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.
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
Stil though, how well does that work with a rapidly fluctuating value of the bitcoin? Prices would have to be superfluid for external good to have known value of some sort.
Stability of the value of savings and currency seems crucial to using it for trade.
Won’t the economy have to go flat (stop growing) since the supply of bitcoin is fixed? Otherwise the value of bitcoin will always be going up. Which leads to hoarding and speculating, which was part of the reason for dropping the gold standard.
Unrelated note: part of why humanity stopped making our money out of precious metals was because the metal was worth more and more while the dollar held steady. So people started shaving the edges off silver coins, and then recievers had to start weighing money at the time of transaction (which slowed it all down). Making money fungible was a huge advantage for commerce.
Bitcoin transactions feel a lot like having to double check that the coins you’re receiving are actually “real” and that you’ll be able to trade them later. The lighting network feels like a tab at the hardware store where anyone can skip town anytime they want.
When i stay stabilize i don’t mean it will stay the same for ever. it will just become less volatile the more it is uptaken. Value should continue to go up as the total supply is finite but should do so in a more predictable manner similar to gold. Of course this requires it’s widespread uptake as a currency.
Unrelated note: part of why humanity stopped making our money out of precious metals was because the metal was worth more and more while the dollar held steady. So people started shaving the edges off silver coins, and then recievers had to start weighing money at the time of transaction (which slowed it all down). Making money fungible was a huge advantage for commerce.
I’m not sure that’s really analogous to bitcoin, sure you can spend subdivisions of bitcoins but you cant shave sats off and still pass off a shaved bitcoin as a full one. a bitcoin is a bitcoin and a bitcoin with shaved sats is a bitcoin minus those shaved sats.
The lighting network feels like a tab at the hardware store where anyone can skip town anytime they want.
except with the lightning network, if your customer “skip[s] town” with lightning you can take the tab (channel) to the bank (blockchain) yourself and still get your payment. Opening a lightning channel requires staking the value of the channel up front. you can get unspent sats back but once you’ve made a transaction on the network then those sats belong to the person who you sent them to. You can try and close a channel with an older version of the channels ledger to try and “revert” the payment but there are mechanisms in place to stop this. if someone does that to you you can just broadcast the up to date ledger to the network and then you get everything in the channel including unspent sats as a penalty.
You still use it as a settlement and security layer. The lightning network is made up of pairs of people that both lock money in a new account with a transaction. Both people get a fully signed copy of a second transaction to reclaim the money, but they don’t publish it immediately. If they need to make a new transaction between each other, they just replace the second fully signed transaction with a new one that divides the money according to the new balance. They can do this as many times as they want for as long as they want, and they only have to make two transactions: one to start and one to stop. If anyone tries to cheat, the only thing they can do is publish an older version of that second transaction that favors them, but you have… I think a day or three, I forget, to publish a newer version that proves they cheated, and if you do, you get ALL the money even if some was owed to them, so cheating won’t go well. The down side is you need a node that’s always online or connects to the network frequently so you can be ready to catch a cheater.
To make a network, they use some fancy cryptography to send money to someone if and only if they send it (minus very, very, very small fees) to the next person in line towards the destination. If anyone in the chain refuses or fails to commit, the transaction fails and no money moves at all. Because it’s all secured by the blockchain, you can trust that everyone both can and will complete the transaction exactly as requested, or the whole thing fails and nothing happens.
You realize “it’s so energy and time consuming that we had to create a secondary layer to try and make it actually usable” isn’t the defense you think it is, right?
Sure glad that’s not why they did it because you’re right, that’d be kinda stupid. That’s not why they made a secondary layer, though. They made a secondary layer so transaction throughput can grow exponentially while maintaining the security of the blockchain without significantly impacting fees or requiring the blockchain itself to become proportionally larger.
