Current transaction fee (for 1 cent or a billion dollars)
Bitcoin - $1.62 per transaction
Ethereum - $3.50 per transaction
Ethereum L2 - as low as 12 cents
Here are credit card fees by comparison (lowest fees assuming you have high volume):
Visa 1.29% + $0.05
Mastercard 1.29% + $0.05
Discover 1.48% + $0.05
American Express 1.58% + $0.10
https://www.fool.com/the-ascent/research/average-credit-card...
Whether you need any of these is debatable of course but it’s extremely disingenuous to consider it an apples to apples comparison seeing as blockchain provides literally none of these things.
For large transfers (a billion dollars) the banking transfer fee is likely zero. I don’t pay for wires with no limit and my status/relationship with banks is nowhere near where it would be for a billion dollar transfer.
Oh and wire transfers provide quite a bit of protection too. I recently had an international wire transfer where the recipient provided the wrong account number. For $10 the funds were returned. With blockchain they would’ve gone up in smoke and lost forever.
People make mistakes. Payment information gets compromised. Fraud happens. As long as blockchain is based on ignoring these fundamental truths it will never achieve any meaningful adoption.
You can have other ways of making sure payments are safeguarded...actually one of the smartest ways to do this was setup on the dark web illegal markets where there was a middle man that didn't have custody of the money (at least in the best multisig ones) but was able to complete or reverse transactions if needed. Basically an escrow account...
https://darknetone.com/understanding-multisig-vs-escrow-vs-f...
The other fees they rake in (I'm assuming you mean interest) are from issuing unsecured loans. That's another topic entirely.
Escrow is many thousands of years old and certainly exists in many forms in the financial system today. It's just that because of all of the other things I mentioned the average person uses it maybe a few times in their lives for very large and complicated transactions.
The suggestion to use escrow or some other kind of really convoluted system for extremely small payments when I can swipe a card anywhere in the world with all of the benefits mentioned above and more for relatively tiny fees is frankly ridiculous. Of course it makes sense for marketplaces where every single actor in the marketplace is breaking the law in the first place.
I've been involved in crypto since 2017 and I'm STILL waiting for a reasonable use case or application where it results in a net benefit for the average person.
Why would sellers need to pay up to 6% to a realtor and buyers pay thousands in closing costs...because there is a disparity in access to information. Crypto/Blockchains can change that.
Oh...and wire transfers can take up to 7 days before they are finalized. Crypto transfers it's generally considered settled in a few minutes.
None of the type of information disparity that realtors help with are going to be solved by blockchains. Perhaps you could eventually build a better title system, but title-related expenses are a tiny portion of closing costs and there are reasons for the complexity.
The biggest portions of the closing costs that aren't directly related to the lender's pricing or real estate commissions-- title insurance-- can't go away anytime soon because the claims they protect against can be decades old. So even if you had a perfect title system today (which seems really hard) and everyone moved to it instantly, we'd still be stuck with those costs.
Even worse, because Bitcoin is no recourse, if you find out that there was legitimate fraud (seller doesn't own the deed, house has leans, etc..) you have some possible recourse while Bitcoin doesn't give you anything.
Sellers and buyers don't need agents right now. Thanks to Zillow, the price disparity is moot. I knew more than my past real estate agent when I purchased my current house (it was a corporate move or I wouldn't have used one.)
Wire transfers should be instant and irreversible, that's why scammers use them. Where have you seen one that takes 7 days?
When you are moving large sums of money between well known institutions the money is very illiquid, mostly to prevent mistakes, fraud, etc. It’s why most fraud that you hear about involves movement of money overseas or into another type of asset or more liquid form, e.g bills, physical goods etc.
No one sits their stolen funds at chase bank… Makes blockchain and NFTs the perfect gateway for fraud.
https://www.bloomberg.com/opinion/articles/2021-02-17/citi-c...
New payments contracts now include "revlon clawback" clause. The blockchain analogy is a buggy smart contract that gets fixed.
If this was done by check, Citi could have simply cancelled the check.
The money is often frozen completely then returned to the defrauded party if caught quickly enough. Sometimes banks try to screw over people who are found to be victims of fraudulent transfers after the money has been pulled from the receiving bank.
Wire transfers can take several days, I suppose depending on mechanism/method. That said anyone who's participated in a real estate closing, funding round, etc knows you receive bank confirmation of the wire in minutes-hours and it's a done deal. In funding companies, for example, I've personally experienced this with wires in the tens of millions of dollars.
You are correct...but again this is something the average Joe doesn't have access to. With crypto/blockchain everyone has the same access (more or less) at their fingertips.
