Understand the implications of Bitcoin's downfall in El Salvador. Learn about the failed economic bet and its impact on the country's financial stability.
Bitcoin isn’t good for making little purchases, firstly because it takes so long to get confirmations, if each block is 10 minutes and you need like 3 blocks to consider it confirmed that’s 30 minutes. But that ties into the second issue which is that you probably don’t want millions of tiny transactions on the Blockchain, you want them processed off-chain and then settled in bulk (to the Blockchain) periodically as a single transaction.
Bitcoin is great for little transactions if you use the lightning network. Sending on the lightning network means instant payments with no confirmation required and absolutely tiny fees. And the only thing that shows up on the blockchain is the transactions to initially start using lightning network and to take your coins back off the lightning network. Transactions made over the lightning network aren’t recorded anywhere other than maybe by the people transacting.
i got back into bitcoin recently and decided to move the contents of my old wallet to a new SegWit one and look into using lightning.
To open a lightning channel i have to stake £170 up front though which is crazy, how are people in poorer countries supposed to do that?
or even here. poverty is on the rise, a lot of people are living hand to mouth and just having that kind of money lying around isnt a thing.
i like the idea of bitcoin but i worry it doesn’t scale well.
Add to that that virtually nowhere accepts it. The value of bitcoin comes from its use as a currency. if it doesn’t have that then it’s entirely speculation.
oh well, i have £2k in there and i’m not turning it back into fiat. I’ll spend it if i can or ride it all the way to 0 if that’s the way it goes
edit: if BTC does hit $1m a coin as the hodlers hope then that would amount to $2000 to open a lightning channel (or more realistically $2400 as electrum wouldnt let me open a channel with the supposed minimum 0.002 BTC, i had to make it 0.0024). I hope that the minimum amount to open a channel will be updated long before that happens though, but i guess we’ll see
the lightning network still uses the blockchain, just less. it’s acts like an immutable public bar tab you can’t default on. once you have spent enough with another person that it is worth them conducting the transaction on chain then it does it. usually when fees are low too.
That is an extremely simplified explanation of how it works though, it is more complex than that.
Edit: another analogy i have just read is it’s like cashing in at a casino. you put some money in the house (the blockchain) and get some chips, you go in and transact with loads of people, then when it’s advantageous you can cash out and get your BTC on chain; to the house that is two transactions, cash in and then out, rather than a transaction for everyone you exchanged with on the network. that’s probs a better analogy than the bar tab one… but again, oversimplified
bar tab is more accurate, casino is easier to understand.
the actual functionality doesn’t really matter to the layperson though. basically, you put some of your bitcoin on the network (minimum amounts apply), and then you can spend that with very fast transactions and low fees. when you’re ready you can send what you have back to the chain
Bitcoin is a great alternative to something like Western Union that charges high transaction fees. It’s time to transmit is comparable to a traditional back wire, but days faster than an EFT.
Everybody knows Bitcoin is too slow to process point of sale transactions on-chain but there are other Blockchain solutions that can do it. Another user mentioned the lightning network which still actually is Bitcoin but it’s another layer.
Also, I’ve just ignored the environmental impact of Bitcoin, which probably needs to move away from proof of work, or some other solution is required to lower the every requirements.
Yeah, and Zelle, Cashapp, venmo, PayPal all do the same and don’t have that environmental impact you so easily dismissed.
It’s been great watching Bitcoin grow from this digital currency for buying drugs online to having all these layers added on to almost sort of make it comparable to the systems we already have. By the time you guys actually make something that isn’t just stocks with no backing but faith, we’ll have moved on to a post-money society(probably not but I have more faith in that than blockchain ever being a useful currency.
IIRC, a deposit is made by two parties to create a lightning network channel that’s enough to cover all transactions (kinda like a multi-sig escrow), and both parties have to sign-off on their balances after every transaction (the last balance signed by both parties is the only valid state). I think most people would use a custodial wallet where the custodian already has channels set up, and this would require trust in the custodian. Lightning networks didn’t exist, and wasn’t fully spec’d out the last time I looked into it though.
