Should bitcoin lower the transaction fee?

[matthewh3]

Should bitcoin lower the transaction fee  

*edit: transaction fee's will be important to miners in the future and it could help condense the bloating blockchain size by having a "high" transaction fee.  But standard wallets like the default wallet-qt and blockchain.info/mywallet require a transaction fee before sending coin unless it's a larger amount of coin sent after a longer amount of in wallet idle of time.  So miners incomes and blockchain size vrs free(cheap) open micro-transactions which could help fuel adoption and growth.

[1714911990]

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[1714911990]

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[1714911990]

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[DeathAndTaxes]

The wording of your question implies it hasn't already been done.  The fee was lowered to its current value when Bitcoin exceeded $20 USD per BTC.   At this point there is no reason to lower the fee further.  Maybe when 1 BTC = $100 then cutting the minimum fee by 80% would make it equivalent to the prior cut.

Still the min fee is likely going to be less and less important in the future.  I already pay about 5x the min fee (still a fraction of a cent).  The min fee doubling or being cut in half wouldn't change anything for me.

[matthewh3]

The wording of your question implies it hasn't already been done.  The fee was lowered to its current value when Bitcoin exceeded $20 USD per BTC.   At this point there is no reason to lower the fee further.  Maybe when 1 BTC = $100 then cutting the minimum fee by 80% would make it equivalent to the prior cut.

Still the min fee is likely going to be less and less important in the future.  I already pay about 5x the min fee (still a fraction of a cent).  The min fee doubling or being cut in half wouldn't change anything for me.

I know the transaction fee has changed before.  Transaction fees will be very important towards miners fee's in the future.

[Revalin]

I suggest the transaction fee should be kept as low as possible while preventing the blockchain from growing at an unreasonable rate.

Long term it may be necessary to use it to encourage mining for security, but that's not a concern until generation is much lower.

[DeathAndTaxes]

Transaction fees will be very important towards miners fee's in the future.

Once again.  The mandatory fee will likely be completely irrelevant in the future.  It isn't designed for revenue.  Never was, never will be.  Competition will cause users to pay a much much higher fee for fast processing than the mandatory fee (which is only designed to mark denial of service attacks prohibitively expensive).

Case in point even now satoshi dice pays a tx fee roughly 5x higher than the mandatory fee and they pay it on tx which don't even require the mandatory fee.  In the future it won't matter much if the mandatory fee is 0.0005 btc but your client advised you that to have a good chance of being include in the next 20 blocks will require a fee of 10x that. 

[Gavin Andresen]

Before I left for vacation, I submitted a pull request that makes the default policy for miners "more fees == more likely to get into a block."  That will be in the 0.7 release (the policy before was mostly "higher priority == more likely to get into a block"), and I've been encouraging the big mining pool operators to implement something similar if they have their own transaction-selection code.

When I get back from vacation I plan on writing code to watch the transactions that do or do not make it into blocks to derive an estimate of the average miners' fee policy, and use that to recommend a reasonable fee to the user.

Those changes will let fees float naturally-- users and miners will form a market and fees will rise or fall based on what users are willing to pay and what miners are willing to accept. I don't like the arbitrary, centralized setting of fees that we've had up until now.

[zebedee]

Before I left for vacation, I submitted a pull request that makes the default policy for miners "more fees == more likely to get into a block."  That will be in the 0.7 release (the policy before was mostly "higher priority == more likely to get into a block"), and I've been encouraging the big mining pool operators to implement something similar if they have their own transaction-selection code.

When I get back from vacation I plan on writing code to watch the transactions that do or do not make it into blocks to derive an estimate of the average miners' fee policy, and use that to recommend a reasonable fee to the user.

Those changes will let fees float naturally-- users and miners will form a market and fees will rise or fall based on what users are willing to pay and what miners are willing to accept. I don't like the arbitrary, centralized setting of fees that we've had up until now.

Agreed, clearly that is the only long-term viable solution.  Market-set fees was not an alternative in the "poll" sadly.

[matthewh3]

Transaction fees will be very important towards miners fee's in the future.

