Steam is no longer supporting Bitcoin (opens in new tab)

Eh? The volatility is a HUGE problem for bitcoin as a currency.

If I run a small business, accepting payment in bitcoin just creates risk. The state of my business not only depends on the quality and success of my product/service but also on the volatility of bitcoin because by accepting bitcoin I am forced to effectively take a long position on BTC. The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem - struggling to pay wages and rent - even though my business is successful in that I made a profit on selling my products or services.

The purchaser of my services is effectively on the other side of this trade and is exposed to the opposite risk wrt to BTC/USD. The only way for the two parties to minimize this risk would be for the customer to convert fiat currency into bitcoin just before paying, and then for the vendor to convert the bitcoin back immediately on receipt. With high spreads and transaction costs, using bitcoin in this manner is incredibly expensive and makes no business sense.

It's actually impossible to reliably get a transaction confirmed in the 15 minutes that BitPay (who they used) is willing to lock in an exchange rate for, regardless of load on the network. The earliest a transaction can confirm is on the next block, and there's about a 25% chance no block will be mined by then.

>However, getting the transaction confirmed can take many hours at the times of high demand and then it still fails because thanks to the volatility, the transaction fees have gone up in the meantime. That is creating unsustainable problems for the customer support and makes BTC unusable for actual payments.

This is precisely what Lightning aims to solve, and at least anecdotally so far, has done so in the case of LTC.

(Though its hard to compare LTC to a chain with a market cap of over $200b even if the former has a skyrocketing trade volume)

Serious question: even if a currency is only good for exchanging for other currencies, doesn't that still make it a currency?

In other words, even if you can't go buy clothing or games or hosting with BTC, doesn't the fact that you can exchange it for $LOCAL_CURRENCY (which can be used to buy those things) give it value?

Basically, a meta-currency or currency of currencies, if you will.

Edit: I realize we are saying the problem is a delay and pinning down the real value at a given time, but it sounds like that doesn't matter so much as the volatility itself, which should eventually settle. If delay were really a problem, then I would think stocks wouldn't be a thing.

Does Valve really needs more than 0 confirmations? double-spending doesn't seems like a big issue for them since Steam is DRM and they have some level of control over the software people have in their libraries (and total control in the case of online games). If the concern is whether some people would just download games, double-spend before getting one confirmation and then keep Steam offline forever (or copy the game files from the steam folder), I think people can already do something similar as they let users "return" games during the firsts 24 hours after the purchase.

If the transactions were quick and Bitcoin were usable, I'd argue that the price wouldn't be fluctuating

Right, that is really the other side of what I didn't say. I don't expect Steam to be holding onto bitcoin for very long but if even for the short amount of time they're holding it the price is fluctuating and doesn't offer an equivalent price in USD from the time the user presses pay to the time the transaction is processed, on top of what can amount to a 20% fee it's simply not currency. They'd be better off allowing people to pay them in stocks sold on the NYSE and NASDAQ.

> The volatility wouldn't be a huge problem

I am having trouble fathoming why you think that.

The possibility of goods or services being returned or disputed at a later date creates risk even when the initial transactions are instant.

> and makes BTC unusable for actual payments

How ironic..

If you treat it like gold(store of value) then having a service that makes it liquid is just a bonus. Is like expecting to be able to purchase something using stock.

It's just a sign that there are technical challenges. This can be solved with adaptations in the protocol (forks) I guess.

My biggest issue with BTC and the reason why I've never been bullish on them, despite owning a couple early on

People seem to forget Bitcoin is still in early "alpha" stages. Transaction times, fees, and even stable price will come IF it proves to be a long lasting means of exchange. This time next year tx times and fees will be solved with the lightning network - today the first text was done on chain. This is still early times

> I think this is what will ultimately bring Bitcoin down

People have been saying that for years. It serves purposes other than buying and selling goods, and in fact almost no one uses it to buy things.

The "$20 transaction fee" was an absolute top, and when that happened it was the single most congested the bitcoin network has ever been.

It's nowhere near that right now. The total cost for your "median" transaction right now (at 226 bytes) is about $4.30 USD (at 150 sat/byte). Even if you double that to 300 sat/byte you are still at ~$9.

Edit: I'm not saying even $4 fees are okay, just pointing out that it's not $20. I agree with steam's decision here, and it's something that Bitcoin needs to solve before it can really be useful as a payment system.

I've had to pay tx fees of ~$5 twice recently. The second $5 fee was to move my coins to a segwit address. Now the fees are under $1 again, i.e. actually viable for many real world txs again.

It's a good option and it's sure used in stocks and commodities but do they want all that extra work? Managing that is a pain and what is the upside of doing it? depending on the amount of bitcoins they handled against fiat currency it probably didn't make sense.

The claim is that (1) if the value of a currency is unstable, it won't be useful as a medium of exchange, and that (2) whether it's unstable because it's rising or because it's falling does not affect the validity of (1).

The reason for (2) is that an exchange has two parties. If the value of your currency is cratering, it won't work as a medium of exchange because vendors won't accept it, which prevents trade from happening.

