RTGS Segwit red Lightning Network Procesamiento fuera de cadena y el futuro de BCH y de la Mineria

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What follows is a translation into Spanish of an article that appeared on Saturday. The translation is by Enrique Melero, a Crypto Finance Consultant based n Geneva.

Daily Fintech is branching out from its English roots by getting more translation into other languages. So far we have done some in German, Chinese and now Spanish. We would like to do more in those languages and add other languages (such as French).

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Este título parece popurrí SEO de términos técnicos. Perdón – lo desglosaré para aquellos que no viven en el mundo digital. Títulos alternativos podrían haber sido:

  • ●  Puedes vender tus BCH porque pronto podrás pagar el un café con BTC.
  • ●  Bitcoin será pronto de uso corriente, elevando todavía más su precio.
  • ●  Por qué puedes olvidarte de aquello que “Bitcoin está condenado a causa de su consumo de energía”
  • ●  Los mineros Bitcoin seguirán haciendo dinero pero ya no controlarán el ecosistema.

    Para tener una explicación de las tecnologías que Bitcoin necesita para escalar puedes ir a este artículo y aprender lo que es Segwit, Lightning Network, procesamiento fuera de la cadena etc.

    Para empezar, propongo una explicación para los que viven en el cyber espacio desde la vieja sala de máquinas de los pagos internacionales.

    SLBTR es el procesamiento fuera de la cadena

    Allá en la era de los dinosaurios, los bancos globales procesaban pagos internacionales a través de los bancos centrales usando un mecanismo llamado Sistema de Liquidación Bruta en Tiempo Real (a partir de ahora usaremos sus siglas en inglés, RTGS). Hoy todavía siguen haciéndolo de la misma forma. Permíteme que un dinosaurio como yo, te explique sus principios básicos y por qué es relevante para Bitcoin.

    RTGS es la forma en que los bancos centrales liquidan pagos entre ellos – es en tiempo real, pero solo los Bancos Centrales tienen acceso al sistema. Es rápido, cerrado a unos pocos y para grandes

cantidades. Piensa en RTGS como procesamiento dentro de la cadena de bloques. A partir de aquí los pagos entran el sistema de pagos nacional y los libros de cuentas de los bancos cambian y Pepito Pérez recibe y paga dinero usando mensajes que funcionan usando la red SWIFT. Este sistema nacional es lento, semi-abierto (cualquier miembro de SWIFT puede participar) y puede usarse para pequeñas cantidades. Piensa en ello como proceso fuera de la cadena de bloques.

Esta es la forma en la que funcionan los pagos internacionales hoy.

El mundo Bitcoin hacia el que nos dirigimos se parece a esto mismo, pero mejor. Las transacciones más grandes se harán en la cadena mientras que las pequeñas se harán fuera de la cadena. Ahí terminan las similitudes.

Este es el modelo de pagos internacionales que va a emerger con la red Lightning (gracias a Segwit):

  • ●  Rápidos: Para pequeñas transacciones fuera de cadena será quasi en tiempo real (algunos segundos). Los sistemas de pago nacionales (que tardan desde unos pocos días hasta unas pocas horas) serán irrelevantes porque los usuarios no entenderán por qué debe llevar más tiempo que un mensaje o una actualización en Facebook.
  • ●  Abiertos: será posible elegir si se quieres hacer un pago en la cadena o fuera de cadena. Todo el mundo podrá convertirse en banco central simplemente montando el equipo de minado y cualquiera con una cartera bitcoin tendrá los mismos privilegios que tienen hoy los participantes de SWIFT.

Nota: aquellos a los que les asusta la centralización que supone el procesamiento fuera de la cadena deben de estar tranquilos. Es como el email. Todos pueden o podrían poner en marcha un servidor de email, pero elegimos usar el de otros. De la misma forma podrías montar tu propia infraestructura de minado que sería el equivalente a un Banco Central, pero la mayoría elegimos no hacerlo.

Puedes vender tus BCH porque podrás pronto comprar café con BTC.

