Center for Strategic Assessment and forecasts

Autonomous non-profit organization

Home / Economy and Finance / The financial system of a new era / Articles
Time Bitcoin banks?
Material posted: Publication date: 27-11-2017
Recently in the world of Bitcoin, there was quite a remarkable event. Was produced a blockin which reward is 12.5 BTC per block was less than the premium for transactions 13.4 BTC. Of course, such a situation has happened before as a result of errors, generosity, or different experiments on the Blockchain, but for the first time this situation was the result of a trend in the cost of the transaction.

Perhaps Bitcoin need banks or their analogues?

 

The background

In 2016, it would seem that nothing boded trouble, the transaction was cheap and was worth 0.15$ per transaction (50 Satoshi per byte). Note: bitcoin is not important the volume of transactions in foreign currency, what matters is the size of the transaction, therefore the transfer 1 000 000$ is the same as 1$-translation. Some enthusiasts have pondered, and I including that the network should work without hashing, transaction fee when you bring more than mining. This moment came, but all was not so rosy.

It is important that the main reason of growth of cost of the transaction is not the rising cost of Bitcion, because comparing components we see that the cost per byte is increased in BTC, from 50 to 1250 Satoshi (during the boom). That is, if we take the ten-fold increase in Bitcoin in $, we get that the price of the transaction was increased from 0.15$ 21.7$. Obviously, this growth was speculative and there were those who could afford to pay such a price for the transaction. But what about those who hoped to pay Bitcoin in a store or to use for micropayments? Even those who'd moved on to other cryptocurrencies were trapped: in order to trade on the exchange, you will need to spend at least 1 transaction.

The size and price of the transaction

We have long been accustomed to working with large sums to pay more tip. For us is not something strange that stock exchanges, banks take % of transaction volume. Then, however, this % is governed by the "greed" of the organization. Bitcoin is not an organization, but is a marketplace, live marketplace transactions, and so the miners included in the block exactly those transactions that are profitable. But people still tend to leave a bigger tip for larger amounts, thus, when there are large trades in Bitcoin, the value of 1 byte in Bitcoin is rising sharply, which throws overboard all the small transactions.

Consider a simple payment transaction and think about where you can save.

TransactionSize=NumberOfInputs∗180+NumberOfOutputs∗38+10+/-40

The minimum size is about 220 bytes. Note that if we want to pay 1000 people at the same time, the size of the "1 payment" tends to 38 bytes, which is 5 times more profitable. It is also important to try to avoid getting money from many sources or to combine them in a single transaction. Association 5000 Inputs = 1 MB is the whole unit and costs around 50 000 $. The question of what to do with the store that accepts 1 000 000 payments per month and then calculated with 100 providers, remains open.

An interesting point that the Economics of Bitcoin transaction is closed: I want to make a transaction — you pay a Commission in Bitcoin. Therefore it is necessary to study not the cost of the transaction of $, which depends on the exchange rate on the market, and the cost in BTC. The value of BTC increasing 10 times in 1 year because the volume of transactions increases.

Scalability Bitcoin

The easiest way to reduce the cost of the bytes in the block is to increase productivity. Rumors that scale Bitcoin easy and 100 ICO/Coin already has, remain rumors. So far not a single coin has not come close to 1 MB blocks, so the introduction of a 2-MB blocks Litecoin / DashCoin prematurely and the average demand of about 100 KB. Even Bitcoin Cash with 8 MB generates an average of 100 KB blocks.

There are 3 obvious avenues to increase performance:

  • To increase the block size.
  • To increase the speed of production of the unit.
  • To reduce the size of the transaction.

The first two issues are closely related to each other, because validation 1 MB it may take from one minute and more + more time is needed to spread the unit over the network, to prevent fork. At the moment we are working to accelerate the validation and dissemination in the network, but a possible acceleration here is only 2-4 times, given that Bitcoin already has 4 MB Segwit blocks.

