA region, Bitcoin is far worse on cost (free vs $5-10 in my experience), and sometimes worse on speed (1 - 1.5 business days for SEPA to clear).
So in this geographic area, Bitcoin is literally losing to a combination of the legacy banking system, and a huge, multi country, multi lingual, somewhat unwieldy bureaucracy.
Which shows how pathetic the main development team behind Bitcoin is (the core team). The fact that they haven't managed to fix problems that are years old and steadily getting worse is inexcusable. It should be a walk in the park for them to out compete a massive, political entity like the EU and the traditional banking sector.
I hear you on the "strange places", that was where BTC was supposed to shine. It hasn't made any inroads into underserved markets that I'm aware of, e.g. less well-off countries and unbanked people. That is a pipe dream as long as the fees are so high to move funds around.
There are solutions being worked on, but they are not ready for primetime yet.
So ideally there will be more traffic but less congestion
Not to mention that the currency's extreme volatility means that when you sell it to convert it to greenbacks (the currency your investors actually care about) it probably won't be the same amount you were paid for.
But there are some really cool solutions being worked on right now for this problem in bitcoin that can make it scale to a similar way to Visa. But they aren't here yet (and some might turn out to be nonviable). Lightning network would allow Visa levels of transactions per second, at basically zero or next to zero fees per transaction for the majority of them.
The privacy info is valid, but BTC isn’t private either and people are connecting identities to purchases all the time. Not to mention 99% of the time I must give my info to the merchant so they can mail me whatever I purchased.
Vs with bitcoin it's push. You decide how much you are sending to the merchant, and if it's not enough, they don't deliver the goods/services.
But this has completely gotten away from the issue I was talking about (i'm in a shitty mood today and let myself get sucked into internet arguments).
Bitcoin has problems, and those problems aren't going to be easy to solve, but it's ability to change over time means they can be solved, and I really believe that it's a better way of sending money online.
The "pull" method that banks have used for years is a mess, and I truly believe that the core of bitcoin is valuable and useful over the traditional system.
the push/pull problem has been solved for a decade, and not by bitcoin
Even if I push my money to you, you have my address that you can pull from later if you want.
A one-time use CC# by nature can't be abused. And any merchant that attempts to issue fraudulent charges starts to run into legal and regulatory frameworks that issue punishments to anyone who has repeat violations. Punishments that range from being kicked off of a payment processing system all the way up to jail time.
That said, I can't currently put my EMV card into a card reader on my computer and purchase things online. However, many credit card networks have created tokenized payment systems, where the merchant redirects you to your bank, the bank authorizes you and validates the single transaction, and then redirects you back to the merchant with the signed transaction information. Not many merchants use these systems yet though.
any merchant that commits that sort of fraud repeatedly will have their account terminated
Assuming they are really fraud and aren't just a "free trial" expiring, aren't a contractually-agreed upon price increase hidden in fine print, or that the cardholder saw the fraud and reported it within 60 days.
Not to mention now the cardholder is now unable to use the card if fraud is found, and needs to wait for a new one to be sent via mail. It would suck if the credit card thought getting gas out of state was fraud, and they canceled your credit card on the first day of a week long trip (happened to me, I had to borrow thousands from a friend for the length of the trip...).
in the UK I can walk into my bank branch and have my card replaced on the spot, so I don't really see that as a problem, unless you're abroad (and if you're abroad with only one card you should probably know better)
Then I can call the bank, tell them I didn't make that transaction, or I didn't agree to it, and if i'm lucky they will refund it right away, then investigate. I then need to follow up on that investigation because if they find for some reason it's not "fraud", then they will recharge me that at a later date, so I need to keep up on it until resolved.
And no matter how easy it is to get a card replaced, it's work that I shouldn't need to do.
I'm not saying that Visa is "broken", or that Bitcoin is the only way forward. But I am saying that I think Bitcoin's core values are better than the current system. And that one day Bitcoin will be easier, more secure, more private, and just as usable as Visa.
Hopefully one day we will look back on the way current payment processes are run and it will seem as terrifying and stupid as if you were required to leave a copy of your car keys at every single parking lot you parked in.
Sure but that is Visa's problem not mine.
With Bitcoin it seems fees are both ridiculously high, plus I can't even tell what I am going to be charged?
Since TX fees go to miners, they are incentivized to pick the transactions with the largest "fee per size" to include first to maximize their profit (though they aren't required to do so).
So basically you can envision all transactions as a stack, with the highest fees at the top. Once a block is found, it takes the top ~1MB worth of transactions, and the cycle repeats. [0] is a good visual representation of this.
Unfortunately this means there isn't an easy way to determine what fee will absolutely get you included in a block before it's mined, since if thousands of transactions show up with higher fees than yours after you (but before a block is mined) yours might not make it in the next block (even if your fee was the highest when you made the transaction).
It's a tough problem to solve, but there are some solutions being worked on to help solve this problem for the vast majority of bitcoin transactions.
Might be a nitpick, but you mean the miner puts as many high value transactions as they can fit into a block and then searches for a valid hash?
Technically the miner needs to know what they are going to be including in a block when they begin trying to find a valid hash, but for the sake of explanation I generally switch it around for simplicity.
Whenever you make a transaction in bitcoin, you point to the previous balance you have from a previous transaction, then you say how much you are sending to what address.
The "fee" is the difference between the amounts.
So if I have 1 Bitcoin, and I send .9 to you, the fee is .1
If you want to make sure you keep some Bitcoin, you just send it to yourself.
