Bitcoin Scaling Debate - Round 2
What bitcoin was and what bitcoin is today are two different things. This is important because when I hear newbies in cryptocurrency talk about bitcoin, you can generally tell they have been sold on a story that is not true.
They were sold on bitcoin's original story, a story which looks like it has died and will not recover.
I was reminded of this when I saw a facebook advertisement today of a person operating a bitcoin educational organization. He looks like he is doing a good job, just that his advertisement was incorrect. He was still marketing bitcoin under the old ideas of, "Bitcoin can be a currency for the unbanked of the world."
With average transaction fees about $1 USD, this dream has died. It died in the last 12 months, and even with the added volume of Segwit2X, I do not expect that dream to recover. The torch has been passed on to many other projects which are adhering to a low transaction fee models. However, bitcoin is not aiming to go this direction.
I do not have a lot of positive things to say about bitcoin, other than it is first to market. Crypto people are still going to be trading with it, so bitcoin's new niche is its existing niche. Bitcoin is the speculator's cryptocurrency. Want to trade that hot new crypto? Chances are, you are trading it against BTC. BTC is the traders reserve currency. BTC pairs generally have the best volume on exchanges, better than USDT and often better than USD even.
This model works for bitcoin because traders generally can afford something like paying $10 per transaction to move a large sum of money. If I send $5k USD between exchanges, it is not a huge deal to pay $2 to $10 for a transaction. I mention $10 because in the future we could be paying this. Then also, there is the advancement of the lightning network which will permit all the exchanges to settle with each other in a way that should reduce fees in the future. Meaning, the speculators moving funds between 3rd parties where they have accounts setup, could reasonably see the touted near zero fees we were promised long, long ago. Standard network transactions would still be expensive, but 3rd party lightning network channels could become very cheap.
Yet as other coins eventually outpace BTC in market capitalization, we have to consider that exchanges may gradually shift toward that as their primary base pair for trading. Shifts like this are gradual because they hinge on individuals making choices.
After Bitcoin upgrades to 2MB this fall, they need to return directly to the scaling debate. The debate was not solved, because I would anticipate to still see bitcoin fees at or above $0.50 USD and climbing. Meaning harder changes are required to scale bitcoin. Changes that the community is unlikely to want to make; however, the hope is that the community is no longer in control. The New York agreement I think was progress because many community members were ignored in order to reach that agreement. At the juncture where monetary incentive tramples idealism, we might see actual progress made with the bitcoin protocol. Eventually, they may realize the bitcoin unlimited model was the solution. Rather than having a debate, controversy, and hard fork every year in order to scale the protocol, if you just build that governance process into the protocol, participants could choose how to scale the system throughout the year without hard forking and creating all the issues around a hard fork.
Really good post and you bring up some very important thoughts looking forward to BTCs place in the crypto market in the future.
I look at BTC in a similar light. "BTC is the traders reserve currency" Do you feel BTC simply maintains it's reserve currency function in the future? This is the question I'm trying to figure out. If it maintains this peg, the BTC price could skyrocket as more money flows into the crypto space. It really has no other viable use. It was first to market and is the most widely known and accepted form of crypto, but when will this start to change and what coin will supplant it is the questions I've been asking myself. I would love to hear your thoughts on this. I've been researching other coins and Litecoin and Dash from the coins I've studied both seem like realistic alternatives. I just don't have a good enough feel for the space or the knowledge yet to come to any definitive thoughts on how to gauge BTC 3-5 years from now.
For now, I think it will hold it's reserve status just because of how the exchanges are setup. Recently, I learned, if I want to buy coins on coinbase, consider buying ETH or LTC instead of BTC. I think BTC may even gradually lose gateway status of the USD to Crypto coin. I know if coinbase supported Dash, I would just be using that with the near instant transactions.
That said, once a big pool of BTC is on an exchange, we can trade it back and forth on the exchange without paying network fees. So it functions as the reserve currency on the exchange. And the price on the exchanges can be managed by people who do arbitrage, buying huge volumes of BTC and paying small percentage of network fee. Also, if the exchanges get lightning network going, BTC stands a good chance of remaining the reserve currency for a number of years.
I firmly agree the glory days of bitcoin are OVER.
Because it was the king it will still appear to be the king for some time. However people will begin to realize (as those on the cutting edge such as your self already have) that it is outdated and there are FAR better cryptos out there.
The question is which one and when!!???
The answer I do not yet know but realistically bit coin cash will out perform bitcoin in the months to come. There are other potentials out there that are even better than bit coin cash but people will have to adopt them before their price sky rockets like bitcoin did in the last 2 years.
Serious question: why not Litecoin to become the reserve crypto? Cheaper and faster.
It's only slightly better than bitcoin would be my way of looking at it. Slightly better doesn't beat on marketing. That said, next time I am buying off coinbase, I might use litecoin to do that transfer. If we switched to LTC, it would hit the same bottlenecks BTC is facing.
Well what do you think about this analysis? https://cryptoinsider.com/litecoin-bound-for-growth-spurt/
If China demand is as large as they're expecting, I see LTC as pretty bullish for smaller transactions.
Excellent post Ted - we at Community News were thinking along the lines of the Educator you mentioned. So thank you for sharing a new perspective.
Incidentally - what are your thought on an Exodus wallet storing and trading cryptocurrencies - noting one can also buy EOS within the wallet.
I would also believe that from here we could participate in the EOS token distribution- through as it would be our first ethereum wallet too.
Would be nice if it held STEEM as well.
Thanks.
Exodus is good, I use it. You can buy EOS on it which is decent. You would just want to monitor the EOS situation come June 2018. People have to register their EOS public keys on the ETH blockchain, should that fail to get done through the Exodus wallet, all the EOS people buy on it would be worthless. I imagine, Exodus would spam many notices on how to handle that transition when it arrives. Just people who buy EOS and forget about it, stand a fair chance of losing their EOS.
Great - thanks for this reply Ted. Incidentally - is there a way to password protect the Exodus wallet assuming multiple persons use the same computer?
My install came password protected by default.
Brilliant - will look into this - thanks Ted!
OK - just made first deposit and then the password protection is created. :)
Hi again Ted -
Hoping that you can pay the post a visit.
https://steemit.com/eos/@communitynews/community-news-buying-eos-and-claiming
Thanks in advance.
CN.
Solid article. I fully understand what you're talking about. Not sure if I believe in the current crypto investment climate but I do believe in the blockchain. We do need more indept investment analysis. An interesting website I found: https://www.coincheckup.com This site did all the research for you. It's truly amazing.