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Monday, 8 April 2019

The best money is the one that most reduces transactional friction, incl. friction of finding a transacting partner (by having a large network effect), friction of making a tx (by being fast and cheap to transact), and friction of holding money between tx's (by having a predictable, finite supply)

Literally the entire purpose of money is to reduce transactional friction. The best money is thus the one that does this most effectively, including: (1) reducing the friction associated with finding a transacting partner (by having a large network effect, i.e., being widely held and accepted): (2) reducing the friction associated with making an individual transaction (by being fast, cheap, and reliable to transact); and (3) reducing the friction associated with holding money between transactions (by having a predictable, finite supply). BTC is still the leader with respect to the first category (which is arguably the most important, certainly that's true in the short-term), but it's absolutely shitting the bed when it comes to the second. Indeed, BTC is in a really ugly spot where as it becomes a better money along one essential dimension (thanks to increased adoption and network effect), it simultaneously becomes a worse money along another essential dimension (as growing congestion causes transacting to be increasingly slow, expensive, and unreliable). BTC's arbitrary limit on block space is a collar around Bitcoin’s neck that turns into a noose as the network attempts to grow.

BCH on the other hand is doing very well in categories two and three and at least reasonably well with respect to category one. The question is whether BCH can grow its network effect faster than BTC can fix its broken protocol.



Written by: Capt_Roger_Murdock
Source: http://bit.ly/2UlXEk5

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