Si recibiste BCH después del hard fork podrías estar tentado a guardarlos porque BCH es más rápido y más barato para pequeños pagos lo que hará que suba su precio. BCH podría tener sentido hoy en día porque los pagos pequeños en BTC son lentos y caros. Pero eso será irrelevante cuando Bitcoin se integre con la red Lightning y el procesamiento fuera de la cadena.

¿Todavía te sientes a gusto guardando BCH? ¿o a lo mejor tiene más sentido venderlos mientras siga habiendo posibilidad de hacerlo antes de que la red Lightning y el procesamiento fuera de la cadena sean de uso corriente?

Bitcoin será pronto moneda de uso corriente, impulsando su precio.

La idea que que el precio de Bitcoin se sostiene gracias a que es oro digital no tiene ningún sentido. Es presentarlo como un taburete cojo e incita a pensar en él como algo inestable que terminará cayendo. El Bitcoin necesita otra pata para sostenerse. Necesita ser tanto una moneda como una reserva de valor. El oro es teóricamente una moneda además de ser reserva de valor, pero realmente es cuestionable su uso como moneda con las

dificultades de transporte que ofrece. Bitcoin puede que también lo sea, pero no tanto.

Un Bitcoin con esas dos patas – reserva de riqueza y moneda – puede ofrecer un valor creciente y que sea sostenible en el tiempo.

Una vez que la red Lightning y el procesamiento fuera de la cadena sean de uso corriente, volveremos a examinar la salud del ecosistema bitcoin y los números deberían ser diferentes.

Puedes olvidarte de aquello de que “Bitcoin está condenado a causa de su consumo de energía”

La web Motherboard hizo un gran trabajo sobre esto y sus argumentos son innegables: La mayoría de la energía eléctrica viene de combustibles fósiles y un consumo creciente de estos recursos es lo último que queremos para el planeta. La conclusión a la que llega Motherboard es que Bitcoin es malo.

Tendremos la oportunidad de ver aparecer muchos artículos de investigación sobre este tema en los próximos años. Hay demasiado dinero en juego gracias a Bitcoin con el que podrán pagarse (junto a otros muchos investigadores que honestamente creen que Bitcoin es malo porque consume mucha energia).

Imagínate un mundo en el que la red Lightning y el procesamiento fuera de la cadena se conviertan en uso corriente. Muchas menos transacciones grandes se hacen en la cadena y la mayoría de las pequeñas se hacen fuera de la cadena que consume probablemente tanta electricidad como poner al día tu estado de Facebook.

Los mineros Bitcoin seguirán haciendo dinero pero ya no controlarán el ecosistema.

Tiene todo el sentido del mundo que los mineros de Bitcoin se resistan a Segwit. Saben que con Segwit lo siguiente es la red Lightning y el uso corriente de transacciones fuera de la cadena. Actualmente los mineros se llevan lo mejor de los dos mundos. Procesan las transacciones grandes via BTC y las pequeñas como el pago de un café con BCH. Todo esto lo perderán cuando la red Lightning y el proceso de transacciones offline se establezcan en el procesamiento de BCH. Seguirán encargándose de las transacciones grandes, donde la seguridad de las transacciones en la cadena es crítica. El volumen de transacciones grandes via BTC se incrementará para poder liquidar todas esas transacciones fuera de la cadena. Los mineros seguirán estando bien. No controlarán el ecosistema Bitcoin pero todavía podrán contar con unos beneficios adecuados.

RTGS, Segwit, Lightning Network, Offchain processing and the future of BCH and the Mining business

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That is an SEO smorgasboard of tech jargon. Apologies – I will break it down for those who do not live in cyber land. Alternative titles which may encourage you to read on:

  • You can sell your BCH because buying your coffee with BTC will soon be viable.
  • Bitcoin will soon go mainstream as a currency, adding more fuel to the price rise.
  • Why you can ignore the “Bitcoin is doomed because of the electricity cost” stories.
  • Bitcoin Miners will make OK money but won’t control the ecosystem.

For an explainer on the technologies needed for Bitcoin to scale, please go to this post to learn about Segwit, Lightning Network, off chain processing etc.

First, an explainer that will be needed for those who live in cyber land, from the old engine room of cross border payments.