That last part is the real motivation. The goal is to above all else, remain decentralized. That means the average user needs to be able to run a full node capable of verifying any transaction it needs to. To do that, the blockchain can’t grow too quickly, or people will get forced out. If it grew exponentially faster as transactions grew likewise, nodes would eventually centralize in fewer and fewer hands until someone could exert control over the network.
The blockchain is currently something like 650-700 GB, which is a lot, but most people can manage it, even if it might be pushing it for poorer regions. Without the lightning network and with substantial user growth, the only option is to increase the block size, and to achieve an actually usable capacity of strictly on-chain transactions, you’d be looking at sizes on the order of hundreds of TB or pushing into PB territory. Nobody would be able to store the blockchain without a dedicated server rack. Not a single server, a whole rack. It’d costs thousands and thousands of dollars to run a node. Instead, we acknowledge that you purchasing a pack of gum at the convenience store doesn’t need to be immortalized on the blockchain and use the lightning network to secure your transaction without having to create a permanent record.
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.
The fact that one anonymous person could create a solution that “almost sort of make(s) it comparable to the systems we already have” is fucking amazing since all of humanity worked for like 70 years since the invention of the computer to create those systems.
Remind me again where Bitcoin is actually used vs actual databases. It didn’t solve anything and did it in an energy hungry way. It’s not “almost sort of comparable”. All of the scams that immediately came about because it doesn’t have the numerous regulations regular financial instruments have is proof. For the last decade Bitcoin has been struggling to reach parity with financial regulations. Ffs, the US PRESIDENT JUST PULLED A RUG PULL.
You’re the one who said it was “almost sort of comparable” to the systems we already have, I was literally quoting you. Then you disagree with yourself? Argue with yourself then, you don’t need me.
No, originally I said “Bitcoin is great if you don’t use the blockchain”, mocking the lightning networks existence because blockchain on its own is terrible for transactions. I never said they were almost comparable. They’re not. One is a database that’s been proven to work for all kinds of things, and the other is a techbros fantasy that wastes energy and is basically just tech stocks at this point.
This is what you wrote, I was literally quoting you. I didn’t even summarize what you said, I just copied and pasted it:
“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.”
“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
Stil though, how well does that work with a rapidly fluctuating value of the bitcoin? Prices would have to be superfluid for external good to have known value of some sort.
Stability of the value of savings and currency seems crucial to using it for trade.
It’ll settle eventually
Won’t the economy have to go flat (stop growing) since the supply of bitcoin is fixed? Otherwise the value of bitcoin will always be going up. Which leads to hoarding and speculating, which was part of the reason for dropping the gold standard.
Unrelated note: part of why humanity stopped making our money out of precious metals was because the metal was worth more and more while the dollar held steady. So people started shaving the edges off silver coins, and then recievers had to start weighing money at the time of transaction (which slowed it all down). Making money fungible was a huge advantage for commerce.
Bitcoin transactions feel a lot like having to double check that the coins you’re receiving are actually “real” and that you’ll be able to trade them later. The lighting network feels like a tab at the hardware store where anyone can skip town anytime they want.
When i stay stabilize i don’t mean it will stay the same for ever. it will just become less volatile the more it is uptaken. Value should continue to go up as the total supply is finite but should do so in a more predictable manner similar to gold. Of course this requires it’s widespread uptake as a currency.
I’m not sure that’s really analogous to bitcoin, sure you can spend subdivisions of bitcoins but you cant shave sats off and still pass off a shaved bitcoin as a full one. a bitcoin is a bitcoin and a bitcoin with shaved sats is a bitcoin minus those shaved sats.
except with the lightning network, if your customer “skip[s] town” with lightning you can take the tab (channel) to the bank (blockchain) yourself and still get your payment. Opening a lightning channel requires staking the value of the channel up front. you can get unspent sats back but once you’ve made a transaction on the network then those sats belong to the person who you sent them to. You can try and close a channel with an older version of the channels ledger to try and “revert” the payment but there are mechanisms in place to stop this. if someone does that to you you can just broadcast the up to date ledger to the network and then you get everything in the channel including unspent sats as a penalty.
