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Tesla has said they "expect to begin accepting Bitcoin as a form of payment for our products in the near future."

But Bitcoin doesn't scale. It achieves about roughly 6 transactions per second, paling in comparison to the likes of Visa, which facilitates around 1,700 transactions per second.

What's the rationale behind their decision?

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  • Have you heard of the Lightning network?
    – Jivan Pal
    Feb 8, 2021 at 13:54
  • @JivanPal They could accept LN only.
    – MCCCS
    Feb 8, 2021 at 13:55
  • @MCCS, sorry, not sure what point you're trying to make; OP seems to not be aware that LN exists if they're focusing on the fact that the BTC blockchain is capped at 6 tx/s.
    – Jivan Pal
    Feb 8, 2021 at 13:57
  • Oh ok I interpreted it differently. I "autocorrect" the question to why a business would accept BTC directly.
    – MCCCS
    Feb 8, 2021 at 14:00

3 Answers 3

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Sending a Bitcoin payment incurs a fee relative to the weight of the transaction. Every transaction must have at least one input and one output. Assuming a minimal transaction weight for either, it costs the same to send 1 mBTC or 100 BTC.

The cost per transaction weight is one reason why on-chain transactions are ill-suited for micropayments, but it also means that larger payments can come at a significantly lower relative cost than other payment forms.

A new Tesla 3 costs about 0.9 BTC today. At a feerate of 150 sats/vB (next block confirmation even at high demand) and a transaction weighing 250 vB, the transaction fee of 37,500 sats (0.375 mBTC) translates to a relative fee of 0.0417%. I believe that you will find many other payment forms to incur a larger fee, especially for the merchant.

On the other hand, payments on the Lightning Network incur a cost relative to the paid amount, so I expect smaller payments to shift to Lightning Network and similar solutions more and more.

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  • What does "weight of transaction" mean? I'm not sure I understand how it's any different than the actual "paid amount"
    – nz_21
    Feb 8, 2021 at 23:26
  • Ok, I've just googled. It's the number of blocks needed to capture the transaction. Not sure I understand how this could be the same for 1 million btc and 100 btc though
    – nz_21
    Feb 8, 2021 at 23:29
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    The weight of a transaction corresponds to the length of its witness data and the byte length of its serialized form. More inputs or outputs increase a transaction's weight. Bitcoin blocks are limited to 4,000,000 weight units. I've added a couple links to corresponding topics to better explain.
    – Murch ♦
    Feb 9, 2021 at 0:06
  • Great answer. It seems like the fee structure essentially incentivizes large tx's, so it solves the scalability issue on a monetary level. However, I'm not sure how it addresses the issue on a physical level -- specifically one where there are many large tx's happening at a global scale. Does the network have the kind of bandwidth to handle the volume?
    – nz_21
    Feb 9, 2021 at 0:18
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    Did you mean "high value" with large?—I'd say my main point is that there are generally fewer high-value payments, and high value payments will remain competitive longer per the fee structure. On the other hand, there is a viable escape valve for low value payments.
    – Murch ♦
    Feb 9, 2021 at 0:21
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  1. Bitcoin transactions can be done for more than 1 real world payment so "TPS" is not correct when comparing it with few other ways to make payments. VISA payments are not same as bitcoin on-chain transactions. Chargebacks, settlement times, censorship and lot of other differences.

https://bitcoin.stackexchange.com/a/100829/

  1. Bitcoin scaling works in layers: https://bitcoinkpis.com/layer2 and this does not mean on-chain development has stopped. Scaling is an ongoing process. Every improvement helps in scaling better. Example: Schnorr Signatures

  2. We don't know the details yet how will Tesla use bitcoin for payments. So it's difficult to speculate but I am sure they have enough money to hire the best bitcoin developers to setup bitcoin payments for their products.

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Cutting the middlemen: No bankers, no SWIFT, no account fees, no manual approval, easy intercontinental transactions.

And Musk likes (sometimes too much) to take risk. Perhaps, it's because he believes that the BTC they store would increase in value in the long term.

If everyone adopted SegWit addresses, especially Bech32, then the tx rate is higher than 7 TPS, although TPS may not matter since larger transactions are forced to weigh equally as smaller transactions.

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