RTGS is off chain processing from ye olden days

Back in the dinosaur era, global banks processed cross border payments via central banks and a mechanism called Real Time Gross Settlement (RTGS). Actually they still do that. As I lived in the dinosaur era, let me explain the basics and why it is relevant to Bitcoin.

RTGS is how Central Banks settle among themselves – it is real time, but only Central Banks get access. It is fast, permissioned, big ticket. Think of that as Onchain processing. Then a payment gets into national payment systems and ledgers within banks get changed and Josephine Q. Public gets credited/debited after Banks process messages via the SWIFT network. This national settlement is slow, semi-permissioned (any SWIFT Member can do it) and can be small ticket. Think of that as Offchain processing.

That is how cross border payments work today.
The Bitcoin world we are moving to today will look similar but better. Big transactions will be done Onchain, small transactions will be done Offchain. That is where the similarity ends. The Bitcoin cross border payments model that will emerge with Lightning Network (which required Segwit) will be:

  • Human real time (within seconds) for small Offchain transactions. National faster payments systems (going from a few days to a few hours) will be irrelevant because consumers see no reason why payments should take longer than messages and Facebook updates.
  • Permissionless. You can transact Offchain or Onchain. You can set up like a central bank just by setting up a mining rig. Anybody with a Bitcoin wallet is like a SWIFT member today.

Note: those who bemoan the centralisation that comes with Offchain processing need to chill. Its like email. We all can/could run our own email servers, but most of us choose not to do that. You can run your own mining rig and be the modern equivalent of a Central Bank – but most of us will choose not to do so.

You can sell your BCH because buying your coffee with BTC will soon be viable.

If you received BCH after the hard fork, you might be tempted to keep them because BCH is faster/cheaper for small payments and so BCH will rise in price. BCH makes sense today because small ticket payments are slow and expensive. Now look at what happens when Bitcoin moves to Lightning Network and Offchain processing. Are you still comfortable holding BCH? Hint: it might be smarter to sell as there are still a lot of trading days until Lightning Network and Offchain processing go mainstream.

Bitcoin will soon go mainstream as a currency, adding more fuel to the price rise.

The idea that Bitcoin price could be sustained only as a digital gold makes no sense. It is a one legged stool and if that image conjures pictures of a crash that is deliberate. Bitcoin needs two legs to sustain itself. It needs to be a currency as well as a store of value. Gold is theoretically a currency as well as a store of value, but in reality it is lousy as a currency. Bitcoin maybe flawed as a currency but Gold is even more flawed.

However if Bitcoin becomes a two legged stool – store of value and currency – then the price rise looks sustainable.

Once Lightning Network and Offchain processing go mainstream we will do another Bitcoin Ecosystem Healthcheck and the numbers should be different.

Why you can ignore the “Bitcoin is doomed because of the electricity cost” stories.

Motherboard has done a great job with this. The numbers are staggering and with most electricity coming from fossil fuels this is the last thing the world needs. The conclusion – Bitcoin is bad. Expect a lot of well researched pieces on this subject. There is enough money threatened by Bitcoin’s rise to pay for research along these lines (and plenty of honest researchers who believe that the “Bitcoin is doomed because of the electricity cost” story is true).

Imagine a world where Lightning Network and Offchain processing go mainstream. A much smaller number of big ticket transactions are done Onchain via Miners and the vast majority of small ticket transactions are done Offchain which will consume about the same amount of electricity as updating your Facebook status.

Bitcoin Miners will make OK money but won’t control the ecosystem.

It makes total sense for Bitcoin Miners to resist Segwit. They know that Segwit leads to Lightning Network and Offchain processing going mainstream. Today, Miners get the best of both worlds. They process big ticket e-gold type transactions via BTC and small ticket coffee shop type transactions via BCH. All they will lose when Lightning Network and Offchain processing go mainstream is BCH processing. They will still process big ticket transactions, where the security of Onchain processing is critical. Volumes of big ticket e-gold type transactions via BTC will go up to settle all those Offchain transactions. Miners will be just fine. They won’t control the whole Bitcoin ecosystem but they will make a very good living.

