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    So… what’s the plan to deal with expensive transactions? Are they ever going to increase the block size limit, or should we all just switch to Bitcoin Cash?

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      lightning.network. “If we all just switch to Bitcoin Cash” would not make anything better. “All switching” would result in high fees on Bitcoin Cash. If they raise the blocksize to handle “all” it would simply be a very expensive version of PayPal, which is silly.

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        Isn’t the lightning sidechain not yet ready? Bitcoin fees are going hockey-stick as of 2017, and the blocksize limit appears to be the obvious culprit.

        With 1MB blocks, and six blocks per hour, you can only achieve about half a million transactions per day. Maybe sidechains are the future, but we need a solution to high transaction fees soon. Every other coin’s fees are way lower.

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          Your hockey stick plot is outdated. Currently it swings wildly: https://bitinfocharts.com/comparison/bitcoin-transactionfees.html

          If the blocksize limit is the culprit why does it swing so much? It should stay high, no?

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            Here’s a chart where you can also see the fee for BCH: https://fork.lol/tx/fee

            Here’s the current fee percentage collected by miners: https://fork.lol/reward/feepct

            The “problem”[1] is that fees are set in token (BTC, BCH, etc) terms. If the token’s value in fiat appreciates, fees get proportionally larger, in a way that’s not always beneficial. So the fee increase is both a reflection of greater network utilization (=more transactions are vying for inclusion in blocks) and that the price of the token has increased dramatically - at least for BTC.

            Because the transaction size of moving $3 worth of BTC isn’t appreciably smaller than moving $3,000,000, small transactions get hit by proportionally larger fees. In a traditional fiat economy, small transactions (whether by cash or checking account or just sending via a mobile) is “subsidized” by the larger economy (or borne by merchants and priced into the products they sell).

            [1] “problem” in quotes because the system is working just as designed. After seigniorage ends fees are going to be the only incentive for miners to keep adding transactions to blocks.

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              That is a better chart, thanks.

              Volatility aside, transactions are way more expensive than they used to be. One year ago, transactions cost $0.25 apiece. Today they they cost well over $2, often as high as $6, even $9 in August.

              I’d hypothesize that the average fee rises whenever there’s a backlog of transactions. Higher fees allow you to get higher priority in line. As the backlog diminishes, the fees go down again.

              A larger block size would have greater maximum throughput, keeping the backlog short. The only downside I see to increasing the block size is that it would require faster internet to keep up to date.

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              Isn’t the lightning sidechain not yet ready?

              What? Lightning doesn’t have a sidechain. You’re probably thinking of Elements, which … is where the Bitcoin devs play around and experiment with new ideas. Since SegWit’s adoption Lightning is now fully compatible with the main chain.

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                Oh, lightning allows on-chain scaling? How does that work?

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                  Oh, lightning allows on-chain scaling? How does that work?

                  No. Once you start trolling, I stop taking your questions seriously.

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                    I solemnly swear that I never intentionally troll, on this forum or otherwise. There’s a lot of conflicting information flying around, particularly with all the forks this year.

                    Last year, there was only one Bitcoin chain, and fees were cheap. In 2017 the scaling debate intensified, and as far as I can tell there are basically two sides: “big-blockers” who want on-chain scaling, and those who want off-chain scaling with sidechains, which segwit is supposed to enable.

                    Now, many of the big-blockers got fed up with Bitcoin development, and hard-forked to create Bitcoin Cash. In theory the 8MB blocks would allow it to support over 2 million transactions per day, but it’s hard to test that theory since BCH doesn’t have as many daily transactions as BTC.

                    The canonical BTC project seems strongly against increasing the blocksize for reasons I don’t understand. I expected them to follow the “New York agreement” compromise: implement segwit now, and double the blocksize later. Apparently they’ve reneged on the blocksize doubling.

                    What I don’t understand is, why would anyone want to cripple Bitcoin by limiting it to half a million transactions per day? It’s causing huge backlogs and fee spikes. What is so spooky about 2MB blocks? The paranoid answer is that the blocksize is intentionally being kept small in order to strangle BTC with high fees, or drive people into profiteering sidechains.

