Question…
I apologize if this topic is a bit controversial.
To scale Bitcoin to support micro transactions, do you think that there must be a trusted third party at some level?
Discussion
You mean like liquid and lightning? Not sure if it MUST be custodial or 3rd party. But these are great solutions for every day transactions that don't have to be on chain.
The idea behind bitcoin is to have peer to peer transactions.
Lightning is good because you don’t need to have a trusted third party to open a lightning channel and you can transact small amounts as many times as you want with little cost.
It seems like lightning has a tendency to centralize into trusted third parties though. Don’t ask my why, I don’t know.🤷
Liquid is a trusted third-party company.
Fedimint is a trusted third-party federation.
Cashu is a trusted third party mint.
I’m wondering if anyone knows of a scaling architecture that does not require trusted third parties.
Just seeing if anyone has heard of projects like that.
Solving that without breaking mainnet is a 100k BTC problem. It's probably impossible.
We should be able to make cheating immediately detectable, with security provided by violent backlash. That might be enough.
100k is not that far off. And I am interested in having conversations about it. I believe that the problems will be solved by clever engineering. I just like talking about it. I find it fascinating talking about the different potential architectures and the trade-offs for each one. It’s conversations like this that help build the solutions.
Apologies, I meant that the value of a fully self-custodied scalable solution is worth 100k bitcoin, not one to solve at 100k fiat price. It's a rabbit hole of a problem.
Ultimately, mainnet as it currently exists cannot serve humanity long term, though BTC can and should. Simple proof: Mars is never closer than 6 light-minutes round trip. No Martian colony will ever be able to mine bitcoin in a viable manner. And that's our backyard. Other stars is a joke.
This is why I believe in the transmutation protocol through sidechain. Scale via L2, verify everything. You can't necessarily stop abuse at the transition point, but if you can guarantee it's caught and execute violators, that's not bad. If a sidechain performs an important enough task that being a layer 1 is necessary, then plan and execute a burn of all the custodied BTC after allowing exits. The layer 2 token goes from being backed by BTC to made from BTC. Like smelting Spanish coins to make French coins. No violation of absolute scarcity.
Maybe we get better, but if not, seems the best option.
Here’s a thought: Gold served as a great form of money for many reasons, and most people would agree. The main issue with gold, however, is its size and weight, making it difficult to transport. To solve this, paper certificates redeemable for gold were introduced. The problem was that the issuers of these certificates could issue more than the gold they actually had, leading to a lack of trust.
The real issue wasn’t the idea of issuing paper certificates but the inability to verify that the number of certificates matched the gold held by the issuer. Instead of focusing on scaling Bitcoin, perhaps we should focus on solving the verification problem. If we could easily verify that the number of issued certificates corresponds exactly to the Bitcoin held by the issuer, scaling wouldn’t be an issue, and we could trust third parties because we could verify their claims.