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Bernard Lunn is a Fintech deal-maker, author, investor and thought-leader.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Blockchain Bitcoin & Crypto Weekly CXO Briefing Week 2

The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and offer one expert opinion.

For the introduction and index to weekly posts please go here.

News Item 1: Bitcoin Pool ViaBTC says no to Segwit

News Decrypted: Last week we reported that a major Bitcoin miner (Bitmain) who has been backing the breakaway group (called Bitcoin Unlimited) has filed for a patent to a technology called ASICBOOST that would be harmed if Bitcoin used a technology called SegWit. For explanations/glossary please go to last week’s post. Our take on last week’s news was that this signaled the last bloody battle in the Bitcoin Civil War and that Bitcoin Core was winning.

The news this week is that another Bitcoin miner is saying no to Segwit.

Our Take: This week’s news seems to indicate the opposite of what we reported last week, but we hold to our conviction. Our take this week is that there are always skirmishes after a war is over. You could also say “it ain’t over till the fat lady sings” and that there is always some risk, but that does not invalidate that there is more upside than downside. If you read this week’s news item below the headline, it is more “not yet” than a no, despite the headline. You often get “headline negotiations” ie making a tough public statement followed by private negotiations.

News Item 2: Billionaire investor holds 10 percent of his life savings in bitcoin predicts price to hit 2000

News: Billionaire hedge fund investor Mike Novogratz, who made it into the Forbes billionaire list in 2008, revealed that he holds 10 percent of his net worth in Bitcoin and Ethereum.

Decrypted: Bitcoin price continues to rise and so we get forecasts that it will continue to rise. There are many more stories like this that are along the lines of “follow the brilliant investor leader”. Novogratz also invested in Ether. Another high profile investor making bullish statements is Tim Draper.

Our take: These investors are talking their book and they bought when the price was much lower, but that does not invalidate what they are saying. With the Bitcoin Civil War nearly over, there is more upside than downside, but nothing goes up in a straight line. A major Bitcoin hacking story is likely in 2017 and that will be a buying opportunity. It depends on your time horizon. If you view buying Bitcoin like a 10 year bet on a startup, these fluctuations are irrelevant.

News Item 3: Criminals who deal in bitcoins in Florida could soon be busted for money laundering.

News: Just because you use bitcoin to do something illegal, does not give you a defense.

Decrypted: This is only relevant as it drives mainstream sentiment and regulation. If the headline was “Criminals who deal in dollar bills in Florida could soon be busted for money laundering” it would not be significant.

Our Take: Regulators are in a quandary. On the one hand, bitcoin should be like cash – it is irrelevant as a defense for illegal activity. That is what this week’s news is about. On the other hand, banks and governments want to have control over cash and so don’t want bitcoin to be a legal currency and tax authorities prefer to see it like a commodity and to tax based on capital gains. The last sentence in the news article is interesting “But critics say the law could deliver a chilling effect on the bitcoin, which can be valuable in promoting commerce between Florida and countries such as Venezuela, where traditional banking systems have gone awry.” In short, money laundering out is bad, but money laundering in is good.

Opinion: Bitcoin continues to struggle ethereum looks strong

Why it is worth listening to: Ethereum is the only crypto currency with a market cap even comparable to Bitcoin and Ethereum is building the world’s first decentralized operating system.

Our take: Ether, like all Altcoins, have done well price-wise during the Bitcoin Civil War. If that is over, bitcoin price will rise and much of that will come from people converting Altcoins to Bitcoin. Ethereum could be the one exception to that. However, as a reality check it worth noting that few mainstream people have heard of Ethereum – this is reserved for crypto true believers . Also, the news last week was more about traction for Sidechains, which takes away some of the programmability benefits of Ethereum and to have a major differentiator, Ethereum needs to prove Proof Of Stake as an alternative to Proof Of Work and there is still real technical risk in that. If you love the idea of the world’s first decentralized operating system (I do), you may want to buy the Ether currency. As an investor, Ether at current price has a lot more risk than Bitcoin.

Bernard Lunn is a Fintech thought-leader and deal-maker. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.