This week’s Big Crisis in Bitcoin has ignited the crypto unknowns discourse.
Criminal: Big, Fat, unwieldy fee rates.
George Kalaudis is a senior researcher and host of CoinDesk TV. “All About Bitcoin.”
Until recently you could send bitcoin transactions cheaply, at a fee rate of perhaps 1 Satoshi per vByte (equivalent to a fraction of a cent). Now, with the rise of Use of non-fungible tokens such as “inscriptions” And this BRC-20 Token Standard On bitcoin, the typical fee rates are absurd by comparison. At the time of writing, a bitcoin transaction sent over a reasonable time period would cost something like 100 satoshis per vByte.
All things considered, it’s actually still quite cheap – but it’s more expensive than bitcoiners. In such a situation, people are worried. The point is that they are upset not because the duty rates are high, but because of why the duty rates are high.
See, there is always scarce blockspace in the bitcoin blockchain. “When billions and billions of people want to use bitcoin will it become too expensive to use?” There has always been an open question about bitcoin. It was also a central point of contention during Blocksize Wars In 2015 to 2017 that led to the introduction of Segregated Witness (SegWit) for the Bitcoin and Bitcoin Cash hard forks.
(Note: SegWit solved for transaction malfeasance and opened the door for our most recent reason for fee increases; funny how that works).
This time, bitcoin fees have skyrocketed because a lot more people want to use bitcoin. and not to send without permission, good money Others, or because they want to hoard money, instead put monkey pictures on the bitcoin blockchain and speculate on the token.
Blasphemer Bitcoin is supposed to be used for financial transactions, hence the hullabaloo.
putting ethics aside Arguments for what bitcoin should be used forBitcoiners didn’t really have a good response on how the network should handle the timeout when transaction fees increased. Canned answers that “people will just pay for blockspace” or “the free market will figure it out” are setting up a world where the only people who are able to transact on the network are the bitcoin rich.
Shit. So much for evicting rent seekers.
Of course, there are some potential solutions to the high bitcoin fees. The most cited solution is bitcoin lightning network, which has been marked as a serviceable means of sending bitcoins quickly and cheaply. When you’re already involved and using the Lightning Network (and you know what you’re doing), that’s absolutely great. Transactions seem like magic. They are fast and cheap (when they don’t fail,
But the problem is that you can’t access layer 2 without sending an initial transaction to layer 1, in this case the currently comparably expensive bitcoin blockchain. It’s just like you can’t reach the second floor of most buildings without stepping onto the first floor. In both cases, you can just wait until the fees go down or until the lift bank is free (or take the stairs I guess?) but what if the fees don’t go down Is? What if people keep flocking to the building you are in?
One way to solve this could be through third-party custody. It’s like your friend setting up a zipline from the second building to the second floor through the window you opened so that you can reach the second floor without ever touching the first.
See also: SEC Blasts Over Custody Proposal by JP Morgan, Crypto Industry
All you need is a little trust. of course it’s the same bitcoin was built to survive – as a purely peer-to-peer version of electronic cash that can be sent directly from one party to another without going through a financial institution, But it’s true, a custodial solution might actually be the easiest way to use the Lightning Network.
Doesn’t it sound dirty though?
Unfortunately, the current design of bitcoin probably doesn’t allow the entirety of the world to be efficiently onboarded via layer 1. Maybe the big philosophical discussion about being financially self-sufficient is over for most because it’s hard to actually be completely self-sovereign. Same with bitcoin.
Our future conversations around bitcoin should probably focus on one thing: the trade-offs.
Maybe it’s okay that I use my bitcoin in a custodial way because it’s easier for me, and you use it non-custodial. Good. Maybe I’m wrong and you’re right. Maybe it’s none of your business how I use my (or rather, my patron’s) money.
The point is this: We should be more open to discussing custodial solutions to our problems, no matter how dirty they may sound to us. And to that end, implementing certain custodial products in your financial or bitcoin life does not preclude you from using non-custodial products.
You can use both. We deserve more clarity and options when it comes to these particular trade-offs.
The views and opinions expressed here are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.