                    I don’t know anything about Lightning except that it’s supposed to solve everything and doesn’t exist yet.

                    Edit: I’m reading the link you posted in another comment, and I’m still left confused. The UI says “Lightning payments will be instant, while on-chain Bitcoin transactions will require at least one confirmation”. If lightning isn’t on-chain, doesn’t that mean it’s a sidechain?

                    Edit2: Apparently this confusion (thinking Lightning is a sidechain) is common. https://bitcoin.stackexchange.com/questions/58064/does-a-segwit-based-side-chain-like-the-lightning-network-allow-for-fractional-r

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                      The main thing you are right about is “there’s a lot of conflicting information flying around”, and I can see it’s creating a lot of confusion.

                      To help you understand what’s going on, I would have to spend like an hour with you, based on the reply you’ve just given. I’d be happy to do that … but I couldn’t justify the time given:

                      • You’re probably not going to pay me for it
                      • The core developers have answered your questions very clearly in multiple places across the web, and at this point it is not their fault for not being clear enough, but others fault for not putting in the effort to understand how Bitcoin (and decentralized consensus systems in general) work.

                      So, if you want to pay for an hour of my time, send me a PM. Otherwise, I recommend spending a weekend on the subject.

                      If it helps you get started, here’s what you’re confused about:

                      • “off-chain scaling with sidechains” <- sidechains are on-chain (edit: on another chain)
                      • “The canonical BTC project seems strongly against increasing the blocksize for reasons I don’t understand” <- at least you’re aware of what you don’t know, that’s better than many
                      • “Apparently they’ve reneged on the blocksize doubling” <- they didn’t reneg on anything
                      • “why would anyone want to cripple Bitcoin by limiting it to half a million transactions per day?” <- they are not crippling it, they are protecting it from attack
                      • “The paranoid answer is that the blocksize is intentionally being kept small in order to strangle BTC with high fees, or drive people into profiteering sidechains.” <- just, no.
                      • “I don’t know anything about Lightning except that it’s supposed to solve everything and doesn’t exist yet.” <- apparently you don’t know anything about Lightning, period. It doesn’t take much effort to READ
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                        I can work with a todo-list of topics, thanks :)

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                          Keeping up with blockchain news is harder than clearing out a Skyrim questlog.

                          Here’s a collection of (hopefully correct) things I’ve learned today:

                          • Increased blocksize is one way to scale, but comes with increased bandwidth and storage costs.
                          • Increasing the blocksize above 1MB requires a hard-fork, whereas segwit was implementable with a safer soft-fork.
                          • The terms “on-chain” and “off-chain” are muddled and there’s no real consensus on definitions.
                          • A “sidechain” is a separate blockchain, attached to BTC using a 2-way peg to ensure no fraudulent coins are created, and the value remains stable across chains.
                          • In a sense, sidechains allow off-chain transactions (not part of the main BTC chain), but they are settled on-chain.
                          • Exchanges like Coinbase manage their own books. These are truly off-chain transactions and are not cryptographically secured.
                          • Lightning attempts to provide scaling without using more bandwidth.
                          • Lightning is not a sidechain. It uses conditional payments to tie-up BTC in hubs/channels which support cheap micropayments. It’s a pretty elegant hack.
                          • Lightning does not support credit. You must deposit BTC into a hub before you can spend within that channel.
                          • Lightning’s architecture benefits from large hubs. Too many hops between hubs will likely be prohibitively expensive.

                          Still unclear:

                          • How does limiting BTC’s transactions per day protect it against attack?
                          • People say large blocks give more power to miners. How does that follow?
                          • When will I be able to use Lightning?

                          In short, there is more than one approach to scaling Bitcoin. Blocksize is the obvious approach but 1) requires a hard-fork to implement, and 2) isn’t a long-term solution to the scaling problem.

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                            Since you actually went out and researched stuff on your own (note: not endorsing all of your conclusions, but they’re considerably less problematic now), I will answer your remaining questions:

                            How does limiting BTC’s transactions per day protect it against attack? People say large blocks give more power to miners. How does that follow?