It's not a perfect system yet for sure...there is a long way to go, but it is a huge leap forward in leveling the playing field for financial usage for everyone (I mean just looking at western union in 2021 they had $5B in revenue...that's about 5% of the transaction amount with an average transaction size of $300).
1. Divide miner revenue (fees + seignorage) by the number of transactions, yielding the total amount that miners extract. It was $34m today, with ~261k transactions, yielding a cost per transaction of $130. [1]
2. Estimate energy cost at 1,173 kWh per transaction [2]. If you assume cheap electricity at say $.09/kWh you get a cost of $105 per transaction in electricity alone, which ignores hardware capital costs, etc.
Either way the cost is over $100 per transaction, and would be reflected in a falling value of BTC. But it may be masked if there's an influx of new money into the system.
1: https://ycharts.com/indicators/bitcoin_miners_revenue_per_da...
2: https://fortune.com/2021/10/26/bitcoin-electricity-consumpti...
If the creators had predicted its explosive growth, they would have chosen a faster rate of reward halving, more quickly bringing the transaction fees in line with the externalities.
Perhaps someone could create a "Bitcoin Green" fork which would simply speed up the reward halving to once a year instead of once every 4 years, since by now, everyone has heard of Bitcoin, and only large specialized operations can mine it profitably (thus the reason for its inflation has disappeared).
3.4 trillions in Jan 2020 -> 5.8 trillions now
If we get to cherry-pick from whatever money transfer systems exist, it's worth remembering that bank transfers within the Eurozone area are free and practically immediate. What crypto can beat that? Clearly you don't need cryptocurrency to deliver a service that's ideal for consumers, as regulation has achieved it in Europe.
At present, this global computer is very weak. Cryptocurrencies are a good first program to implement on this computer because each transaction is essentially just adding and subtracting a few numbers. So yes, in some sense, it's crazy that the cost of adding and subtracting a few numbers costs $20.
However, even though these global computers are currently very weak computationally, the new computational model allows for new things to be built. For instance, smart contracts. Using smart contracts and cryptocurrencies, you could easily implement almost every facet of the global financial system. From bank accounts, to money transfers, to bonds, to securities, brokerage services, margin services, options, credit default swaps, etc. Yes, many of these things can be implemented some other way, but blockchains allow anyone with a computer to build something along these lines.
And yes, it's nice that the Eurozone regulated free money transfers. But how much work went into building the Eurozone and passing the required regulations? What if you want to write your own options contract? How long would it take to get regulation passed in the EU to allow free options contracts? Blockchains allow you to build a system akin to the entire EU banking infrastructure from your laptop. Even if it's not quite as good as the current system, I think it's still a cool idea.
Any fraudster that wants to!
There are more reasons than technical why such things are limited.
> The existing Visa credit card network processes about 15 million Internet purchases per day worldwide. Bitcoin can already scale much larger than that with existing hardware for a fraction of the cost.
If the original design of Bitcoin anticipated Visa-scale transactions for a fraction of the cost, what's the motivation for a L2?
I'm assuming Nakamoto wasn't being cheeky when he wrote fraction of the cost. Afterall, 1000/1 is a fraction...
I could just as easily come up with a post hoc story that says that the reason that he has never come forward to claim credit is out of extreme embarrassment about the size of the fortune he lost, and that this is evidence that he does care about the money.
The entire conversation started because someone pointed out that just because Satoshi said something doesn't mean it has to be true (although they made that point in a rude way.)
The vibe I am getting from your responses is: 'satoshi is a saint, everything he said has to be true, and any attempt to point out that we have little evidence about Satoshi's character is a baseless smear.'
I am sure that is an inaccurate and unfair characterization of what you are trying to see, so please correct me as to where I have it wrong.
I thought you were defending the a comment claiming satoshi was being malicious. I would've done better to search for a more charitable interpretation.
If Satoshi did stretch the truth or lie in that quote, I would be inclinded to view it as motivated by ideolatry rather than greed. However, any speculation as to motives is fairly pointless given the lack of information.
For all we know, these coins have already been "burned"
like I said, the best you can do is burn the private keys, but that isn't verifiable - you can't prove something doesn't exist
The leading L2s on Ethereum are rollups, which store all transactions on chain in compressed form.
the TAM is 400+ trillion.
Payments are low margin, low value business. Often even subsidized by the systemic banks.
Do you really think it costs zero to secure the entire GDP, and the entire wealth, of an entire economy? zero cost SEPA transactions don't secure the EU economy. The US military and their nuclear weapons do, and they don't cost zero, like a SEPA transactions for a coffee.
What's the cost to secure 10 trillion? 100 trillion?
What do you mean by that? Backing?
