WE HAVE A BIG ANNOUNCEMENT... WE’RE LIVE! Last week we came out of Beta testing and launched The Bitcoin Company app in the Apple App Store and Google Play Store.͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏  ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ 
TBC Newsletter Cover Image

The Bitcoin Company

Newsletter

 

Hellooo!

 

Welcome to the fourth edition of our newsletter. Happy to see you here!

Every two weeks we’ll jump into your inbox to help you understand Bitcoin – not only what Bitcoin is, but what it’s doing and what’s happening in the community around it. We’ll explain known concepts as well as new developments.

 

Let us know what you think! We’d love your feedback.

We have a big announcment...

WE’RE LIVE! Last week we came out of Beta testing and launched The Bitcoin Company app in the Apple App Store and Google Play Store. You can download it here or type 'The Bitcoin Company' into the App Store. We published a couple technical blog posts written by two of our rockstar advisors. One is about bots in the Bitcoin mempool (written by Lisa Neigut) and the other is about Lightning pull payments (written by Paul Miller and Tony Giorgio). We also launched our website if you want to click around and see what we’re all about. My favorite page is this one ¯\_(ツ)_/¯

 

Our team is so excited to get all this out the door and into your hands… Seriously - it’s so freaking awesome. Hopefully now my mom will stop asking me “when app?”

Now, Mom. Now.

 

We’re stoked to have you all along on this journey with us and hope that we make you and the Bitcoin ecosystem proud.

We believe Bitcoin is for everyone. We’re in this to bring Bitcoin to as many people as we possibly can, so, the first step was pretty clear: give away bitcoin!

 

Our first approach is a feature that allows you to pick from hundreds of gift cards like Chipotle, Home Depot, Uber and more, pay with bitcoin on the Lightning Network, and earn bitcoin rewards for all your purchases.

 

I know, I know… you don’t have to spend your bitcoin! Soon we will be rolling out the ability to pay with credit or debit card, so you won’t have to spend your bitcoin, but will still earn bitcoin back.

 

That’s just the beginning :) My team will get mad at me for spilling the beans (sorry @benthecarman), but we are also rolling out our next big feature - the ability to purchase prepaid Visa gift cards - very shortly. That means you will be able to instantly convert your bitcoin into funds on a Visa card that you can spend anywhere (well..., anywhere Visa is accepted). The team is really excited about this one because we all want to stop eating Chipotle, Burger King, and IHOP all the time using our gift cards! Just kidding… IHOP rocks. Those pancakes are the fuel that got this app out.

 

We've got way more to come in our rewards app AND in the broader banking & Bitcoin space, but I'm gonna stop here to keep you guessing (and to keep @benthecarman happy).

 

Also - we're going to Miami! From the 2nd to the 12th we'll be hanging around The Bitcoin Conference. Come check out our booth near the entrance. We'll have a ton of sweet merch AND a lot of love (& bitcoin) to give away. Drop by, say hi, and cheer us on while we're on stage.

 

And last, we launched a sweet referral program in the app. Every friend you invite earns you a bitcoin bonus. What's really cool is that it boosts your in app reward rates AND you stack sats every time they make a purchase. It's a totally new way to DCA!

 

If you're feeling generous, use referral code "DONATE" on sign-up to support Bitcoin developers and open source contributors via OpenSats. Otherwise, join our Telegram community, make a friend, and hook them up.

 

We really appreciate you all being here and supporting us. We could NOT do it without all the love from our friends, our family, our early adopters, our investors, and our Bitcoin Community.

 

We love you all.

Bitcoin, for everyone.

 

Ben P and The Bitcoin Company team

By the Numbers

Glossary

Each issue we will define a new Bitcoin term or highlight an element relevant to the ecosystem.

Using Bitcoin is Too Expensive

 

Critics of Bitcoin have long pointed out that Bitcoin is destined to be too expensive to use. Some even say it’s already too expensive [though at the time of this writing it costs less than $0.10 to get a bitcoin transaction confirmed]. Often these critics are themselves proponents of (insert_any_altcoin_here) which usually proclaims to be faster and cheaper than Bitcoin. In most cases, they are right about the faster and cheaper part (unless you consider the near free transactions when sent over the Lightning Network), but they rarely - if ever - acknowledge the trade-offs that lead to these perceived improvements.

 

Bitcoin is designed, above all, to be secure and irreversible. As we discussed in our last newsletter, it is also designed to be a peer-to-peer technology. These important constraints require a few things to make the whole package work. One of these is a limited block size. If Bitcoin blocks were allowed to hold a much larger or even an infinite amount of transactions, it would be very hard for the average user to store and verify all that data on a normal phone or computer. Making blocks BIG would make fees cheaper, but this would likely result in only very few, very powerful computers being able to run the Bitcoin software. Users of Bitcoin took a powerful stand in 2017 against the so-called ‘big-blockers’ (more on that here) and in the end the network chose to value decentralization over potential cost savings.

