[k__]

I always read that crypto currencies will replace money, because they are distributed.

But does a blockchain, that is at the core of every(?) crypto currency really scale well?

Keeping the whole ledger constantly available seems rather storage and traffic intensive to me.

[davidgerard]

tl;dr no. Bitcoin has a theoretical limit of 7 transactions/sec (or 4200/10min) for everyone in the world. Ethereum can do up to about 14-16 tx/sec.

There are plans to fix this - sharding on Ethereum, Lightning Network on Bitcoin - but both are largely vaporware at this stage.

In practice, a lot of the transaction action happens inside the individual exchanges, not on the blockchain itself - so we already have a "level 1" and "level 2" system.

Also, there's issues of securing your bitcoins - "be your own bank" means "be your own extremely knowledgeable chief security officer". This is why even a lot of big holders keep a lot of money on exchanges (and lost lots in Mt. Gox). And why losses due to human error are extremely common.

The blockchain is more interesting than useful.

[JudasSicarius]

"In practice, a lot of the transaction action happens inside the individual exchanges, not on the blockchain itself - so we already have a "level 1" and "level 2" system."

Can you expand on this a bit? Is it somewhat analogous to the role that dark pools play in the stock market?

[davidgerard]

By quantity a hell of a lot more individual trades happen on the exchanges than on chain. It's not hidden - just not as radically transparent as on-chain transactions. But obviously harder to gather data on, has none of the blockchain's cryptographic guarantees, etc. It turns out the actual traders care more about getting a good price than the ideological basis for the blockchain. And that's even in a situation where you can't really trust the exchanges - rife with insider trading, wash trades, front running, spoofing, whether a Tether can be counted as a dollar, etc., things that are highly illegal in normal security trading. As long as the number keeps going up, everyone seems okay with this.