So 1 have one, and I send .1 to you, and .8 back to me, the fee is .1
Then when a miner mines a block, any unspent money is now theirs, and they claim it via the address they liked for.
And you are correct that bitcoin's ultimate goal is to have mining income come solely from transaction fees eventually. But by that point the hope is that "second layer" systems will take the brunt of the transactions and the actual core blockchain will only be a settlement layer where a $500 fee is no big deal for 2 banks settling hundreds of millions of dollars directly on the blockchain.
So if a fee is 150 "sat/byte" or satoshi's per byte. A satoshi is 0.00000001 of a bitcoin.
So if your transaction is 250 bytes (which is average for a single transaction to a single person), then you will pay (250 * 150) satoshis (37500 sat), which is about $5.
If your transaction is larger, you'll pay more, if it's smaller, you'll pay less.
But they are "ranked" in terms of who is picked first by "sat/byte" since the amount of room in the block is only 1MB.
So a 500 byte transaction with 37500 sats in fees is worth less than a 250 byte transaction with 37500 sats in fees, because the 500 byte transaction takes up more room that other higher paying transactions could fit in.
Sally and Bob each have 1 Bitcoin. Sally received her bitcoin to a single address. If Sally wants to send that 1 Bitcoin to Charlie, that transaction would have 1 input (the address she received it on) and one output (the address Charlie wants to receive it to). Bob has 1 Bitcoin total, but his 1 Bitcoin came from 4 x 0.25 transactions. Bob didn't want to reuse addresses, so for him to send 1 Bitcoin to Charlie he has a transaction with 4 inputs (each address which contains 0.25 BTC) and 1 output. Thus, Bob's transaction is much bigger than Alice's, despite the same amount of Bitcoin being sent.
The problem is that there are now so many transactions that are attempting to get through (And there is a maximum number of transactions that can be placed in a single block) that miners can be more selective. At this point your transaction is unlikely to get through without a minimum fee/bribe being provided because there are enough transactions with fees already at or above that level.
There is some compression at a storage level after blocks have been created, but it's not all that important. Pretty much all the data in Bitcoin is very difficult to compress with most of it being signatures, transactions, and addresses all stored in a binary format. The random nature of encryption makes it difficult to compress, and the formats have already been "hand tuned" for minimum size in many cases.
Every so many blocks, the number of new Bitcoin handed to the miners is halved, and eventually it will drop to zero. When that happens, the only incentive for miners to continue mining (And thus keep Bitcoin going) is the fees collected from the transactions. So required fees are only going to go up.
The number of transactions that can fit into a block (ie. "clear") is roughly fixed. The rate at which new blocks are added (ie. "clearing rate") is roughly fixed. Traders effectively bid for clearing via the transaction fee, and the highest bidding transactions are accepted.
In order words: supply of transactions is effectively fixed, and demand for transactions determines the fee.
There is work going on to enable external clearinghouses called the lightning network that will fix this problem, but that work isn't ready yet.
Volatility wouldn't be a big issue for payments if transactions were instant and free. The addition of slow transactions and high fees on top of volatility is what's causing problems for Valve's customers, which ultimately comes back to Valve as customer service issues. And there's nothing a retailer hates more than customer service issues.
For example, if you own 5 BTC and want to hedge the USD value of your portfolio against BTCUSD fluctuation, you can short 1 CME bitcoin contract (http://www.cmegroup.com/trading/equity-index/us-index/bitcoi...). If BTCUSD decreases, the USD value of your 5 BTC decreases while you gain the same amount of USD on the short futures position, so you have no net profit or loss in terms of USD. If you acquire a bigger BTC position, you can maintain your hedge by increasing your futures short position.
For a big merchant like Steam, at least theoretically, they could accept BTC directly and hedge their BTC position using the futures. Although the granularity of 5 BTC is rather high, for a high-volume merchant that can increase or decrease their BTC holdings relatively quickly, hedging like this should be quite feasible. For example at BTCUSD=15000, 5BTC=75000USD. That means while waiting to accumulate an additional 5BTC=75000USD of revenue so that they can hedge with another BTC futures contract, they are exposed to exchange rate risk. How long does it take Steam to accumulate 75000USD of sales? Their 2016 revenue is said to be 3.5bn (https://www.statista.com/statistics/547025/steam-game-sales-...). That amounts to about 5 hours per 5BTC. BTCUSD could change a lot in 5 hours, but if you're a payment processor with 10x larger scale than Steam or think that the up and down fluctuation should roughly even out over the long run, maybe it's still not too risky to accept BTC.
I'd say it does, but the thing is that if the value is rapidly appreciating today, it might as well be rapidly depreciating tomorrow.
The reason for (2) is that an exchange has two parties. If the value of your currency is cratering, it won't work as a medium of exchange because vendors won't accept it, which prevents trade from happening.
If, on the other hand, the value of your currency is rocketing, it still won't work as a medium of exchange because customers won't spend it. That prevents trade just as effectively.
For example, suppose you need to transfer $10M from the US to China, you'll need a prominent and trustworthy bank on each side of the transaction that will ensure it gets from point A to B. Transfers of this nature often take several days, and each bank will take a nice cut for that peace of mind.
Bitcoin can potentially allow that same money to be transferred in minutes without huge banks on either side.
So essentially in these use cases you are just offsetting the chain of custody a few steps later.
They stay clearly why they're not supporting bitcoin, it's because the time that it takes to mine the blocks means that often the transaction is processed after the payment gateway times out. And the mining fee is too high to make it viable for consumers.