Isaac Morehouse and Dean Little on 'Tiny Payments are a big deal' part 6: Which protocols work best?
This article covers part six of the video series called Tiny Payments Are a Big Deal. In it, Isaac Morehouse talks to Dean Little about tiny payments and much more.
Introducing Dean Little
People in the BSV ecosystem are probably already familiar with Dean Little. He’s the founder and CEO of Bitping, a company that uses micropayments on the BSV blockchain.
Bitping provides analytics for web apps and services by utilizing real users to test them. They make micropayments to the users for completing the work. This gives more accurate analytics and data to the owners.
Dean uses BSV but keeps an open mind about different protocols. He says he could potentially use BCH or Solana for Bitping. However, he says that BCH is still significantly more expensive in sats per byte when compared to BSV. When dealing with micropayments, these tiny amounts add up and make a difference.
Some early hurdles with BSV micropayments
One of the problems Dean faces while running Bitping is that some users don’t want BSV. They immediately want to cash out, and it’s challenging to do so since only a few exchanges list BSV. Likewise, those who have made a small amount and held onto it have watched its value plummet in recent times.
Isaac says that he believes this is a core problem that needs to be solved for micropayments to really take off. Right now, Dean says that sending USDC on Solana could be a potential solution. It’s possible to send tiny payments on this network worth a fraction of a penny, and the stablecoin element eliminates the volatility. However, Dean doesn’t see much to spend it on right now. Solana users might be able to flip their micropayments for a JPEG, and that’s about it.
Decrying the lack of entrepreneurship in the industry in general, Isaac says that he believes BSV has the most to offer, even if it only has 20 or so apps. He feels that it’s still extremely early and that the industry is still focused on speculation trading and has largely forgotten about the possibilities of micropayments.
What protocols are capable of sub-cent payments?
Isaac asks Dean to outline what the options are for protocols that are capable of sub-cent payments. He asks if there are any other than BSV, BCH, and Solana.
Dean speaks briefly about Litecoin on a good day and the fact that Dogecoin could do them at one time. Isaac asks about Dash and Nano, but Dean says that if you’re going to consider micropayments, you need to be able to rely on .0001 cent fees at scale.
Isaac then wants to know more about true nano payments at 1/110th of a penny or less. Dean says that Solana is capable of these. Even as Solana scales, the fees don’t climb, which gives it true potential as a micro and nano payments platform. On Solana, all transactions are treated equally in terms of fees. There’s no fee discrimination. Isaac asks if this is behind Solana’s recent technical problems. Dean answers that bots are partly responsible for this but that Solana’s servers are capable of accepting transactions, and the network itself is breaking down.
“It’s the bandwidth and the throughput that they’re struggling with,” Dean says.
Which platform can scale best now and in the future?
Isaac then asks for Dean’s opinion on Solana versus big block Bitcoin at scale and far into the future. He asks whether there’s one he trusts more and why. Dean says that Bitcoin is battle-tested and is basically full-proof for vanilla payments. He reserves his judgment on complex scripts and says that he has been able to take down Bitcoin testnet nodes before, so we’ll have to see if it can handle those types of transactions reliably in the future.
Giving the example of Twitter and all of its daily interactions, Isaac asks if there’s any existing protocol that could handle it today. Dean says the Bitcoin protocol could handle it, but the nodes and node software could not. He thinks BSV would last the longest but does not believe even BSV is doing enough to scale to the dimensions of something like Twitter.
Speaking more on the potential use cases of micropayments, Dean starts with the internet market for things under $1, such as surveys. “There are a lot of things on the internet that would be worth $1 that we can’t pay $1 for,” he says.
Talking more about the various network’s attitudes to scaling, Dean gives his opinion on the different approaches. He says BCH is taking a ‘don’t build it and hope they come’ perspective, Solana always breaks and reacts but fixes the problems through voluntary cooperation, and BSV broke at Christmas due to a node software malfunction, but those responsible blamed everyone else. He thinks Solana currently does best by the metric of admitting fault, taking ownership, and fixing the problems.
Why would Dean keep working on BSV, given some of the problems he has identified?
Dean still thinks there’s a lot he can squeeze out of BSV. While he’s not happy with the current node software, he does believe that if the problems are solved, it could fulfill the original vision for Bitcoin.
Dean calls on BSVers to stop pretending that uploading large files is scaling and focus on being able to handle 50,000+ transactions per second reliably. He believes that micropayments should be prioritized over other transactions on BSV.
Dean’s thoughts on proof of work and proof of stake
“When you have significant proof of work behind something, you can trust it in the absence of the rest of the blockchain,” Dean says.
Dean believes that proof of work is more trustworthy. Using the example of a block header on BTC, he says that yes, it could be fake, but you would know that someone would have had to spend a lot of money to make it so. One problem with proof of work is things like block reorg attacks.
Proof of stake does not have these problems (reorgs) as the economic incentives are not there. His main criticism of proof of stake is that it leads to big exchanges running nodes because they’re the ones with the most liquidity. Of course, they take fees for this. He likens it to a network run by banks charging bank fees. This means that if you can accumulate a lot of liquidity, you can essentially control or subvert the network.
Dean also notes that proof of stake is cheaper to produce than proof-of-work. This means you’re really only buying into network effects. He also refers to the economics of locking coins up to take liquidity away and increase the value of the coins as “ponzinomics.”
Isaac asks if there’s any fundamental reason why proof of stake would have to worry about higher fees than proof of work. Dean says that they might if the big cartels that hold all the coins jack the fees up.
Overall, Dean believes that they’re both good at solving different things.
Some criticism of the current Bitcoin network
Dean always speaks his mind frankly and remains unbiased. Despite building on BSV, he outlines a problem with the current BSV network: false positives and false negatives from miners. He says these can mess up the graph of various applications like Twetch. He believes that these false positives and negatives should be eliminated; it should be a yes or a no, and that’s it. He also thinks these problems could easily be solved with better node software and smarter business decisions.
“It’s incentives chasing incentives,” he says. He points out that the development of this software is closed source, the developers are paid whether they do a good job or not, and miners are chasing block rewards and don’t care what other problems they cause on the network. Both Isaac and Dean believe the block subsidy reduction schedule was not aggressive enough and that many of these problems could be solved if miners were chasing fees alone.
Dean believes that BSV is still the best place to battle-test his software despite these problems. However, he doesn’t mind if it ends up living somewhere else in the long run.
Finishing up, Isaac asks Dean for his advice to anyone out there with an idea for a Bitcoin business. Dean says to start small with 20 or so users, listen to customers and implement feedback, and remember that Bitcoin doesn’t have to solve every problem; it just has to solve the double-spend problem and be cheap enough to use for your needs.
Watch: CoinGeek New York presentation, Micropayments for the World: APIs, Tokens and Computation
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