Bad news travels slowly, in the cryptocurrency world. Tribalism causes unpleasant facts to be treated as an attack. But if nobody tells the truth, you can’t blame anyone for being confused.
Decentralized payment systems don’t scale up; to really know if a payment to you is valid you need to know every payment which fed into it was valid. To know if the system is working you need to know nobody is faking money out of thin air, and that nobody is simply stealing money from others. To get this level of confidence, you need your own computer to check everything, and so it needs to see everything, and that’s never going to scale.
It’s a superb and unprecedented level of trustlessness. But it doesn’t scale.
Bitcoin can’t scale to meet demand, unless demand vanishes and it all fails. If bitcoin is used by 100,000 people today, and we want everyone to use it, we need bitcoin capacity to grow 75,000 times larger. Yet we’re already struggling with 140GB of storage caused by bitcoin’s first 8 years when it was mainly not being used, and rampant mining centralization which makes everyone nervous about making things more difficult for small, independent miners.
- Bitcoin fees are only going to rise from now on. Plan on it.
- The largest cause of non-spam transactions seems to be companies who designed their infrastructure assuming transactions are cheap. The big VC-backed ones know making their operations more efficient won’t increase their valuations, but expanding their business will. Their pain threshold is clearly higher than the recent fees.
- Even with segregated witness, demand can easily outpace the increase. There might be a short 50% drop in fees for early segregated witness adopters, but it won’t last.
- Even a double-once hardfork, which doesn’t require anyone to actually optimize anything, won’t give relief for long.
- Other once-offs like Schnorr similarly only offer 30% increase, easily swallowed.
- The only attempt to attach growth to a metric was Pieter Wuille’s 17.7% per year increase. That takes 70 years to reach everyone-scale, so no relief there in my lifetime.
The scaling problem was the very first criticism raised when Satoshi posted his proposal to the cypherpunks mailing list. That was a champagne problem then, but a real one now.
This is the reason I’ve been working as hard as I can on solutions, but denying the problem doesn’t help.