The Block Size Problem

I recently read an article by @eeks titled " Steemit is Bitcoin's Killer App ". I think it is a great article and contains a lot of truth in the short term. But reading it got me thinking. Bitcoin may not be able to maintain its position of gateway to the altcoin world.

The Bitcoin blockchain is currently at its maximum capacity. Fees are rising. Bitcoin supports about 300K transactions per day. This means that Bitcoin can only support 9 million people making one transaction per month. Going through an altcoin exchange requires at least 1 bitcoin transaction from an altcoin exchange to a bitcoin/fiat exchange.

Steem User Growth

Steem has the potential to grow faster and reach farther than any prior crypto. It is entirely conceivable that Steem could reach millions of people in the next year. If these people were to use Bitcoin as a gateway to buy in and/or cash out each month then it could more than saturate Bitcoin's capacity all by itself.

Even if Bitcoin doubles its block size, the combination of existing transactions and any new transactions generated by Steem users would saturate the network. Market forces and transaction fees would cause people to bypass Bitcoin. There is no reason for Steem users to get into Bitcoin except speculation when Steem Dollars are available for savings and commerce.

Steem onboards people to Steem

The people Steem reaches that Bitcoin couldn't will still have no use for most of the other cryptocurrency projects. Just because Steem is a cryptocurrency doesn't make learning the value of Steem the same as learning the value of Bitcoin and other crypto projects. People want STEEM because of what it does for them. The value proposition of other cryptocurrencies remains unchanged.

In fact onboarding users through Steem may make converting them to Bitcoin even harder. It would be like onboarding someone to a high-speed bullet train and thinking that it would in turn onboard them to old school wood burning steam trains. It is easy to convert people from old trains to new trains, it just doesn't work the same the other way around.

If Bitcoin and other cryptocurrencies wish to benefit from Steem's attraction of new people to cryptocurrency, then they will need to solve the scalability problem much faster than previously anticipated. Failure to scale means the market could pass them by all together.