The point is that money is not wealth. Wealth is the ability to consume goods and services. If you got stranded on a deserted island with a suitcase full of millions you'd still live in extreme poverty despite all your millions.
Therefore securing crypto-currencies doesn't replace the need for securing actual wealth. On the contrary, it's an extra cost that its users have to bear, in addition to the costs of securing GDP and the entire economy.
The suitcase, stuffed with medium of exchange, holds value across time.
This is the key concept to understand the issue at hand.
For a medium of exchange to become useful, it must first become able to hold value, preferably long term, months/years.
The only way an asset can do that, if there is demand to hold the asset for long durations, committed long term investors.
Bitcoin is an experiment in bootstrapping a neutral money system from scratch.
If you look at bitcoins money velocity, it’s much closer to M2, than M1. Thus comparing it to investment assets, or bonds, is much more relevant today than to payment systems. It’s a store of value for now, maybe a little speculative, sure.
Once it grows large enough and value becomes more stable, it can become a decent medium of exchange then.
This implies market capitalisation in many trillions, and if it proves to be successful: displacement of many other store of value. Negative yield bonds, gold. Maybe even real estate and rental yields on that are actually negative in real terms in many markets. We will see.
As such it would represents a cloud economy of sorts with large amounts of wealth stored in it, trillions of dollars. That would require a correspondingly sizeable security budget to protect.
Regarding the question of bitcoin's utility as money. The defining trait of money is that it's used widely as medium of exchange, not that it holds value. An asset has to hold value reasonably well, for it to be able to be used as money, but holding value is not what makes an asset money. Some assets depreciate quickly and don't hold value, but most don't, most assets do store value and yet are not money. Is bitcoin a good store of value? No, it isn't, because a good store of value not only has to hold value over long periods, it also needs to have low volatility. Using a high volatility asset such as bitcoin as a store of value, means there's a big chance you may forced to sell it at times when its market price is well below your purchase price.
Lastly, I don't know what "bitcoin's velocity" is. As far as I know, the velocity of money is a concept from the Quantity Theory of Money. The basic assumption that this theory makes is that GDP is sold and paid for with money. If you wanted to apply QTM to bitcoin, first you'd need to locate a country that sells its entire GDP in bitcoin, and only then you could calculate bitcoin's velocity, in principle. This velocity would be specific to this country. Then again, I'm not aware that such a country exist, so I don't know what you mean by bitcoin's velocity or why it is relevant to this conversation.
In theory. Many banks are not using this system and stayed on old SEPA wire transfers: charges split between sender and receiver or covered by sender, 3 work days to process, ability to pay more to speed-up the process by two days etc. It's slow and/or costly.
> That’s why it recently cost $22 (!) to send a single token transaction on Ethereum
So Ethereum has prices ranging from 3.5$ to 22$? Great.
And vast, vast majority of my transactions would be costlier on Ethereum. I am rarely paying over 267$ in one transaction. 22$ per transactions would result in typical grocery shopping doubling in price. 3.5$ would be noticeable.
Also, in bank transfers that I use I am simply not paying anything at all (within European Union).
> well under Visa/MC fees most of the time
That is simply untrue, and depends on how much you transfer.
So there's the units of computation used x "gas price".
But yes, the "gas price" that serves to price congestion on the network is wildly variable due to congestion and low throughput. And that limited throughput is currently a real practical problem as you've pointed out in that the fees are too high.
The answer will likely be in L2s as other people are pointing out. I think one interesting side effect of this ecosystem is it is actually driving new research and application for cryptography (including substantial funding): for example practical uses of zero knowledge proofs.
L2 like zkSync and Optimism are already very cheap and can likely continue to get cheaper.
Tell me more about the wonders of paying $1.62 plus currency conversion fees plus speculative asset volatility risk to send money to their bank account with eventually consistent settlement...
> Bitcoin - $1.62 per transaction
This is misleading. A best-effort transaction can be submitted with a fee of 1 sat/vB. For a 374 vB transaction (a typical 2-in-2-out P2PKH -- see https://bitcoinops.org/en/tools/calc-size/), this is 11 cents. $1.62 is either an enormous transaction, or one submitted at very high priority.
Except 500x is not nearly enough. It may be enough to temporarily drop the fees but it a post-blockchain world where everybody does dozens of blockchain transactions a day, be it to play a game or buy a coffee or ride the subway, it's not ever close to being sufficient. Your scaling factor needs to be millions of times better.
So what's the solution? Even more complexity on top of this ridiculous Rube Goldberg machine? All that to emulate solutions that already exist and already work well and vastly more efficiently?
Why?
