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3 Reasons Why Bitcoin Transactions Are Slow

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Aug 01, 2020 at 08:27 // News

Bitcoin is the slowest cryptocurrency

Despite Bitcoin offering unprecedented decentralization and security, its network has one significant flow, namely, the transaction speed. A single transaction processing can take up to 10 minutes. But why is this happening?

To understand why bitcoin transactions sometimes take so much time to confirm, it is essential to first understand how they are verified.

Delving into the essence

Once a transaction is created, a transaction message is sent to the Bitcoin blockchain and passed around all the nodes available on the network. This is called the Mempool queue where unconfirmed transactions are waiting to be validated by miners. Now the miners (in simple words, nodes validating a new transaction) will select a collection of transactions (not exceeding in size of 1MB), and try to validate them by solving a complex mathematical problem as their proof of work (POW). 

Once a miner successfully validates a transaction and adds a new block to the blockchain, they’ll pass it around the updated ledger to other miners who are trying to validate a new block on top of that. In this case, many miners validate a new block almost instantaneously, and the longest chain rule is applied to accept one block and discard the remaining ones. The longest chain rule is basically accepting the blockchain with more blocks every node on the network, therefore, agreeing on the same transaction history. 

Such a process seems time-consuming, although the speed actually depends on the equipment used. However, there are several other reasons for the slow speed of transaction confirmation.

Low transaction fee

Once an unconfirmed transaction is waiting around in the Mempool queue, the miners are more likely to pick up the transactions with a high transaction fee. Why so? Because seeing it from the miners’ perspective, when they mine a new block to validate a translation, they’re using the computing power, thus energy which costs them money. Therefore, they’re more likely to put their resources and money to validate a transaction that offers them better returns.

Network congestion

A block on Bitcoin blockchain can only contain a collection of transactions not exceeding 1MB of data. Therefore, the Bitcoin blockchain can only handle up to 7 transactions per second. Considering the current difficulty of complex mathematical problems, it takes on average 10 mins to apply the longest chain rule and validate a new block. So, if the network is congested and a large number of unconfirmed transactions are lying around in the Mempool queue, it can still take a long time even if you’re willing to pay a higher transaction fee.

Transaction size

Since a block in Bitcoin blockchain can only store information up to 1MB in size, a large transaction can take a lot of space. Thus, making it harder for the miners to validate transactions of a larger size. Therefore, miners are more likely to pick smaller transactions which are comparatively easy to validate.

Most of the exchanges and wallets dynamically adjust the transaction fee based on network congestion. It means the wallet service or exchange will calculate the appropriate transaction fee depending upon the current network load and transaction size. However, the fee can be adjusted manually. Many wallet services offer their users some adjustable options.

What about other altcoins?

Bitcoin is not the only cryptocurrency but is probably the slowest one. As compared to the average transaction speed of 10 largest cryptocurrencies, Bitcoin takes the longest time for processing. 

Ethereum usually takes around 6 minutes whereas coins like Ripple (XRP) or Stellar (XLM) take less than 5 seconds. That is because Ripple and Stellar can handle more than 1000 transactions per second, whereas Bitcoin and Ethereum blockchain can only handle 7 and 15 transactions per second respectively.

Talking about the transaction speed and its limitations, in the coming years the rise of Ethereum 2.0 is expected to solve these limitations. On the other hand, Bitcoin developers also work on improvement of their network, so the community might see an improvement as well.   

Source: https://coinidol.com/bitcoin-transactions-slow/

Blockchain

Eyeing EU Banks, Hex Trust Teams With SIA on Crypto Custody

A multinational payments firm is partnering with cryptocurrency custodian Hex Trust to help its European banking clients hold digital assets.

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Multinational payments firm Sia is partnering with cryptocurrency custodian Hex Trust to help its European banking clients hold digital assets.

“When you have one bitcoin, it’s not a big problem, but when you start adding 10, 20 or 100, you have a treasury and you have to decide where to store this,” said Daniele Savarè, SIA’s innovation and business solutions director. “We are discussing digital custody needs with banks in Europe.” 

The firm is also helping banks manage and safekeep security tokens and central bank digital currencies, he added.

Through SIA, Hex Trust plans to offer European banks the software to custody digital assets on behalf of their customers. Hex Trust will also act as a sub-custodian for banks that don’t want to directly offer the service, said Hex Trust CEO Alessio Quaglini. 

Currently, Hex Trust works with three banks – Mason Privatbank Liechtenstein AG and two unnamed Asian banks. Quaglini said Hex Trust has 10 other banks that are exploring the custodian’s products.

Going forward, SIA will be the primary distribution partner for Hex Trust to offer digital-asset services to banks in Europe, Quaglini said. 

Source: https://www.coindesk.com/hex-trust-sia-crypto-custody-eu-banks

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Blockchain

Collider Labs Raises $1M to Invest in Blockchain Startups

The venture builder is seeking to invest in early-stage startups with a focus on transparency, privacy and “fairness.”

