All you need for micropayments are low fees - that doesn't require a pseudo-anonymous collective keeping a shared public database of transactions. In fact it's better if you know who the counterparties are.
Companies like stripe, apple, google or banks like monzo could offer low fee transactions for example between two counter-parties who are both customers, bypassing payments networks and taking on a little more risk for a lower fee.
Payment networks are ripe for disruption, but I'm not sure bitcoin et al will do the disrupting - it's solving the wrong problems.
Oddly it kind of does, but for bad reasons.
Existing rules for payment processing basically require the payment processor to eat the cost of fraud. That means you can't have small transaction fees because they have to cover the cost of fraud or the payment processor goes out of business.
A payments system where there is no "payment processor" middle man to foist the cost of fraud onto thereby doesn't require that middle man to charge high transaction fees to cover it. In principle that could allow lower transaction fees.
> Companies like stripe, apple, google or banks like monzo could offer low fee transactions for example between two counter-parties who are both customers, bypassing payments networks and taking on a little more risk for a lower fee.
Scenario: Mal uses your payment service to buy goods from Alice, Bob and Carol and pays you with a credit card, possibly stolen. As soon as the goods change hands, Mal (or the real owner of the card) disputes the charge with the credit card company.
You have a bootstrapping problem. You need a way for the customer to get money into the system which doesn't impose the cost of fraud on you if the charge gets reversed after the goods change hands.
This could also be solved by changes to the law, but easier said than done, especially with a bunch of incumbents enjoying the larger vig from the status quo.
1) A significant portion of the cost of chargebacks is administrative, especially for small transactions. The banks at least nominally attempt to prevent customers from defrauding merchants, even if they fail more often than not, because if they didn't even try it would get a lot worse fast. But that costs money, and the money it costs is proportional to the amount fraud/chargebacks and not linearly proportional to the purchase price. Having to go through the chargeback process over a nickel is not something they're about, hence the minimum transaction fees. They also sometimes lose the money because it's not possible to recover it from the merchant for some reason.
2) If you're trying to become a payment processing system with low transaction fees which people can transfer money into using their credit cards, the "merchant" who eats the cost of fraud is you.
On the other hand, there might be higher responsibility for card-not-present transactions (i.e. someone entering a CC number into a web form over the Internet, or merchants deciding to accept a CC transaction while their machine is down and can't swipe, entering the transaction later as a card-not-present).
Not an expert on this.
One remark I'd share is that many crypto systems, in their basic transaction form, remove all consumer protections like that exist in the form of chargebacks. This can be a good thing if the merchant or marketplace is reputable and can be trusted to do the right thing. It could be a bad thing for consumer protection broadly though. The fact that you can easily charge-back a transaction provides a sort of lubricant that makes consumers more willing to spend online. You know that if a subscription company makes it really a pain in the ass to cancel, then you have the nuclear option to fall back on.
(OTOH, there's no such thing for subscription payments for blockchain. You'd have to build that custom as far as I know.)
If you want the convenience of it being online, here in Sweden we have something called swish, it's essentially a bank transfer initiated by via your phone number. It is free for non business transactions (I actually don't know how it works when used by a business). As far as I know bank transfers are free in most of Europe.
Also would this work if you try going from say, Swedish citizen/bank to German citizen/bank?
I think the potential gain in transaction fees would be worth this risk, particularly for companies which know both the customers well (e.g. already process all their transactions).
Cryptocurrencies don't address this, they simply pass the risk to the merchant instead which is far worse.
1. It allows you to forget (most of) the system's history without sacrificing the consistency of the system
2. It allows you to distribute/factor out the work of the system into lots of independent components
3. It maintains decentralization, whereas most "fast" "cryptocurrencies" actually just work by having a trusted central authority, once you peel back enough layers of obfuscation
The lightning whitepaper also says a minimum block size of 155mb is needed to work at scale. Bitcoin currently has a 1mb block size.
I dont see lightning network being useful on a large scale until thats resolved.
Where? I just checked and can't find it. This statement also seems nonsense in isolation - positing block size requirements involves a lot of assumptions about network topology and load.
"If all transactions using Bitcoin were conducted inside a network of micropayment channels, to enable 7 billion people to make two channels per year with unlimited transactions inside the channel, it would require 133 MB"
https://lightning.network/lightning-network-paper.pdf#sectio...
If everyone on earth was using lightning, I suspect most users would be using custodial lightning wallet providers (e.g. "Wallet of Satoshi" is very popular now). I doubt even 1% of people would elect to host their own node (although it's important that they be able to). 500 bytes is also a high estimate of channel opening transaction size.
The socially efficient end state I expect looks a lot like the current state of affairs (in terms of payment network topology), except A) small institutions (including individuals) have direct access to the same financial network used by large institutions if they want it, B) the financial network is trustless, C) transactions are non-repudiable. This is to be expected - there's no reason to expect Bitcoin would cause a radically different experience for the typical end user, except insofar as they will capture whatever passive benefits may be associated with saving in a hard currency. Paypal et al is already quite convenient and technically amenable to microtransactions. The benefits of Bitcoin, while substantial, mostly occur at the margins.
The block size limit was kept small in order for everyone to be able to run their own node.
so far block size increase has not been necessary. if hyperbitcoinization occurs and there is a bottleneck with lightning, block size increase is ok.
with lightning factories this may never be necessary.
if it is, it is.
The gist of it is you have a "multi core blockchain" that is only verified by a randomly chosen subset of validators that then sync their state back up to an oversight chain called the beacon chain.
The sharding design is integrated with that but won't actually be implemented until next year. First version of sharding will only store data; execution on shards will be after that.
The other thing going on is various layer-two systems called "rollups" which compress on-chain data to a minimum and prove its validity with either fraud proofs or a cryptographic zero-knowledge proof. Some of those are in or near production and can take today's Ethereum to about 2000 tx/sec, for simple transactions like transfers and exchanges. The data-only phase of sharding will multiply that by the number of shards.
The real issue is no one cares about microtransactions because they're "micro" - and not enough to actually live off. See the artists spotify pays for plays - living that microtransaction lifestyle and making nothing.
But not if your $0.01 transaction has a $0.30 minimum transaction fee.
Where do you see microtransactions being applied in practice?
Lightning network is capable of solving the issue though, as these transactions are done over a secondary layer.
The lightning network whitepaper states a base block size of 155mb is needed for it to work at scale. Right now bitcoin has a 1mb block size limit. And as you said, this size is intentionally limited, so i doubt we'll ever see lightning network work at scale.
This can be seen by the 0 fees on network on Alipay and WeChat Pay which don't use crypto and transact more volume now than Visa and Mastercard seamlessly.
With the rollout of DCEP why use the others?
I say that, but a transaction on the Bitcoin ledger has been more expensive than $0.15 since mid-2016 and fluctuates wildly. Other cryptocurrencies might be able to handle this better. I'm optimistic about Stellar being a useful transaction network, but I don't think the value of 1 XLM is going to move much relative to 1 USD.