Once again.  The mandatory fee will likely be completely irrelevant in the future.  It isn't designed for revenue.  Never was, never will be.  Competition will cause users to pay a much much higher fee for fast processing than the mandatory fee (which is only designed to mark denial of service attacks prohibitively expensive).

Case in point even now satoshi dice pays a tx fee roughly 5x higher than the mandatory fee and they pay it on tx which don't even require the mandatory fee.  In the future it won't matter much if the mandatory fee is 0.0005 btc but your client advised you that to have a good chance of being include in the next 20 blocks will require a fee of 10x that. 

I use blockchain.info/MyWallet to send amounts down to just BTC1.00 that I have often only just received so have to pay the recommended "default" BTC0.0005 like satoshi dice.  So once btc/usd>$100 that's $0.05 on even a $1 transaction or 5% fee.  I understand the need to stop blockchain spam but wouldn't having the lowest fees possible help the adoption of bitcoin by people transacting sub $1.00 amounts often as btc value rises. 

Before I left for vacation, I submitted a pull request that makes the default policy for miners "more fees == more likely to get into a block."  That will be in the 0.7 release (the policy before was mostly "higher priority == more likely to get into a block"), and I've been encouraging the big mining pool operators to implement something similar if they have their own transaction-selection code.

When I get back from vacation I plan on writing code to watch the transactions that do or do not make it into blocks to derive an estimate of the average miners' fee policy, and use that to recommend a reasonable fee to the user.

Those changes will let fees float naturally-- users and miners will form a market and fees will rise or fall based on what users are willing to pay and what miners are willing to accept. I don't like the arbitrary, centralized setting of fees that we've had up until now.

Sounds interesting.

[DeathAndTaxes]

I use blockchain.info/MyWallet to send amounts down to just BTC1.00 that I have often only just received so have to pay the recommended "default" BTC0.0005 like satoshi dice.  So once btc/usd>$100 that's $0.05 on even a $1 transaction or 5% fee.  I understand the need to stop blockchain spam but wouldn't having the lowest fees possible help the adoption of bitcoin by people transacting sub $1.00 amounts often as btc value rises.  

Last time before I give up forever.  As I pointed out the mandatory fee (which isn't required on all tx just low priority ones) was lowered to the current 0.0005 when BTC was $20.  Considering lowering it to 0.0001 when BTC is sustainably >$100 probably makes sense.  That keeps the fee below 1 US cent.

However the point you seem to be missing (over and over and over across multiple threads) is that the mandatory fee doesn't determine the actual fee.  

1) Mandatory fee is only required on low priority transactions.  Simply wait long enough and you could pay 0 BTC on your $1USD equivelent tx.  Tada.  The mandatory fee being 0.0005 or 0.0001 doesn't really matter if you don't pay it.

2) Users are paying fees HIGHER than the mandatory fee.  Gavin change suggested above will only accelerate that.  Transaction volume increasing will only accelerate that.  There is finite space in a block and tx processing does require some amount of real cost.  It is entirely possible the mandatory fee could be cut to a single satoshi or removed completely and you STILL would have to pay a much larger fee simply due to competition (or wait days or weeks for your free tx to finally get processed).

[DeathAndTaxes]

Before I left for vacation, I submitted a pull request that makes the default policy for miners "more fees == more likely to get into a block."  That will be in the 0.7 release (the policy before was mostly "higher priority == more likely to get into a block"), and I've been encouraging the big mining pool operators to implement something similar if they have their own transaction-selection code.

When I get back from vacation I plan on writing code to watch the transactions that do or do not make it into blocks to derive an estimate of the average miners' fee policy, and use that to recommend a reasonable fee to the user.

Those changes will let fees float naturally-- users and miners will form a market and fees will rise or fall based on what users are willing to pay and what miners are willing to accept. I don't like the arbitrary, centralized setting of fees that we've had up until now.