Rollups on Ethereum today can handle a couple thousand tx/sec, and the sharding system they have planned will boost that by about a factor of 200. These systems are somewhat centralized for block production but fully decentralized for verification.
Having had to spend time more than once physically visiting bank branches to send wires, or wait for days to get checks to clear from one bank to another, I'm not convinced that today's solutions are all that impressive. They don't exactly seem simple, either.
If you used real sources I'd take this thread seriously, but you don't and this is exactly why I don't respect the majority HN's view on most things with regards to Bitcoin and to a lesser degree crypto in general.
It's currently $0.04 for a high priority tx on the mainchain [0] right now as the memool is pretty clear.
And for those transactions using cash, let alone BitCoin, would not have eliminated those transaction costs.
Charging the same price for 1$ and 1000$ transaction would either make 1$ transaction not viable (BTC/ETH is doing this) or would be overall less profitable.
https://en.wikipedia.org/wiki/Price_discrimination
Also, insuring against fraud is actually more expensive for more expensive transactions. And CC provide some minimal service here.
- Transactions are more expensive in BTC for small amounts, and more expensive in Visa for big amounts.
- However this is only true if you use on chain transactions for BTC. BTC transactions using lightning are always cheaper than Visa no matter the amount.
- Lightning nodes do not yet form a network big enough to cover 100% of the transactions, and most transactions are small, so the idea that VISA transactions are cheaper for most people is, for all intents and purposes, mostly true at the moment.
Lightning, though, is quite an interesting system. Half of the solution it offers is technical, but half of it will be the social construction of the network of channels. I doubt most people will open one consciously, but I assume wallet providers will make that automatic.
Eventually, this means somebody needing the decentralized aspect of BTC will be able to open a channel and profit, while somebody who wants convenience will use a centralized wallet and be happy.
I suspect most people will want the turn key solution and that the system will centralize a bit.
Anything above 3000 will likely be cheaper using BTC.
But I see your point.
Although you are probably going to use your card to buy this: https://www.apple.com/shop/buy-mac/pro-display-xdr
But again, I see your point: our financial system is already very efficient, BTC will have to be way better than it current is before it can compete with it for day to day use.
I'll keep an eye on lightning though. It makes any transaction, no matter the size, instant, and cost a tenth of a cent. It has potential.
Mastercard and Visa charge a percentage (?!), Bitcoin is a fixed amount per transaction.
Plus Bitcoin won't deny your ability to make a transaction.
Visa will not steal all my money.
No, Bitcoin transaction fees are dynamic. https://bitinfocharts.com/comparison/bitcoin-transactionfees...
You pay a flat fee per transaction with Bitcoin, you pay a percentage fee with Mastercard and Visa. Yes, the Bitcoin fee changes with time based on a market. The Mastercard and Visa percentage changes based on how much they like you.
Source for this misinformation?
https://ycharts.com/indicators/bitcoin_average_transaction_f...
Remember that for bitcoin value transaction size is not a factor in the transaction fee. So if you want to transmit a billion dollars worth of bitcoin around the world, it is the same exact fee.
Unlike credit card transactions, which are a percentage of size.
Let's also remember that work is being done to do low cost smaller transactions on L2 networks.
I don't imagine anyone ever uses credit cards for billion dollar transfers anyway, normal banking is good enough for that. I just checked and the business account that I use for contracting has EUR 0.10 flat fee costs per transfer to anywhere in the SEPA region.
You gotta get up to speed with these things then. A lot has been happening the past year.
Lightning in it self is used all over the world by small vendors in developing and western countries. And it's a mix of using a service provider for using this (usually in the west) to self custodian where they cannot motivate the cost.
It was one of the big things needed before El Salvador's legal tender roll out.
I can give you more examples if you want.
https://twitter.com/HODLneverSODL/status/1518134911244320769...
https://twitter.com/CoinCornerMolly/status/15323143997629480...
It spent half of 2021 in the 10 dollar range.
> Remember that for bitcoin value transaction size is not a factor in the transaction fee. So if you want to transmit a billion dollars worth of bitcoin around the world, it is the same exact fee.
You don't use a credit card to send huge amounts in the first place.
Personally I need to do ten and hundred dollar transactions. One or two dollars for bitcoin would not be terrible for the latter, but it's still a lot more than a debit card ($0.21 + 0.05%), with no advantage to me over debit. I think that's a better comparison than the complex situation credit cards are in.
It's like the way Amway victims will try to sell you an $8 tube of toothpaste, "draw circles" to show that 7 people get a cut from that tube of toothpaste and then say "How does Amway bring you great prices on quality products?" (tap whiteboard) "By eliminating the middleman!"