How is Bitcoin doing these days? How does bitcoin today compare with Bitcoin of 2017? It seems like a lot has changed. So, here is a quick look I decided to put together.
SegWit
Segregated witness was activated in August 2017. It segregates signature data from transactions into blocks past the 1Mb limit - effectively freeing room in the block for more transactions. It also paved the way for other improvements related to future soft-forks as a way to add new features to Bitcoin without disrupting existing users or requiring everyone to update their software. Let's look at segwit adoption:
Not as good as one would have hoped, but the trend is good. In terms of large (i.e. in value) transactions, Segwit has become the sleight majority. In terms of the number of transactions and block-space used, SegWit is now half of the transactions.
Blocksize
That pesky 1Mb block limit, which can't be removed without a hard fork (and associated risk/split/centralization). How has it changed over the last 5 years?
The solid block around 2018 is when blocks were full - fees were sky-high, and we were witnessing a boom in Bitcoin. The blockchain hit a wall. SegWit was new. That seemed to have resolved, and we can now see that blocksize averages of 1.3Mb are common. The blocksize could still be even higher as not everyone is using SegWit yet.
Fees
What happened to fees over time?
The fee issues leading up to 2018 is clear - but then, it seems to have settled down. It may not stay that low if the demand for transactions goes up, but we are far from the fee issues we had in 2017 and 2018.
Lightning Network
The beta lightning network is still under development, but, it is already very useful. If you are reading this, you've probably enjoyed a few Lightning Network transactions already.
The number of public channels and capacity seems to have reached a plateau. A public capacity of 1000 BTC seems to be the sticky point. Unfortunately (fortunately!), due to the nature of the Lightning Network, we can't see how many transactions are going on. How's that for privacy enhancement? I can say that my lightning node has already conducted almost 130,000 transactions. Yes - that's right 130K! I think I've paid under $1 in routing fees for all of those combined. I also open channels at 1-2 satoshi/byte, so minimal chain fees too.
If we were to have this kind of transaction capacity on the native blockchain, that would take about 52 blocks of space. Also, remember - I am just one of now 12,000 public nodes on the network. I might be among the most active nodes, but I hope that one can see the scaling going on here. At even $0.01 per transaction, that would have cost $1,300 to transact on-chain, likely more.
Keep in mind this is all on a measly 1Mb blockchain.
Summary
I think that Bitcoin is in a pretty good place. There are still things to work on (i.e. keeping fees low), but the future is bright. We are not in a corner, and there are multiple exciting developments in the works. The change that has me most excited is BIPs 340, 341, and 342. These Bitcoin Improvement Proposals add (through soft-fork) Schnorr Signatures, Taproot, and Tapscript. I should do a future post to explain what this gives us in more detail - but I'll say now that it gets me really excited for the future of Bitcoin. I'm talking about privacy, scaling, safety, and powerful smart contracts.
* Note that nowhere in this post did I make any mention of market prices.
In case of the tax, very simple solution just don't mine the supposed upgraded chain, and let it be 2 chains, one supports the tax the other doesn't, very simple, centralization my ass, at least you can choose if you want tax or not.
Guess what, I think people will go for the tax so that they can pay development, in the case of Bitcoin, they didn't tax the mining Bitcoin just gave up on trying to be a currency and instead decided to be MoneyGram Lightning Network which is not a currency just a money sending service.
Lightning Network means two onchain transaction fees plus routing fees on top, you can't be a currency with three fees, the best you can hope to be is Western Union. Not to mention you are not private whatsoever.
Bitcoin Cash will charge you a tax, Bitcoin sold out to governments and corporations and gave P2P, that's a hell of price to pay for development, I rather pay 8% than give up peer to peer currency.
By to way I have been using Western Union Lightning Network because to not pay the opening and closing of channels I have been forced to use wallets like Phoenix and wallet of satoshi.
And many other will continue to use lightning this way just to not pay onchain fees and many are starting to think using wallets like that is actually using Bitcoin which is not it is just another PayPal account.
At Phoenix Wallet, you have to pay a fee because it's a non-custodial wallet. And what you can do is:
- Abandon Bitcoin
- Promote Lightning to keep onchain fees as low as possible
- Recommended for fee reduction solutions on the first layer like SegWit, Schnorr, Taproot.
BCH will not allow itself to split, because it would be dead.
I don't care what happens to Bitcoin Cash, for all I care all Bitcoin direct forks should die, just like Bitcoin will. The moment Bitcoin dies, I don't want a fork to say we are the new Bitcoin, I want anyone that holds Bitcoin or any fork to lose their money for forgetting what was supposed a peer to peer currency.
All fiat will start experiencing hyperinflation, and when people try to use Bitcoin to scape hyperinflation than they will realize Bitcoin is not a currency and the price will dump. People will not go to Bitcoin just to hold it at some point they will want to use it, but in a hyperinflation world usage will be so big that tx fees will go so high that people will dump it.
And lightning network will mean double the fees, not to mention custodian wallets may 3ven get a letter saying please give us this and that user funds because we are the government, and since the only way to pay less tx fees is to use custodian wallets, pretty soon people will realize they are using PayPal Lightning Network account when their custodian wallet overlords tell them that the government has ask for their funds and as such they can go and suck a dick for not owning their own keys.
Bitcoin not being a peer to peer currency will only come to light once people try to use it as such, and it will be when people will want to use it the most as a p2p CURRENCY but it will be when they realize they got fuck.
Hyperinflation in fiat currency will show the importance of peer to peer currency with low fees, but if you haven't cash out into something else by that time, you won't even have the possibility to dump because the network will be stuck with higher and higher tx cost.
You don't need to be that smart to realize high transaction fees will be the end of Bitcoin in a hyperinflation world.
Bitcoin is no ordinary cryptocurrency - thousands of developers, millions of users and a very large adoption (for a crypto) make it the largest project in the world.