Bitcoin isn’t good for making little purchases, firstly because it takes so long to get confirmations, if each block is 10 minutes and you need like 3 blocks to consider it confirmed that’s 30 minutes. But that ties into the second issue which is that you probably don’t want millions of tiny transactions on the Blockchain, you want them processed off-chain and then settled in bulk (to the Blockchain) periodically as a single transaction.
Bitcoin is great for little transactions if you use the lightning network. Sending on the lightning network means instant payments with no confirmation required and absolutely tiny fees. And the only thing that shows up on the blockchain is the transactions to initially start using lightning network and to take your coins back off the lightning network. Transactions made over the lightning network aren’t recorded anywhere other than maybe by the people transacting.
i got back into bitcoin recently and decided to move the contents of my old wallet to a new SegWit one and look into using lightning.
To open a lightning channel i have to stake £170 up front though which is crazy, how are people in poorer countries supposed to do that?
or even here. poverty is on the rise, a lot of people are living hand to mouth and just having that kind of money lying around isnt a thing.
i like the idea of bitcoin but i worry it doesn’t scale well.
Add to that that virtually nowhere accepts it. The value of bitcoin comes from its use as a currency. if it doesn’t have that then it’s entirely speculation.
oh well, i have £2k in there and i’m not turning it back into fiat. I’ll spend it if i can or ride it all the way to 0 if that’s the way it goes
edit: if BTC does hit $1m a coin as the hodlers hope then that would amount to $2000 to open a lightning channel (or more realistically $2400 as electrum wouldnt let me open a channel with the supposed minimum 0.002 BTC, i had to make it 0.0024). I hope that the minimum amount to open a channel will be updated long before that happens though, but i guess we’ll see
You are very close
“Bitcoin is great if you don’t use the block chain”
That’s what you just said. So why even use it in the first place?
the lightning network still uses the blockchain, just less. it’s acts like an immutable public bar tab you can’t default on. once you have spent enough with another person that it is worth them conducting the transaction on chain then it does it. usually when fees are low too.
That is an extremely simplified explanation of how it works though, it is more complex than that.
Edit: another analogy i have just read is it’s like cashing in at a casino. you put some money in the house (the blockchain) and get some chips, you go in and transact with loads of people, then when it’s advantageous you can cash out and get your BTC on chain; to the house that is two transactions, cash in and then out, rather than a transaction for everyone you exchanged with on the network. that’s probs a better analogy than the bar tab one… but again, oversimplified
bar tab is more accurate, casino is easier to understand.
the actual functionality doesn’t really matter to the layperson though. basically, you put some of your bitcoin on the network (minimum amounts apply), and then you can spend that with very fast transactions and low fees. when you’re ready you can send what you have back to the chain
Bitcoin is a great alternative to something like Western Union that charges high transaction fees. It’s time to transmit is comparable to a traditional back wire, but days faster than an EFT.
Everybody knows Bitcoin is too slow to process point of sale transactions on-chain but there are other Blockchain solutions that can do it. Another user mentioned the lightning network which still actually is Bitcoin but it’s another layer.
Also, I’ve just ignored the environmental impact of Bitcoin, which probably needs to move away from proof of work, or some other solution is required to lower the every requirements.
Yeah, and Zelle, Cashapp, venmo, PayPal all do the same and don’t have that environmental impact you so easily dismissed.
It’s been great watching Bitcoin grow from this digital currency for buying drugs online to having all these layers added on to almost sort of make it comparable to the systems we already have. By the time you guys actually make something that isn’t just stocks with no backing but faith, we’ll have moved on to a post-money society(probably not but I have more faith in that than blockchain ever being a useful currency.
Sounds like you can steal or fake things
IIRC, a deposit is made by two parties to create a lightning network channel that’s enough to cover all transactions (kinda like a multi-sig escrow), and both parties have to sign-off on their balances after every transaction (the last balance signed by both parties is the only valid state). I think most people would use a custodial wallet where the custodian already has channels set up, and this would require trust in the custodian. Lightning networks didn’t exist, and wasn’t fully spec’d out the last time I looked into it though.
Finally someone who knows what theyre talking about, with an actual valid criticism.
That’s the same way as the economic system works though
Each bank and creditor keeps track of if what they owe each other and then they settle the balancebetween them periodically (depends on the country)
If assume you could do something similar with bitcoin, but you would need an overlay