Nice.  I am pretty sure at least some pools prioritize based on fee using custom code.  In analyzing DeepBit blocks I am fairly certain they are doing some prioritization other than pure priority.  It will be good to have it in the reference client though.  That gives all miners and pools the ability to do similar prioritization without a lot of reinventing the wheel.

However correct me if I am wrong even if when your pull is integrated in future versions the mandatory fee on low priority tx will remain.  Right?  It exist to prevent denial of service or spam attacks.  A fee market place won't negate that (at least not for a while). 

[matthewh3]

I use blockchain.info/MyWallet to send amounts down to just BTC1.00 that I have often only just received so have to pay the recommended "default" BTC0.0005 like satoshi dice.  So once btc/usd>$100 that's $0.05 on even a $1 transaction or 5% fee.  I understand the need to stop blockchain spam but wouldn't having the lowest fees possible help the adoption of bitcoin by people transacting sub $1.00 amounts often as btc value rises.  

Last time before I give up forever.  As I pointed out the mandatory fee (which isn't required on all tx just low priority ones) was lowered to the current 0.0005 when BTC was $20.  Considering lowering it to 0.0001 when BTC is sustainably >$100 probably makes sense.  That keeps the fee below 1 US cent.

However the point you seem to be missing (over and over and over across multiple threads) is that the mandatory fee doesn't determine the actual fee.  

1) Mandatory fee is only required on low priority transactions.  Simply wait long enough and you could pay 0 BTC on your $1USD equivelent tx.  Tada.  The mandatory fee being 0.0005 or 0.0001 doesn't really matter if you don't pay it.

2) Users are paying fees HIGHER than the mandatory fee. Gavin change suggested above will only accelerate that.  Transaction volume increasing will only accelerate that.  There is finite space in a block and tx processing does require some amount of real cost.  It is entirely possible the mandatory fee could be cut to a single satoshi or removed completely and you STILL would have to pay a much larger fee simply due to competition (or wait days or weeks for your free tx to finally get processed).

Low priority = small amount sent quickly after receiving | Yes ? Not everyone has or will have a large amount of coins sitting idle long enough like you.

mandatory fee doesn't determine the actual fee = It is for MyWallet and the default setting in Wallet-qt needing changing for every transaction after it has failed after hours of waiting.

So much for bitcoin selling its self for free and instant transactions?

Not everyone is an early adopter with high vale wallets like yourself who can afford to pay.  Most new users to bitcoin will only have fractional bitcoin wallets and wanting to send them often after just having received i.e "low priority transactions".  

OK if I have just received BTC0.01 or even BTC0.0010 how long do I have to wait to send it for free?  Then bitcoin is not a quick payment method.  Once BTC=$100 BTC0.01=$1.00 not really a micro transaction.

High bitcoin Tx fees may be suitable for you with your large transactions or with coins you've had sat idle for a long time to enable a micro-Tx but it'd be better for bitcoin to be able to operate as a micro as well as a macro currency for everyone not just the people with large idle balances.

Yes I understand the bitcoin blockchain is bloating and also that you usually make large transactions or have a large balance sat around long enough to enable you to make free speedy micro-transactions but that's the only new thing your telling me.  Billions of people live on less than a dollar a day.  Yet mobile phone proliferation is growing in that demographic.  Hence possible bitcoin adoption.  

Users are paying fees HIGHER than the mandatory fee. Gavin change suggested above will only accelerate that - I'd rather have bitcoins market capitalisation made up of billions of sub dollar accounts then just leave it to the early adopters with mega-wallets and a few wealthy investors to form the the market capitalisation of the network.

I think were both looking at this idea/problem from totally different standpoints as I too feel like I'm repeating myself to you.  Yes the current model works for you and so does a higher Tx but I'm thinking of people coming at bitcoin with just change in there pocket or like $50 monthly wages in the developing world.  Not just early adopters waiting for some big investment from the wealth elite.  Maybe if bitcoin is shaped by enough people like you it won't become what I suggest.  Then the next p2p alt-coin who can sort out the blockchain bloating will.

[Stephen Gornick]

So much for bitcoin selling its self for free and instant transactions?

