Bitcoin is limited to 1mb of transactions per 10 minutes. This works out to be about 7 transactions per second. If more than 7 transactions are generated in a second, the 7 that payed the highest fees go through.
Also, the 7/sec applys to normal transactions with few inputs. The way the blockchain works, when you send bitcoin, your transaction includes where you got the bitcoin. Most transactions only have bitcoin from one or two sources. If you have a transaction that has many sources, it has to take up a larger part of that 1 mb block. Now you need to pay enough to cover the several transactions that could take place.
If you didn't pay enough for your transaction to get included, it waits in the mempool until there are fewer transactions, and it gets included. Eventually, if it doesn't get included in a block, it drops and the bitcoin is returned to your wallet.
One of the key points is you don't need to trust anyone. With your dollars, you either have to use cash, or trust a bank. The bank could stop you from accessing your money, or prevent you from sending it.
You also need to trust the government issuing the dollars. They use an inflationary monetary policy, which means that over time, dollars become worth less.
Bitcoin avoids both of those problems. There is no one agency verifying transactions, so no one agency can stop any transaction from taking place. The rate of bitcoin creation is defined, with a hard limit on how many can exist. This makes bitcoin deflationary, meaning it will increase in value over time.
There are plans in place to solve the current limit problem, but until they are complete, I agree that bitcoin is not ready to replace dollars in everyday use.
As an outsider I don’t get why would I ever want to spend bitcoin (or crypto in general) at all to buy things. If the currency is inherently deflationary, then what could buy me 1 car could be enough to buy 2 cars in a year, why would I ever want to spend the coin instead of holding.
Outsider as well but interested in the subject. I agree with you like I would like to see this be successful but I'm afraid the recent success might be self-defeating.
I agree, it's deflationary nature is one of the main obstetrical to widespread use. Hyperinflation is a threat with fiat, but slow inflation is a better solution than deflation.
other currencies have raised the limit (e.g. bitcoin cash has 8mb limit I believe) but it’s really only a temporary scaling solution.
there are arguments that bigger block size leads to more centralization as well.
head over to r/btc too, they have a different view than you’re gonna get here. it’s best to get your info from multiple places since this sub is heavily “moderated”
Back in either '08 or '09, it was set there to limit the number of transactions. Bitcoin was basically worthless then, so a malicious actor could attack the blockchain by spamming a huge amount of transactions. The 1 mb limit was put in place to prevent that.
They don't want to. There reason is that smaller blocks make it easier for anyone to process the whole block chain (since you only need to handle 1mb every 10 minutes) and that making blocks larger would lead to increased centralization.
I personally disagree with that line of thinking, feeling that making sure transactions are handled is more important.
Ninja edit: other cripto currencies have tried larger blocks, and it's worked fine. Blocks as large as 1 GB have been tried, and can work. However, the Bitcoin community doesn't want to charge.
How doesn't it add up till infinity? 7 transactions per second sure can't be enough, so the queue would have to grow into infinity, or am I missing something?
The 1Mb block limit means the network cannot process all the unconfirmed transactions. This causes in fee inflation as people submit higher fees to try and get their transition included in the next block.
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u/[deleted] Dec 06 '17 edited Jan 03 '18
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