at least that’s how i understand it
You still use it as a settlement and security layer. The lightning network is made up of pairs of people that both lock money in a new account with a transaction. Both people get a fully signed copy of a second transaction to reclaim the money, but they don’t publish it immediately. If they need to make a new transaction between each other, they just replace the second fully signed transaction with a new one that divides the money according to the new balance. They can do this as many times as they want for as long as they want, and they only have to make two transactions: one to start and one to stop. If anyone tries to cheat, the only thing they can do is publish an older version of that second transaction that favors them, but you have… I think a day or three, I forget, to publish a newer version that proves they cheated, and if you do, you get ALL the money even if some was owed to them, so cheating won’t go well. The down side is you need a node that’s always online or connects to the network frequently so you can be ready to catch a cheater.
To make a network, they use some fancy cryptography to send money to someone if and only if they send it (minus very, very, very small fees) to the next person in line towards the destination. If anyone in the chain refuses or fails to commit, the transaction fails and no money moves at all. Because it’s all secured by the blockchain, you can trust that everyone both can and will complete the transaction exactly as requested, or the whole thing fails and nothing happens.
You realize “it’s so energy and time consuming that we had to create a secondary layer to try and make it actually usable” isn’t the defense you think it is, right?
Sure glad that’s not why they did it because you’re right, that’d be kinda stupid. That’s not why they made a secondary layer, though. They made a secondary layer so transaction throughput can grow exponentially while maintaining the security of the blockchain without significantly impacting fees or requiring the blockchain itself to become proportionally larger.
That last part is the real motivation. The goal is to above all else, remain decentralized. That means the average user needs to be able to run a full node capable of verifying any transaction it needs to. To do that, the blockchain can’t grow too quickly, or people will get forced out. If it grew exponentially faster as transactions grew likewise, nodes would eventually centralize in fewer and fewer hands until someone could exert control over the network.
The blockchain is currently something like 650-700 GB, which is a lot, but most people can manage it, even if it might be pushing it for poorer regions. Without the lightning network and with substantial user growth, the only option is to increase the block size, and to achieve an actually usable capacity of strictly on-chain transactions, you’d be looking at sizes on the order of hundreds of TB or pushing into PB territory. Nobody would be able to store the blockchain without a dedicated server rack. Not a single server, a whole rack. It’d costs thousands and thousands of dollars to run a node. Instead, we acknowledge that you purchasing a pack of gum at the convenience store doesn’t need to be immortalized on the blockchain and use the lightning network to secure your transaction without having to create a permanent record.
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.
The fact that one anonymous person could create a solution that “almost sort of make(s) it comparable to the systems we already have” is fucking amazing since all of humanity worked for like 70 years since the invention of the computer to create those systems.
Remind me again where Bitcoin is actually used vs actual databases. It didn’t solve anything and did it in an energy hungry way. It’s not “almost sort of comparable”. All of the scams that immediately came about because it doesn’t have the numerous regulations regular financial instruments have is proof. For the last decade Bitcoin has been struggling to reach parity with financial regulations. Ffs, the US PRESIDENT JUST PULLED A RUG PULL.
Blockchain is just digital speculation.
You’re the one who said it was “almost sort of comparable” to the systems we already have, I was literally quoting you. Then you disagree with yourself? Argue with yourself then, you don’t need me.
No, originally I said “Bitcoin is great if you don’t use the blockchain”, mocking the lightning networks existence because blockchain on its own is terrible for transactions. I never said they were almost comparable. They’re not. One is a database that’s been proven to work for all kinds of things, and the other is a techbros fantasy that wastes energy and is basically just tech stocks at this point.
Keep up.
This is what you wrote, I was literally quoting you. I didn’t even summarize what you said, I just copied and pasted it:
“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.”