If, on the other hand, the value of your currency is rocketing, it still won't work as a medium of exchange because customers won't spend it. That prevents trade just as effectively.

Putting aside all the nefarious ways bitcoin can be exchanged, I still see it as a great way to transfer huge sums of money without a typical chain of custody.

For example, suppose you need to transfer $10M from the US to China, you'll need a prominent and trustworthy bank on each side of the transaction that will ensure it gets from point A to B. Transfers of this nature often take several days, and each bank will take a nice cut for that peace of mind.

Bitcoin can potentially allow that same money to be transferred in minutes without huge banks on either side.

Wasting electricity.

They don't hold the bitcoin, they use a payment gateway who processes it into dollars instantly.

They stay clearly why they're not supporting bitcoin, it's because the time that it takes to mine the blocks means that often the transaction is processed after the payment gateway times out. And the mining fee is too high to make it viable for consumers.

It could be as simple as “the hassle was not worth the benefits”

There’s just a lot more steps in converting bitcoins into something they can pay their bills with.

Main source of instability is price manipulation by big players and market inefficiency (not easy enough to arbitrage between exchanges). It would be interesting to see them do the same thing if BTC market cap is in couple of trillions.

For example, if you're on any exchange that lists the total amount of orders in BTC, you can easily catch when the manipulation starts by seeing out of the ordinary sums (triple the amount of usual) for open positions.

Not to mention insane bot activity that is equivalent to a DDOS attack on the exchange.

During the last several hours of IOTA pump, exchanges, even the IOTA tangle were, and still are unstable.

The argument I hear by people like Ari Paul of Blocktower Capital, is that many emerging market currencies are already less stable, so you can use bitcoin as a way to escape inflation/government control in those markets.

Stores of value are normally viewed from a long term perspective. For most investors these are viewed as a hedge, even if the underlying store can be used for other purposes (think industrial and ornamental uses for silver, or the enjoyment of a renowned art piece), and so the short term fluctuation is not really an issue.

That said, if the trend of wild volatility were to continue into the long term it would indeed prove to be a poor store of value, but market speculation would indicate as such long before we were to get there (assuming we pick now as the period delta starting point for a "long term").

I think most people are perfectly fine with the instability as long as the price doesn't go _down_.

Nothing has that value if you look at a long enough time span. Gold, a traditional store of value, gained >100% and then lost >50% in the course of a decade.

Obviously this is not even noise compared to bitcoin; but my point is that bitcoin has shown to be an exceptional store of value for a long term hold.

Beyond that, I think most people who believe in bitcoin as a long term store of value expect that when it reaches a mature global-level market cap; the swings should be less severe.

The term gets used to contrast with 'medium of exchange', as the reality is that for most people, most of the time, bitcoin is not very liquid.

Store at least the value you put in. Falling in value would be bad. But rising in value is a bonus.

You exchange it for whatever currency you desire to make smaller transactions with. Even with slow scaling, it should remain suitable for large transactions.

As a store of value, it has many desirable properties. There is a fixed supply, it can be used anywhere with internet access, it is secure, and it is very inexpensive to hold. Gold, for instance, has a large potential supply, is very difficult to move and secure (e.g. vaults, armed guards), and typically requires you to trust a 3rd party (most hold gold IOUs, not the physical bars).

If you accept that there is a demand for such a store of value, then you must recognize the value of cryptocurrencies. There is also a great deal of potential value as technological solutions to the scaling problem are found, as well as new uses for Nakamoto-style networks.

> What value?

$13K of value, and counting.

Maybe it's a cultural thing, but I've always been told that gold is a great investment.

The "digital gold" argument doesn't make sense to me at all. Human beings aren't rational spenders. Gold, if nothing else, looks good. I can buy a $10,000 bar of gold and even if its value crashes by 20% tomorrow, I at least have an aesthetic metal that feels nice to touch.

BTC doesn't even give me that satisfaction

Currency exchange is a great bitcoin usecase.

> For that $2 a transaction is forever recorded on thousands of nodes in a worldwide consensus network, secured by a huge number of miners. Blockchains are not going to scale to visa level numbers of transactions without huge blocks and de facto centralization.

Bingo. Short of it is that consumers don't care. They just want to be able to buy something and have the transaction complete immediately. Whether it's a central payment network, a distributed consensus of 1000s of nodes, or a single "ring" from an in person cash register it's all the same.

So a 20% transaction fee on a $10 transaction? Who pays that fee?

Or a second transaction layer, like a bank or VISA?

At which point, why not use those same layers over USD instead of over bitcoin?

Who wouldn't want a "store of value" that might be worth +/- 20% by the time your transaction is complete?

No, because your fee is constantly competing to get into the block against future fees as miners sort the mempool by satoshi/byte to fill up the block.

Check out the asymptote: https://estimatefee.com/

Kind of, if you set it too low it might never get confirmed at all, but for the most part you can set fees pretty damn low if you are willing to wait for confirmation.

Yes

A Lightning Network transaction results in one of two things - a proof that a certain amount of bitcoins can be withdrawn at any time (minus some delay), or a proof of cheating. Surely a proof that you can withdraw a certain amount of bitcoins is more-or-less equivalent to that many bitcoins, and therefore any rational actor - including your suppliers - should accept it as such?

