Can Bitcoin scale to keep up with demand created by Steem?
I recently read an article by @eeks titled "Steemit is Bitcoin's Killer App". I think it is a great article and contains a lot of truth in the short term. But reading it got me thinking. Bitcoin may not be able to maintain its position of gateway to the altcoin world.
The Block Size Problem
The Bitcoin blockchain is currently at its maximum capacity. Fees are rising. Bitcoin supports about 300K transactions per day. This means that Bitcoin can only support 9 million people making one transaction per month. Going through an altcoin exchange requires at least 1 bitcoin transaction from an altcoin exchange to a bitcoin/fiat exchange.
Steem User Growth
Steem has the potential to grow faster and reach farther than any prior crypto. It is entirely conceivable that Steem could reach millions of people in the next year. If these people were to use Bitcoin as a gateway to buy in and/or cash out each month then it could more than saturate Bitcoin's capacity all by itself.
Even if Bitcoin doubles its block size, the combination of existing transactions and any new transactions generated by Steem users would saturate the network. Market forces and transaction fees would cause people to bypass Bitcoin. There is no reason for Steem users to get into Bitcoin except speculation when Steem Dollars are available for savings and commerce.
Steem onboards people to Steem
The people Steem reaches that Bitcoin couldn't will still have no use for most of the other cryptocurrency projects. Just because Steem is a cryptocurrency doesn't make learning the value of Steem the same as learning the value of Bitcoin and other crypto projects. People want STEEM because of what it does for them. The value proposition of other cryptocurrencies remains unchanged.
In fact onboarding users through Steem may make converting them to Bitcoin even harder. It would be like onboarding someone to a high-speed bullet train and thinking that it would in turn onboard them to old school wood burning steam trains. It is easy to convert people from old trains to new trains, it just doesn't work the same the other way around.
If Bitcoin and other cryptocurrencies wish to benefit from Steem's attraction of new people to cryptocurrency, then they will need to solve the scalability problem much faster than previously anticipated. Failure to scale means the market could pass them by all together.
Very true. This only means to me that Steem's economy needs more on and off ramps including directly to fiat. You may not want to get into fiat, but I hope that some more third party services spring up to deal with this demand, especially if we cannot rely on Bitcoin in the long term.
These fiat ramps will happen as Top Exchanges list STEEM. I'm sure Polo will be next to pick off that volume from Bittrex. Essentially, every BTC fiat ramp will become a STEEM ramp up to $10 billion. But Dan is worried about what happens at $100 billion cap. Then we need new solutions.
Excited that my piece could stimulate this! Thanks for the detailed response.
We'll see how it plays out. I see a rising tide lifting and legitimizing all ships. It brings more people closer and makes more people feel at ease. Bitcoin and crypto are just thought of as an inscrutable nexus of nerd scams to most people. Steem will be a bridge. And its own thing.
This is salient. Bitcoin makes it hard but robust and perfect. Steem makes it easy and invisible. Pretty clear which will attract people more effectively.
Your article is very eye opening. Thank you!
FWIW, I personally have found Steemit to be a great crypto intro for people. By the end of talking with them, they often are asking far more Bitcoin related questions than Steem questions, even though I've been trying to get these people into Bitcoin for years. It would seem to me that Steemit has given validation that crypto "works" to these people, so once they realize that, they immediately want to know about the Crypto OG.
That is definitely ONE of steemit's true value, the ability to bring people who have no interest in crypto's, into the crypto world.
Steemit is the bridge. It's beautiful.
We'll see! I've been away from the crypto world for a year or two, and based on my 2-day experience with Steem so far I'm absolutely blown away at how good the user experience has come.
AFAIK, Steem is doing something completely new in the crypto-finance world: it's giving people a non-technical onramp. Until now, to participate in the world of crypto, you've got to be savvy enough to either run rather sophisticated software (miners, BTS witnesses, etc), or you've got to literally buy in. Steem doesn't require anything like that - and that, as you know, is incredibly exciting. Good stuff is coming!
I would argue that the user experience is not that great...yet. They have very little "default" social media features that are available as standard issue these days. It will only get better. Nothing wrong with being blow away but relative to their own potential it kind of sucks. Love the style so far though. Facebook is with more room to breathe.
Large brokers will start to sell STEEM directly. No question.
The bitcoin scalability issue needs to be fixed immediately. The community of people who want to keep the bitcoin block size that way drives me insane!!
you have voted on a couple of my postst so... starting a linux blog and tag I would love to hear from you.
https://steemit.com/linux/@joelinux/linux-1-lets-make-money-from-talking-about-linux-joelinux
I was next to you! )
Full steem ahead!