Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Scalability of cryptocoins
Transactions with the bitcoin these days are so slow that the entire system is likely to get stuck. That is why bitcoin devs are working hard on a solution: the Lightning Network, which comes on top of the blockchain and has to save the bitcoin. A new technical masterpiece, but what is it and will it work?

With the most important marketing trends for 2018, blockchain is mentioned time after time. As a marketer you'd better have the technology mastered. But the system is cracking. The problem is that blockchains can barely handle the many transactions. This is the reason why the tech world works on the Lightning Network, that is fast and on top of the blockchain.

What's going wrong?
Let's start at the beginning. What goes wrong is especially noticeable with the bitcoin. The digital currency runs on a blockchain, where all payments are recorded in blocks to exclude fraud. If you want to transfer bitcoins to someone, the payment must be confirmed and stored in a block. But the supply of transactions is so large that a waiting list has arisen. Whoever comes first, the miners determine who store the transactions in blocks. And who will let the miners go before? Precisely, the person who offers the highest amount for that. It is not mandatory to pay less, but that is the practice of the day. The slow system therefore goes hand in hand with high transaction costs. Sometimes a few dollars, but tens of dollars per transaction is no exception. Due to the large price changes, it makes a difference whether a payment is made within a minute or a day. Speculators are willing to pay high amounts if the transaction is executed quickly.

The ratio is completely lost at small amounts. If you want to buy a cup of coffee worth 2 euros, you will probably lose more than 2 euros in transaction costs. It also takes a while before you have your coffee, because the transaction must be published on the blockchain and that takes ten minutes.

It must all be faster and cheaper. Technicians and programmers are considering how this could be done. Opinions are sometimes so divided that it has already led to divisions within the original bitcoin community. The professional jargon is about 'channel factories', 'layered solutions', 'segregated witness' and what the ultimate solution should be: the Lightning Network.

The most obvious solution is to make the blocks larger. Then there can be more transactions in one block and you do not have to wait for a next block to be made. The big disadvantage of large blocks is that even heavier computers are required to assemble the blocks, which costs even more energy than is currently the case. That is not really an option.

Lightning Network as an alternative
The Lightning Network is an alternative that is under development and can become operational in the course of 2018. The network consists of two new layers on top of the blockchain with which users can open channels for direct payments. This can be done quickly and without further costs. It is done using the technology of 'smart contracts'. Two important principles that you can not ignore are 'multisig addresses' (addresses where multiple users need to sign to enable bitcoins transfer) and 'hashed timelock contracts' (encrypted contracts that you use to make digital money for a certain period to prevent fraud ). A second layer containing the 'channel factory' with the mutual channels will be added to the blockchain. A third layer contains the micropayment channels where small payments can take place quickly. The network can link existing channels to each other and thus also allow payments to be made quickly and safely via a third party. The Lightning Network seems well considered and can be a solution to prevent further system shutdown, while the safety standards remain guaranteed.

The power of new crypto coins
There are hundreds new coins now and they are not stuck. Many of them work (function) with smart contracts, where the transactions go fast. The CEO of Ripple (Brad Garlinghouse) finds the bitcoin obsolete. "With us, payments expire in seconds and there are hardly any costs for users."

Due to the problems with the bitcoins, more and more people are switching to other crypto coins. Unknown names are receiving increasing recognition. "A few years ago, few people were exited about Ethereum. Now we see that many people are switching. Everything revolves around innovation. Ultimately, the coins will win at the lowest cost and highest speed.

Amazon biggest threat for bitcoin
The biggest threat to the bitcoin, is whispered in tech circles, may well be Amazon. Amazon, the largest retailer in the world, has so far withheld payment with digital coins. A fast system is required for the many transactions. Is Ethereum an option? Amazon has already claimed the domain name for security. More obvious is perhaps its own digital currency, which has to operate within the system of Amazon. As a result, Amazon loses intermediaries as banks that cost the company money. Amazon's own currency can count on a lot of interest and thus put the bitcoin in the shadow. It seems that the giant is just waiting for the crypto coins to come into calmer waters and the systems no longer cause problems.

The Lightning Network can once again accelerate the bitcoin. But companies with other digital coins will do everything to keep a lead. Then the question remains whether the bitcoin remains the most important digital currency. What remains is the underlying technique, which will also bring a lot of change in areas outside the crypto coins, from marketing to stock exchange.

I believe Bitcoin will have a new revival when the lightning networks will be implemented, probably this year.

Of course Ethereum is also working on systems to improve scalabilty and transaction speed. Probably they will implement 2 new systems. I will write another post about this when I find some spare time.
What is this thing that builds our dreams, yet slips away from us?

Thank you for the lesson professor! Big Grin

That's also good news for Cardano, isn't it?
(2018-01-15, 10:07 PM)Cell Wrote: Thank you for the lesson professor! Big Grin

That's also good news for Cardano, isn't it?

yes, it is also good news for Cardano.
But it also shows, Bitcoin is not ready to be beaten by the other ones.
Ethereum will also stay a big player.
If BTC and ETH are performing well, other good cryptos will benefit from it too.
What is this thing that builds our dreams, yet slips away from us?

Very interesting post, thanks.

The Amazon bit caught my attention - it is a good point that a company like Amazon will create its own coin and make it successful. They have the reserves to make it work. It would surely be more stable than the likes of BTC (in terms of price) plus also be quicker too.
Everyone knows by now, that blockchain-based cryptos have a scaling problem. Precisely because such a fast-growing global ledger imposes limitations on both transaction speeds and confirmation times. This is why the Lightning Network could be a game-changer, as it leverages the underlying blockchain by adding a second layer smart contract system that will literally enable a transaction network that is faster than Visa.
What is this thing that builds our dreams, yet slips away from us?

Bitcoin certainly is having a scaling problem so this could be a solution.

Ripple is already very fast and Cardano likewise.
Cardano is the most promising 3 gen. crypto right now.

I wonder when Amazon will go for it. They will have extensively tested and using their own coin is sensible. There is no way to price goods in crypto as it is far too volatile. My company looked into pricing in RBT and if it had not collapsed then I am sure we would be by now. Though whether successful or not is debatable. Stability is needed for sure. And speed as well.
I wrote Amazon many years ago to ask for accepting Bitcoin. I got a standard reply saying they look into it but didn't have any plans.
Cardano is the most promising 3 gen. crypto right now.

I remember that I’ve read something,about that... there was some trsts made in a country with bitcoin and Amazon... can’t find where...
Okay....Cell is back. Man the Spinshot player tennis machine is hard on me Big Grin I was out with her 2 hours today. Was also playing yesterday with a friend. It's too hard on my body.
Cardano is the most promising 3 gen. crypto right now.


Forum Jump:

Users browsing this thread: 1 Guest(s)