Nobody except for you and a couple other wishful thinkers are trying to sell Bitcoin as being free of transaction costs.  Here's Gavin's take on the subject:

Bitcoin isn't suited for transactions worth less than about one US penny-- it wasn't designed or intended for lots of micro-transactions.

That said, building a micro-transaction system on top of bitcoin is certainly possibly (see witcoin or youtipit for some examples-- or see the way the Bitcoin Faucet is handling payments recently, bundling up lots of small transactions to send them without paying outrageous fees).

Maybe if bitcoin is shaped by enough people like you it won't become what I suggest.  Then the next p2p alt-coin who can sort out the blockchain bloating will.

Proof-of-work alt coins all have the same problem as bitcoin -- computing costs, communications costs and storage costs make it impossible to provide free transactions.   Bitcoin is very low cost compared to all existing payment network alternatives.  Providing an EWallet or using EWallet services can provide options to make it operate with even less expense.  Open Transactions can provide this benefit as well.

Related threads:

 - http://bitcointalk.org/index.php?topic=94403.0
 - http://bitcointalk.org/index.php?topic=95218.0

[matthewh3]

Yes I've heard of OT and it sounds very interesting but I don't think bitcoin is stable and/or high value enough yet to spawn OT spin-off's of value of it yet.  Maybe an OT system based on bitcoin would be appealing if you had enough satoshi's you could import/export them from the OT system.  Making it preferable to other commodity based OT systems due to bitcoins characteristics.  So maybe the future of micro bitcoin transactions are to happen within walled-garden wallet environments but still I don't think bitcoin is stable/mature enough yet for large scale micro-investment in walled services for a long shot.

[DeathAndTaxes]

Then the next p2p alt-coin who can sort out the blockchain bloating will.

No it won't you just have utterly unrealistic expectations of a transaction system.  There is a real cost for processing transaction.  Currently the subsidy hides a lot of that but in time the true cost will need to be borne by the participants.  Switching to a different coin doesn't magic that away.

You seem to think if in some hypothetical future if the avg bitcoin transaction costs a penny it is the death blow to Bitcoin.   Compared to what?   Noting else even comes close.  Even centralized payment networks have significantly higher costs.  Dwolla?  $0.25.  CC/PP? $0.30 + 3%  Moneybookers? 1% Liberty Reserve? 2% ACH? ~$0.15  Hell mailing a check costs ~$0.50.  MPesa 1% to 3% (min ~$0.05).


Bitcoin was never going to be free.  Never.  Satoshi paper talks about low cost transactions and Bitcoin can deliver on that.
Free* is just something you made up in your mind and the economics don't support it, they never have and they never will.




* also includes fees so negligibly small as to essentially be free as even billions couldn't support the network.

[matthewh3]

Then the next p2p alt-coin who can sort out the blockchain bloating will.

No it won't you just have utterly unrealistic expectations of a transaction system.  There is a real cost for processing transaction.  Currently the subsidy hides a lot of that but in time the true cost will need to be borne by the participants.  Switching to a different coin doesn't magic that away.

You seem to think if in some hypothetical future if the avg bitcoin transaction costs a penny it is the death blow to Bitcoin.   Compared to what?   Noting else even comes close.  Even centralized payment networks have significantly higher costs.  Dwolla?  $0.25.  CC/PP? $0.30 + 3%  Moneybookers? 1% Liberty Reserve? 2% ACH? ~$0.15  Hell mailing a check costs ~$0.50.  MPesa 1% to 3% (min ~$0.05).


Bitcoin was never going to be free.  Never.  Satoshi paper talks about low cost transactions and Bitcoin can deliver on that.
Free* is just something you made up in your mind and the economics don't support it, they never have and they never will.




* also includes fees so negligibly small as to essentially be free as even billions couldn't support the network.

No I don't.  I just think bitcoin could grow a lot faster if it was available to all people not just wealthy people or early adopters.  Maybe OT's systems or walled-garden wallets can offer suitable cheaper transactions in the future but bitcoin is no way near mature/stable enough for that kind of adoption at the moment or in the very near future.