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Collider Labs has raised $1 million to be invested in early-stage blockchain and cryptocurrency startups.

In an announcement Thursday, the venture builder said the raise had brought on board several notable limited partners including Efficient Frontier CTO Alon Elmaliah and Follow [the] Seed Founding Partner Andrey Shirben.

Collider provides funding and liquidity and actively participates in building up startups alongside their communities and founders, according to the firm’s founding partner, Avishay Ovadia.

The company is actively seeking to invest in early-stage blockchain and crypto startups globally, with a focus transparency, privacy and “fairness.”

Collider “is a venture builder that somewhat resembles an accelerator” Ovadia said. With some “key characteristics” that differentiate it from a typical accelerator.

Venture builders, also known as startup studios, pair with early-stage startups and utilize their own ideas and resources to, if all goes according to plan, construct viable enterprises.

According to Ovadia, Collider forms partnerships with founders, invests in teams and works alongside them as what he calls “Investors in Residence.”

Source: https://www.coindesk.com/collider-labs-raises-1m-to-invest-in-blockchain-startups

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Voyager Agrees to Buy LGO Markets and Merge 2 Firms’ Tokens

Two cryptocurrency trading firms are merging, and in a rare twist, so are their tokens.

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Two cryptocurrency trading firms are merging, and in a rare twist, so are their tokens.

Voyager Digital, a publicly traded digital asset brokerage with offices in New York, has agreed to buy LGO, a French crypto exchange primarily serving institutional investors, as the company expands to Europe.

The transaction requires regulatory approval, which the parties said they expect to receive by the end of this year, along with the token swap. The value of the deal will depend on the value of Voyager’s shares, and the firms’ tokens, at closing; at current prices, it would be in the low seven figures.

As such, this deal is dwarfed by this year’s blockbuster crypto M&A deals such as Binance’s acquisition of CoinMarketCap, estimated to be worth $400 million, and FTX’s $150 million deal to acquire Blockfolio.

Read More: ‘They Have the Users’: Binance CEO Explains Why He Bought CoinMarketCap

What makes this deal unusual is that the two companies’ utility tokens, VGX and LGO, will be swapped into newly minted tokens featuring decentralized finance (DeFi) functions such as community governance and staking at an initial interest rate of 7%.

“We think this is really taking the old-school mergers and acquisitions to the token world, which hasn’t been done before,” Steve Enrlich, Voyager’s co-founder and chief executive officer, told CoinDesk.

Upon completion, Voyager, which is publicly listed on the Canadian Securities Exchange, will issue one million shares for the acquisition and operate in the European retail market with LGO’s Virtual Asset Service Provider registration with the French Financial Markets regulator (AMF). All activities will be conducted under the Voyager brand and LGO will discontinue its institutional services on Oct. 31. Shares of Voyager closed at C$0.67 ($0.51) on Wednesday. 

Read More: Voyager to Pay Interest on DeFi Tokens to Gain Brokerage Clients

Hugo Renaudin, co-founder and chief executive officer of LGO, told CoinDesk that the French company made the deal after it decided to shift its focus from institutional clients to increasing value for its token holders.

“The key decision-maker is what will bring the most value to our tokens,” Renaudin said. “So we have this token. We have token holders and they’re mostly retail [clients].”

LGO launched an initial coin offering (ICO) in February 2018, according to its website, which raised 3,600 bitcoin (worth about $36 million at the time). The company’s white paper shows that 60% of the tokens were distributed through a pre-sale process, while 20% of the supply went to LGO’s founders and advisors.

At its peak in April 2018, the LGO token’s market cap was nearly $40 million, according to data from CoinMarketCap. On Wednesday, that value was calculated to be $1.5 million. 

Renaudin told CoinDesk that the company’s other option would have been focusing on better serving its institutional clients, which means its spot exchange would have to provide new and exotic derivatives products. After consideration, he said that the team had decided to change its focus to retail customers instead.

The merger comes during a time of regulatory crackdown on crypto derivatives trading around the globe. Popular crypto derivatives exchange BitMEX was charged by the U.S. Commodity Futures Trading Commission (CFTC) with facilitating unregistered trading activities, while in the UK, the Financial Conduct Authority (FCA) has banned crypto derivatives for retail consumers.

This is not the first acquisition by Voyager, which went public in early 2019 in a reverse merger with the shell of a Canadian mineral exploration company. Previously, it acquired wallet startup Ethos.io for about $4 million.

Read More: Voyager CEO Says Revenue Growth Accelerates 8-Fold as DeFi Trading Surges

Voyage’s revenue in the most-recent fiscal quarter, which ended Sept. 30, surged to about $2 million, compared with $1.1 million during the fiscal year ending in June.

“We are becoming the financial service firm of the future, which means I will look at acquisitions that can add products, customer assets to the platform, or tokens and other communities that can be accretive to what we are trying to do,” Enrlich said. “And adding these pieces together we are going to either do it organically or through more acquisitions.”

Disclosure

Source: https://www.coindesk.com/voyager-acquires-lgo-token-merger

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