SegWit Killed Bitcoin by Randomshortdude at reddit
41 comments so far
The entire reddit post:
Hey everyone,
Here's a link to the most recent research article that I posted on Medium - I think a lot of people will find this to be VERY interesting: https://medium.com/@cryptomeds/how-segw ... 777b103c56
Here's some basic points that I have in this article:
-Right now, the competition within mining in cryptocurrency is set up to be in a "perfectly competitive" environment - which means that there are no barriers to entry, beside the cost of setting up materials. Over time, this has become progressively less true (obviously), yet there is still some decentralization among miners.
-SegWit's implementation means that miners must now do more work than before for the same amount of fees (additional SegWit data must be validated if the market is to remain reliable)
-Because of this extra cost to miners in term of time & effort in their operations, they will be forced to increase their output in order to maintain their profit margins (or minimize losses).
-However, due to the PoW, these efforts will be offset. So, miners will find themselves at an incurable deficit and many will be forced to exit the market at rapid rates in the future (assuming TRUE SW adoption - only 14% of TX are SW currently)
-This will turn the market from a diverse oligarchy to monopolistic competition.
-The results of this are alarming. The output will be capped by the miners because it will not be economically viable for them to increase their output from a profit maximizing perspective because of the Average Variable Cost (AVC) curve (I show this in the article in greater detail).
Conclusion: From an economic perspective, SegWit has guaranteed the stagnation of the entire network and has not only failed to prove itself as an adequate scaling solution, but an effective impediment to all future scaling efforts.
I also cover the premise of Lightning Network and show that, even if the network was able to somehow reach 100% SW adoption and every single person on the network used the Lightning Network ONLY and the BTC chain merely as a means of settling all payments, it STILL would not be able to adequately handle the volume or even come close to it (this does take into account the 1.7x block increase as well).
If you have a chance, please give this article a read and tell me what you think. I tried my best to be as thorough and accurate as possible with the numbers, research, and economic models. This is for the community and to help move the general scholarship around Bitcoin forward in the future (hopefully)
Please also see:
How Segwit Murdered Bitcoin: Bitcoin Can NEVER Scale
Medium.com
by Crypto Medication
February 12, 2018