This isn't equivalent to unconfirmed transactions - it's tokens of exchange which directly and provably represent bitcoins. Settling on the blockchain shouldn't even have to happen monthly.

One of the other interesting things is that Lightning Network allows for payment in one cryptocurrency while you hold another by channeling it through a very simple, provable currency exchange. This could behave similarly to, for example, paying for something in USD when you hold GBP - practically automatically. So the lack of scalability in Bitcoin's blockchain might not matter so much - if something else turns up that's better for a given person holding money, they can start using it while still continuing to trade with all the people using Bitcoin.

IMHO, cross-chain transactions like this are one of the most important parts of Lightning Network - suddenly, network effects around a specific currency don't matter so much, people can hold whatever they like - Bitcoin people can trade with Litecoin people who can trade with Ethereum scripts, and when something new that solves more problems turns up, people holding that can still buy VPSes with bitcoin.

I agree that Payment Channels is a good step forward but there's the hard limit on how many channels can be open. I'm confident that there will be proposals similar to Poon et al. [1] to create a third layer for networks of payment channels where a Blockchain tx can be used only in case of uncooperative channel counterparties.

[1] https://www.tik.ee.ethz.ch/file/a20a865ce40d40c8f942cf206a7c...

Could also try IOTA (https://iota.org), even though it's early days

Looks like the first mainnet transaction went through today?

https://medium.com/@lightning_network/lightning-protocol-1-0...

  "As developers of the Lightning Network protocol, we’re 
  excited to announce version 1.0 RC of the Lightning 
  protocol specification along with a successful cross-
  implementation test on Bitcoin mainnet!"

I believe some tests have been done on the mainnet: https://www.coindesk.com/lightning-last-test-shows-bitcoin-s...

No. The amount of miners isn't tied to how many bitcoins exist, or how many transactions are happening.

Maybe you're thinking of how when more people are mining, it becomes harder to mine. This is because there is a global fixed rate of Bitcoin creation. Every 10 minutes, 12.5 new bitcoins come into existence. Miners are effectively competing for the chance to be the one to receive those new bitcoins. If mining becomes unprofitable, then some miners will drop out, causing it to become more profitable for those remaining. Miners don't set prices or rules; price affects profitability which either causes more miners to mine or some to drop out.

No, transaction volume and congestion is the thing that drives transaction fees up.

If transaction volume (and fees) stayed constant, then as the minting rate goes down, there will be a lower reward for blocks, and some miners will drop out of mining because it's not profitable for them. Miners dropping out will lower the mining difficulty, so the remaining miners will get a bigger cut. The system finds an equilibrium. Mining profitability only affects the mining difficulty and miners themselves (and the amount of resources necessary for a 51% attack, but as long as that remains obscenely high then the specifics don't really matter in this discussion).

... so bitcoin is doomed as a real currency as the prices are only going to get higher and people are not going to pay a $5 transaction fee for a $10 product.

How is the bitcoin community rationalizing this seemingly inescapable mathematical failure?

That's not really the answer. The answer is that there are more transactions being broadcast than there is space in the blocks to accommodate them. Thus creating fee pressure.

Apparently you haven't been paying attention to the news: https://www.cnbc.com/video/2017/11/06/japan-made-bitcoin-a-l...

I bet you one bitcoin at each time interval the price of bitcoin is above $30 USD.

I predict the price will continue to rise on average for the next 1-5 years, although it might start slowing. At some point between 10 and 25 years, Bitcoin will experience a major crash. Whether it stabilizes into some sort of useful medium of exchange alongside competing cryptocurrencies is hard to predict. It might survive in a limited role or a limited market, the value of which is very hard to imagine at this point.

In 100 years I think bitcoin will be worthless.

Because it's better than being on a trajectory where BTC hitting $1m is a real possibility. That world will be terrifying, and it's important for us to think about ways of mitigating or stopping it.

Litecoin

ouch

Someone else mentioned they used a third party payment service, so that might not have the exact amount they've received over time.

I'm an IOTA fan* but there aren't enough full nodes in the tangle at the moment (and also no direct financial incentive for more public ones to be created, afaik?). You just had to witness their slack last night to see that. People were setting up nodes and getting overrun almost immediately (I saw a guy complain he'd set up 4x 32GB nodes and watched them get swamped and CPU pegged within seconds). I gave up on a bitfinex withdrawal after waiting 12+ hours for it to process.

But, yes, at least with IOTA the tech is proven. More nodes will let it scale. I just wonder how they will incentivize these nodes to come in to existence and keep ownership of them reasonably decentralized/well distributed (and make it easy for light wallet users to find and use them).

* though admittedly I don't follow the project too closely - so apologies if some of the above is off-base/wrong.

it's easy to solve scaling (and the double spend problem) when you're trusting a central entity (the coordinator).

GP's post was just a pun/joke. Think you missed it :)

The market should be regulated if ALL OF US (grandmas too) are really going to end using cryptocurrencies.

Sounds obvious but maybe it explains why Bitcoin's scalability problem doesn't seem to have any effect on its price.