Blockchains and cryptocurrencies were created as decentralized currencies, replacing or supplementing fiat currencies. The most common crypt for crypto fans is the future of the currency and will ultimately cope with the full economy. We dream of a day when we laugh and tell our children and grandchildren that we had physical wallets, paper currencies and things called "credit cards" ("Grandfather, seriously, you're so old!”).
Prepare a cryptic economy for mass acceptance
So what has to happen so that we can operate in the economy chain chain?
We have a number of obstacles that we still need to clarify, such as the value of these currencies to be stable, the processing of privacy in a reasonable manner, and the speed at which approval is given to deal with sales.
However, the most striking obstacle is throughput. We must be able to deal with many many deals per second than any current block chain. In 13 deals per second (high rating), Bitcoin can only process more than one million transactions a day. For a niche, for small economies it might be a trick. But this will certainly not work, for example, for the US economy.
We recommend it in perspective. In 2017, US gross domestic product (GDP) was nearly $ 20 trillion. GDP is not a big indicator of how much money changes hands in a year, but it is close enough for our purposes. If US $ 20 trillion was replaced in 2017, US $ 54 billion changed hands daily (20 trillion divided by 365). Regardless of how slow Bitcoin handles transactions, if it were to make $ 54 billion in transactions a day, transactions would have to be about $ 54,000 on average ($ 54 billion divided by 1 million).
What? Your daily transactions are on average $ 54,000? Of course not. Between 2012 and 2017, US $ 80 was made online by US consumers.
In 2016, transactions with Amex credit cards averaged around US $ 141, while Visa averaged around $ 80. While it is true that corporations tend to deal with higher dollar volumes, it is still possible that the cryptographic community is still in a number of sizes that are unable to handle all business transactions in one block chain.
If, based on the statistics just reported, we assume that transactions are on average $ 100, then $ 54 billion would change hands by about 540 million transactions a day (54 billion divided by 100). This decreases on average to about 6,000 transactions per second. If we take into account the fact that most people do business during the day, a quick recalculation gives about 10,000 transactions during the day (instead of sharing 24 hours a day, divide by 16 to calculate about 8 hours during sleep). .
This calculation is probably correct. The United States has about 324 million people and about 5 million businesses. If we assume that people and businesses do business on average 1.5 times a day, then we have about 500 million transactions per day (329 million units multiplied by 1.5). This is close to our estimate of 540 million daily transactions from past transactions in the United States of America with about 10,000 transactions per day.
Bitcoin should increase the volume of transactions with four size orders to replace the visa
Returning to the original question, how many transactions per second should be able to handle to support the US economy? Our approximate calculation of 10,000 transactions per second is almost not enough, but it provides the basis from which we can work. In order to give a perspective, Visa processes an average of about 1,700 transactions per second, but at a peak it can process about 24,000 transactions per second. Their maximum limit is slightly above the average to handle big days, such as Black Friday or after the Christmas return wave.
For example, using Visa data because 10,000 transactions per second is our approximate average, we might need to be able to process about 100,000 transactions per second to really kill it (one size above average, similar to Visa). It is much. More specifically, it is about 10,000 times faster than Bitcoin – four sizes.
For me, this means that our methods to find a consensus on the block chain are simply not fast enough or strong enough to actually use cryptography as a viable currency. To reach this threshold, we need innovation infrastructure, hardware and consensus algorithms.
Bitcoin is not the future of crypt
This means that, despite some significant changes and improvements, Bitcoin is almost certainly not the future of crypt.
Technologies such as the lightning network are trying to solve the scalability problem, but it is uncomfortable and inefficient. Opening channels to do business outside the chain attracts money in an extremely uncomfortable way. In practice, it encourages users to open a single channel with a centralized liquidity provider in the block chain rather than opening many channels. It actually creates unregulated, centralized banks and, in my opinion, is contrary to the basic principles of block chain technology. Even worse, because transactions are done outside the chain and channel data cannot be rearranged if the lightning node crashes, both sides can easily lose funds. It can really be one of the worst ideas for cryptocurrency.
Nevertheless, future blocks may not be so far away. New research in mathematics shows promising results in the mathematical foundations of consensus that could create block chains with 50,000 transactions per second or more without compromising security or decentralization. New paper is released every day, or a new product is launched by cryptographic launch.
There are many bright minds working to provide a crypt dream. I think in twenty years, if you pay for your foods with cryptography, you know we succeeded.
about the author: Derek Sorensen, Pyrofex Research Mathematician, holds a Master's degree in Mathematics and Computer Science from Oxford University and is ready to begin his doctorate at Cambridge University, where he will study logic and topology. His work on Pyrofex is an official test that includes research on the theory of consensus and the creation of mathematical frameworks to prove the theorem about code.