[legolouman]

The fees are meant to create an incentive for the miner, especially in the event that a block yields no coins. By taking away the fee, the network will eventually fail.

[TangibleCryptography]

No I don't.  I just think bitcoin could grow a lot faster if it was available to all people not just wealthy people or early adopters.

Pure hyperbole bordering on stupidity.  We are talking about fees in the fraction of a cent.  Fees lower by magnitudes than ANY OTHER payment system on the planet even those designed for low income consumers (which ironically tend to have the highest fees).  The idea that a fraction of a cent fee will keep users away in droves is just ridiculous.  

So users turned off by the 1/20th of a USD cent fee on Bitcoin transaction will do what instead?  Pay 10x to 500x as much using PayPal?  That is your logic?  There may be many thing holding back Bitcoin adoption by the masses but fees aren't it.

[legolouman]

No I don't.  I just think bitcoin could grow a lot faster if it was available to all people not just wealthy people or early adopters.

Pure hyperbole bordering on stupidity.  We are talking about fees in the fraction of a cent.  Fees lower by magnitudes than ANY OTHER payment system on the planet even those designed for low income consumers (which ironically tend to have the highest fees).  The idea that a fraction of a cent fee will keep users away in droves is just ridiculous.  

So users turned off by the 1/20th of a USD cent fee on Bitcoin transaction will do what instead?  Pay 10x to 500x as much using PayPal?  That is your logic?  There may be many thing holding back Bitcoin adoption by the masses but fees aren't it.

+1
I think the argument left by people that say that is along the lines of this: People wishing to obtain their first coin find it is relatively difficult, not as hard as it used to be, but generally, it takes time to get a hold of them. After which, they assume they are in the clear and can spend. Alternatively, using paypal, they can give it a credit card and off they go. It is more transparent.

Fees are there for a reason, and they are nominal. They should stay, if anything, I'd support an increase.

[matthewh3]

No I don't.  I just think bitcoin could grow a lot faster if it was available to all people not just wealthy people or early adopters.

Pure hyperbole bordering on stupidity.  We are talking about fees in the fraction of a cent.  Fees lower by magnitudes than ANY OTHER payment system on the planet even those designed for low income consumers (which ironically tend to have the highest fees).  The idea that a fraction of a cent fee will keep users away in droves is just ridiculous.  

So users turned off by the 1/20th of a USD cent fee on Bitcoin transaction will do what instead?  Pay 10x to 500x as much using PayPal?  That is your logic?  There may be many thing holding back Bitcoin adoption by the masses but fees aren't it.

I was in mind of bitcoins continual prises rises.  Current fees of ~$0.005 are payable without regret by anyone in the west who can afford to pay for DSL.  Although if BTC rises to $100 a coin that's a 5% fee on a $1.00 transaction.  So then bitcoin loses its advantage on cash.

[DeathAndTaxes]

I was in mind of bitcoins continual prises rises.  Current fees of ~$0.005 are payable without regret by anyone in the west who can afford to pay for DSL.  Although if BTC rises to $100 a coin that's a 5% fee on a $1.00 transaction.  So then bitcoin loses its advantage on cash.

Mandatory fees on low priority tx likely would be lowered to be ~1 cent IF Bitcoin rose > $100 (just as they were when BTC rose above $20) .  

Still please point out to me where online you can spend $1 and pay less than 5 cents in fees?   Even at 5 cents per transaction bitcoin is cheaper than any digital payment platform on the planet.

So IF mandatory fee wasn't lower
AND
Bticoin rose to >$100
AND
user was unwilling to wait for a high priority transaction
AND
the mandatory fees on low priority tx weren't lowered
AND
the user wanted to spend only $1
AND
no off blockchain solution for micro tx existed
....
Bitcoin would still be the cheapest solution.  

BTW "cash" isn't free ask any successful business that deal in cash. Between the deposit fees, disbursement fees, shrinkage (employee theft), armored car service, risk of robbery/loss, and counterfeits cash isn't free.  Even if it was free it still can't be used online.