Reduce the transaction size, the most promising piece of. The principle of the Lightning Network is to exchange debt obligations outside the network, and fix them much less frequently. Unfortunately, this principle is only applicable if you are constantly interacting in the network with one agent. This principle has a beautiful mathematical basis, but in practice, if you make someone a large number of transactions, you can use similar approaches without Lightning Network. The best approach would be if the transaction value tends to be 0. Because even the minimal entry in the blockchain is already 65 bytes, given Segwit is 4-8 times higher.

The assistance of other blockchains

One of the solutions discussed is the use of other blockchain, good, want to ICO and sell the tokens missing. In fact, the workload of Top 10 SOP < 10%, we can increase the performance by at least 100 times.

The main drawback is that people want to use Bitcoin, but this can only guarantee the Bitcoin Blockchain. To exchange the coin during a transaction causes that transaction to still have in the Bitcoin system. You can try to raise money in Bitcoin like Mastercoin did, and to be independent of the blockchain, fixing your transaction in the Bitcoin blockchain, but even here the growing transaction fee threaten big trouble.

To date, Plasma offers an interesting solution with sub-blockchain and a system of arbitration, but it is not without drawbacks.

Time Bitcoin Banks?

If we put 1 Satoshi = 1 Cent, then 1 BTC = 1 000 000 $ that, in theory, not so much because of BTC Market Cap = 21 trillion $, which is much lower than the world needs money. But, the transaction cost is likely to be 5-100$, which is very much.

Nobody likes the word "Bank" in kryptomere because it is associated inevitably with Fiat money and draconian credits. Most interesting is that in the real world, banks face similar problems of scalability. Giving our money to the Bank and using plastic card to make payments, the Bank transfers money from another Bank, and gives a promissory note and holds a settlement later.

This scheme is perfectly massturbate, but to apply directly to Bitcoin, of course, we have no desire. The main problem: if a Bank does not converge the debit with the credit and the Bank will collapse, no Bitcoin from him we will not receive. And this is exactly what we want to avoid using Bitcoin. Our money needs to stay with us and be safely stored.

Credit for operating expenses

In fact, this problem we can resolve, giving the money to the Bank portions of 100-10000$ weekly, or monthly, depending on our confidence in the Bank. In this scheme, it is ideal to use Lightning Network, as all payments on our behalf holds the Bank and we pay with the Bank.

Cashing and payday

Perhaps everyone should have a choice on what account to get paid: to Bank or personal Bitcon account. When receiving the personal account, the transaction fee will be deducted.
"Operation cash-out" is the operation when you withdraw from issued the loan to the Bank and transfer to your account in Bitcoin. Of course, there will have to pay a transaction fee, as well as in the creation of credit.

Network 6анков

Naturally the circuit will not work if the sender and the recipient of the payment does not belong to the same Bank or the same network, because this transaction will have to fix in the blockchain. Similar solutions already exist — the international network of banks, Visa/Mastercard, and cryptolog — Ripple. Therefore, the sender and the receiver with high probability can belong to the same network. Competition between Bank networks again can improve the mechanisms of trust and reputation.

In fact, much better if the blockchain, the network will provide the state, because it is the primary basis for the calculation of taxes: VAT, profit tax, turnover tax. Of course, this is unlikely to happen, because Bitcoin in this case would be a supranational currency and literally perfect offshore area.

Subscription fee

Oddly enough, but in the Bitcoin banks, the money belongs to you and that the system worked, will have to pay banks for the use of the system. Restriction for example is that sellers will not accept purchases from private customers (from banks), unless they pay high transaction costs.

In the network of the banks most important is the reputation that some Bank will be able to repay its debts to other banks, and it will have to pay, of course, do we. Otherwise, any collapse of one Bank will be reflected on the balance sheet accounts of other banks.

PS I think that banks is not a relic of the old financial system, but the locomotive of the new system. However, banks have a long way to go to become a Bitcoin Bank.


Source: https://habrahabr.ru/post/342732/


RELATED MATERIALS: Economy and Finance
Возрастное ограничение