The argument to increase the block size is fairly well known, but some users have also suggested speeding blocks up. Bitcoin blocks are programmed to be found on average every ten minutes, but if we were to change that timing, the same storage problem would arise fairly quickly. Many other crypto networks have blocks that come in every few seconds or faster, but only a very powerful computer can handle the amount of data they process.

 

In this week’s highlight piece we will be talking more about how Bitcoin has already grown to handle a very large number of users in just a short time and we will outline what the brightest minds in the community think the next steps are. We won’t be spending much more time talking about the bitcoin block size, but if you want to learn more about why it is so important to Bitcoin, we recommend checking out this in depth historical analysis from Till Musshoff.

 

Bitcoin Fundamentals

Each issue we will define a new Bitcoin term or highlight an element relevant to the ecosystem. If you want to explore more on your own we recommend checking out Clark Moody’s awesome dashboard.

How does the fee market work?

 

What happens after you make a bitcoin transaction?

You have to tell the world about it of course!

In many popular bitcoin wallets the process of broadcasting a transaction to the network after you’ve signed it happens with the mere press of a button. The act of broadcasting the transaction is effectively telling all the nodes in the world that you want to spend some of your bitcoin. Your wallet will send a package of data to all the nodes that your node is connected to which describes how you want to spend your money. The receiving nodes will check that your transaction isn’t violating any of the important rules of Bitcoin and as long as everything appears normal they will send that same data to all nodes they are connected to. This results in a massive game of telephone and usually in just a few seconds the whole network will know exactly what it is that you want.

 

Now that you’ve constructed, signed, and broadcast your transaction to the network you have no choice but to wait. Your transaction joins all the others in something called the mempool (short for memory pool) where they all hang out hoping that the miner who finds the next block will choose to include them. Miners are usually smart (economic) and when they are lucky enough to find a block, they will include all the transactions that they can fit without exceeding the size constraint. Normally miners want to maximize their profits and they select the transactions that promise to pay the highest fees.

 

But what happens if space runs out? In short you’ll have to wait until the next block or the one after that and sometimes hours or days. If you’ve ever seen a fee estimator in your wallet or on a dashboard like the one shown below, those estimates are meant to give you a rough idea of how much you’ll need to pay if you want to be included in a block within each given time frame.

TBC_ BIP infographic

Of course these estimates are always just that because at any time the mempool could fill up. When this happens, demand goes up and the fee required to earn inclusion goes up with it. If you want to check out what the fee market looks like in real time, we recommend heading over to txstreet.com to watch their awesome visualization. They show each transaction as a person waiting for a bus and each time a real Bitcoin block is found, the bus loads as many people as it can fit and departs from the station.

 

 

Highlight Story

Layered Money

“The Visa credit card network processes 1,700 transactions per second. How will bitcoin ever hope to replace credit card companies if it can’t process the same amount?”

 

This is something we hear around Bitcoin alllll the time. As we talked about above, the perceived slowness of Bitcoin is far and above the most common criticism levied at the network. However, the reductionist comparison of a credit card network - like Visa to the monetary protocol of Bitcoin - is certainly not apples to apples. This week we hope to teach you how much more there is to this comparison and hopefully surprise you.

 

Have you ever thought about what actually happens when you swipe your credit card? One might assume that the mere act of swiping transfers money from your account to the merchant, but there’s much more going on behind the scenes.

 

For the purposes of this week’s explanation we’re going to follow along with a character named Hal as he runs his errands. First Hal will stop by the grocery store which is owned by Ross. Although Ross may let Hal walk out with his groceries as soon as the card reader beeps in the affirmative, the transaction is far from settled. In reality, Hal’s card issuer is making a promise that a certain amount of money will eventually make it from his bank account to the bank account owned by the grocery store. Throughout the day Ross may collect many promises of payment in exchange for groceries from his store - none of which are guaranteed. At the end of the day Ross will reconcile all these promises with his bank. His bank may in turn go through a similar process and combine a large number of transactions from a large number of merchants. If Ross and Hal use the same bank, the settlement process may be very simple, but this is rarely the case. More likely Ross’ bank will need to contact another bank which may need to contact many others to settle all their transactions with all the major card issuers. Each of these steps has to go through the slow settlement layers of traditional banking and it may take weeks for the original payment that Hal made to end up in Ross’ bank account.