                            Read:

                            When will I be able to use Lightning?

                            Soon, hopefully. Since they’ve got software that they’re testing now on the test net (which you can download and test yourself), I assume it will be out sometime in 2018, but we’ll see.

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                              For posterity, I found a comment which explains the point well.

                              [Big blockers] think all they have to do is plug a 10 tb hard drive into their miners and boom, problem solved right? The problem is that you would have to then be capable of validating more memory and it has to be done before the new block comes out. Eventually you will get to 1 gig blocks and for something to process 1 gig per block EVERY 10 minutes would need much more powerful hardware to validate the network. Making the network harder to validate reduces the network’s security and most importantly decentralization.

                              People are easily fooled because increasing block size instantly relieves congestion in the network and speeds are fast again and fees are low which is what I want too but increasing the block size is no different from a bail out. Its going in the wrong direction. If possible we want to make the 1 mb smaller so more and more devices can validate bitcoin’s network thus making bitcoin’s security indestructible and way more decentralized. Sure this doesn’t relieve pressure to the network but increasing block size is very risky hoping our hardware will keep up and even if it does, that means EVERYONE would have to keep up to reduce centralization, and again you cant just go to your local Best Buy and buy a hard drive, your hardware would have to process all that memory in under ten minutes. 24/7. Eventually this will lead to only a few players being able to validate blocks and boom there’s your 51% attack.

                              We have no choice to find another solution for the sake of decentralization. The network must become easier to run, not more demanding.

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                                Nice find, thanks for sharing that.

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              The “plan” is the Lightning Network, which is completely unlike Bitcoin. It’s presently a two-year-old white paper, a byte-level protocol spec in progress and some sample code.

              They don’t seem to have anything official documenting how the economics of it are supposed to work or feel from the user or merchant perspective. I’m still trying to make sense of the latter (the devs get very defensive when asked about it), but I’m pretty sure the hub nodes turn into something that’s functionally a bank, and you can get credit (the promise of money being approximately usable as money) out of the system, making it even more unlike Bitcoin. I have no idea why anyone will want to adopt this thing. But I eagerly await more details.

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                but I’m pretty sure the hub nodes turn into something that’s functionally a bank, and you can get credit (the promise of money being approximately usable as money) out of the system, making it even more unlike Bitcoin.

                No no no no!

                Banks own your money.

                Lightning Network preserves the ownership aspect of Bitcoin. Hubs cannot steal your Bitcoins (without a lot of extreme collusion and very sophisticated network attacks going on).

                They don’t seem to have anything official documenting how the economics of it are supposed to work or feel from the user or merchant perspective.

                Yes they do!

                Here:

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                  Banks own your money.

                  If you make a deposit at a bank, the bank owes you money.

                  Deposits are liabilities, loans are assets from a bank’s perspective.

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                    Yeah, that’s what the banks say. What is said, what is written, what is promised, is quite different from real ownership.

                    In the real world, accounts are frozen, assets are stolen by the custodian, and banks, along with hundreds of companies, track and approve your every purchase. Bitcoin demonstrates the difference between “ownership” and ownership.

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                Bitcoin Cash for sure

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                  For a “cash” fork, BCH has put no apparent effort into merchant adoption, its supposed use case. Not even the drug market is interested in BCH.

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                    Why not both?

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                  The “plan” is the Lightning Network, which is completely unlike Bitcoin. It’s presently a two-year-old white paper, a byte-level protocol spec in progress and some sample code.

                  They don’t seem to have anything official documenting how the economics of it are supposed to work or feel from the user or merchant perspective. I’m still trying to make sense of the latter (the devs get very defensive when asked about it), but I’m pretty sure the hub nodes turn into something that’s functionally a bank, and you can get credit (the promise of money being approximately usable as money) out of the system, making it even more unlike Bitcoin. I have no idea why anyone will want to adopt this thing, rather than, e.g., just use an altcoin that isn’t clogged (e.g., the drug market increasingly adopting Monero). But I eagerly await more details.