 

Up until this point we’ve been pretending that Hal is a good actor - someone who would never try to charge back the payment - but it is important to remember that he or any one of Ross’ customers could do so leaving the grocery store unable to pay its suppliers. Ross is trusting not only the credit card company, but also each bank that sits between his store and his customers. The web of various settlement layers may be so complex that neither Hal nor Ross could figure out who they’re trusting even if they tried. The graphic below shows just one example of how complex this web of trust may be.

How did we get here?

 

Oh, that's right! We were trying to arrive at a fair comparison between credit cards and Bitcoin.

 

Let’s check back in with Hal who’s next errand involves picking up some tools at the hardware store. Hal likes coming to this locally owned store because the owner, Alice, offers discounts to customers who pay with cash or bitcoin. When customers use cash or bitcoin at Alice’s store, it saves her from having to pay the 3-5% credit card processing fee (Alice has to pay 3% of her revenue to her bank every time someone pays with a debit or credit card). Hal likes to place his orders online ahead of time and when he does, Alice’s website presents him with a QR code that Hal can scan with his phone. In just a few seconds Hal constructs a Bitcoin transaction in his wallet to pay for the tools. He then broadcasts it to the network. Although it didn’t confirm for an hour or so, by the time he arrives to pick up his hardware from Alice, the transaction has been completed. Before Hal even has a chance to pull out of the parking lot, Alice has final settlement in the full amount for Hal’s order. Hal's money moved directly to Alice's account, with no intermediary, fees, or extra hops, like the 8 steps in a card transaction shown above. At no point in this interaction did either individual have to trust a third party, like Visa, a bank, or a payment processor. Other than the fee paid to the miner who confirmed Hal’s payment, there were no extra costs associated with the transfer of funds. Furthermore, Hal cannot reverse (or ‘chargeback’) the payment he made and Alice can sleep easy knowing they have their money and without the extra time and steps involved in credit cards.

 

Hopefully now you can see it is important not to abstract away all the hidden layers behind traditional financial settlement when comparing something like credit card payments to Bitcoin. Many people have no idea how much trust can be involved in the simple swipe of a card. Bitcoin is truly customer to merchant payments... whereas credit cards involve a host of intermediaries, all whom can take their cut of the payment, and at any point, declare it invalid and void... resulting in a loss to Ross.

 

The beauty of Bitcoin is that it removes the need for all that trust. If we want to compare apples to apples, Bitcoin is more like the settlement layer that connect banks to other banks with one key difference: Hal, Alice, and Ross aren’t welcome to use the bank settlement layers directly like they are able to use Bitcoin. Just as the bank settlement layers would never be able to support the same volume that Visa or Mastercard handle at any given time, Bitcoin will never be able to support billions of users without some help. This is why it is important for the Bitcoin community to continue iterating and building on top of the base settlement layer. Scaling solutions like the lightning network exist to help Bitcoin handle greater volumes. Bitcoin solves the core problem of money, which is that it can be inflated any time a politician asks for a favor. Bitcoin is fixed in its supply and nobody can change that.The second layer on top of it, aka "lightning", or the lightning network, solves the real time payment issue that Bitcoin, and its slower processing time (for the sake of global inclusivity) suffers from. The second layer of Bitcoin allows it to be transferred in real time, trustlessly, settled real-time from consumer, directly to merchant, with no middlemen, and NO FEES. This is ground breaking and civilizational changing technology. This destroys the business model of rent-seeking banks and payment networks, which provide little to no value, yet charge exorbitant fees for their trivial "services".

 

We’ll cover these technologies in future newsletters. For now, please know there’s a network of trust behind anything you do with fiat currency. 99% of the time you never need to worry about who you’re trusting, but, it’s still nice to have money that eliminates this trust need completely. The solution is Bitcoin. Bitcoin gives you ability to pay the person you want to pay, not the middleman in between. Next time you go to the market, or the bar, or the restaurant, think twice about paying with your Visa or Mastercard. When you do that, 3% of your payment immediately gets wiped away and eaten by the banking and payments ecosystem. Instead, you can pay the cook who made your food directly. You can pay with bitcoin! With bitcoin, no middlemen, banks, payment networks, payment gateways, payment processors, or intermediaries of any kind, get to take a cut. We think that's a beautiful thing. And that's what we're all fighting for at The Bitcoin Company. Join us. Download the app and start living a better life.

 

Bitcoin, for everyone.

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Tweet thread #1 of the week:

 

Here’s a list curated by @lopp of 68 Bitcoin Twitter accounts that regularly tweet high signal content.

 

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Tweet of the week:

 

@CynthisMLummis

Can you imagine tracking every cup of coffee or hamburger purchase for currency gains or loses at time of transaction? (Nightmare) Let lightning ⚡️(etc) do its thing.

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Q: How many bitcoins are mined every day?

A) 6.25

B) 150

C) 900

D) 1024

 

See the answer