Bitcoin Forum

I have real cash in my pocket and I don't need to pay anything to a 3rd party when give money to someone. Imagine we jumped 20 years ahead and now miners get profit only from transaction fees, so it's useless to send any coins without fee. Usual things become quite complicated and this is a problem for housewives. They don't care about technical issues, they just need to give some "cash" to a son so he could buy a dinner in the school...

Any ways to solve this problem?

Bitcoin is not cash, it has features that physical cash will never have, so if you desire these features, you pay the fee. If you don't, then you keep using cash. Why do people increasingly use credit/debit cards? even though credit/debit cards has a ton of fees to the user and the merchant? because they desire the features of the card system.

It depends on if you see Bitcoin replacing every other type of currency on the planet
or
a useful currency of the internet :)

may I ask how many people pay for their kids dinner at school with say PayPal?

Automate fee calculation based on recent blocks.

Hosted wallets, account hubs.

In the future I see the blockchain used mainly for inter-bank compensation. Bitcoin will be the foundation for overlay protocols, its raw form wouldn't be used by housewives.

Right.

I don't see what the problem is? They can't give some "cash" to their son because...?

Not sure how it is a problem.  Mother sends $10.01 (BTC equivelent) to her son and he receives $10.00.  What exactly is the problem?

Still even if you think it is a problem it already is solved: don't pay a transaction fee.

Of course miners may not include it in the next block.  Every miner has the right to choose which tx to include in the next block.  If a single miner on the planet is willing to process your tx for charity well it eventually will be included in a block.

The network has a real cost though something has to pay for it.   You could "hide" the fee by simply never reducing the block reward but that is merely a transfer of wealth via inflation.   While you don't pay a fee your 1 BTC buys less and a miner gets to produce more BTC.

I would point out cash isn't free.  Not for any business.  We pay $0.30 per $100 to process cash.  Businesses which need an armored car service roughly 5x as much.  It is simply a hidden fee.  So while you handing a merchant $1,000 might not result in a $3.00 added to the bill it is included in the cost of doing business and thus prices are ~0.3% higher.

Bitcoin doesn't need to be free (as in free beer not free speech).  It was intended to be free.  It simply needs to be competitive with other options.

That's probably the future indeed. But the best example of a hosted "wallets" is paypal. And you have some fees, that's for sure.

There's no way around it, you'll always have some fees because you'll have to use a third party infrastructure to move your money. Or you use physical cash.

wrong, printing and minting the paper and coins is quite a part of the expenditures of the country. you might not notice it immediately, but it's there. and since more transactions mean more wear-off, it is somehow measurable.

you are a sexist.

apart from that, right now, if she wants to send 1 btc to her son, he will get 1 btc. it's just that she will be charged 1.00005.

Fees for small transactions will probably be about a cent, and there will be ways to make a payment with less than 1 transaction amortized.

1.0005.

Because they have 10 BTC and need 8 BTC for spa-massage and makeup. Should they give just 1.9 BTC not 2 BTC for dinner? Ok. Wait! To pay for the massage and makeup... it's necessary to have 8.1 BTC.. But what if massage and makeup r payed separately, then it's 8.2 BTC... Hey, I need a computer!

Instead of transferring bitcoins to their address and waiting for however many confirmations, just keep a second pre-funded address at hand and send him the private keys to said address.

Aye! Let's split all bitcoins to 0.0001 BTC chunks and transfer only keys! Need 4.95 BTC? Here r ur 4'950'000 key pairs! :)

You are free to use paper money which can be printed in unlimited capabilities by anyone who has enough skills and resources...

Thx for advice, but it's not a solution of the problem.

I think in the future that even people using the Bitcoin protocol directly will not frequently pay fees.

When paying a merchant, you send the transaction to them, they combine it with a spending a transaction to secure it (which does carry a fee), and broadcast them both on the network. A fee is paid for the original payment, but the customer doesn't see it.

Another solution is a payment protocol which negotiates transactions with the receiver before broadcasting them, allowing the receiver to refund a fee. For example: you want to send 10 BTC somewhere, and you create a transaction that sends 9.9995 BTC to the merchant's address, and 0.0005 as fee. The client software transparently shows it as a 10 BTC transaction, however. This is quite close to how electronic payment systems work now (the receiver pays for the service).

Nonetheless, both solutions above are ways for shifting the fee to the receiver - it doesn't remove it. But that's not really possible in general: Bitcoin is an expensive beast to maintain, and people working to secure it (and maintain it, ideally) need some financial incentive to do so. This is not very different from other currencies, where inflation and taxation can be seen as payment for the service - only it's invisible to the user, as it probably should be in our case as well.

You're mixing stuff.

10 BTC is everything she has to spend during the day? An amount that barely pays spa + son's dinner? I doubt. She probably has more, and the amount is probably is not "round", as probably is your bank account balance right now (or do you have an exact power of 10 as money in your bank right now?)
You're thinking on "$10 bills" or other round values like that - which may still be an option, you may print BTC bills.

But if the transaction is electronic, she'll probably have a "not round amount" of coins, will transfer 2 BTC to her son, and keep having a "not round amount" of coins. Where's the problem?

I once thought the same.

But then multi-sig came by, with all its advantages. Costumers having a part of the key while the "bank" has the other is a much more safe architecture than "bank controls all".

It's safe for the costumers, because they don't lose their money even if their keys are stolen - as long as the thief doesn't manage to authenticate himself as the costumer, a strong authentication mechanism is still essential.
It's safer for the bank, as a hack of its wallet is not enough to spend the money. It's also safer to the banker (his meatspace self), since thugs will have no incentive to force him to give them "all the money", as the banker himself cannot do it.

Multi-sig is better in many ways. But with such architecture, I don't see how can you share addresses with other costumers of the same bank.

I would not compare a hosted bitcoin wallet and paypal.
Paypal is NOT interoperable with other wallets. That's why all "paypal-like" wallets, based on proprietary solutions, are doomed.
Only paypal has had enough market traction through ebay to pull it off.
Today, an internet payment solution must be interoperable and open source.
Bitcoin e-wallets are going to be the optimal solutions for non-tech savy users.

Lock-in: learn about what it means. In bitcoin world, it is very difficult to enforce lock-in to your customers, even with hosted wallets, payment processors etc. Switching is always pretty easy.

Absolutely, I don't really see why the blockchain should be the one-size-fits-all answer for all money transfer use cases. Now if your opinion is different 'Right' isn't really going to cut it :)

Picture it this way, fast-forward ten years, blockchain is overcrowded, Bitcoin transactions will be much more expensive and slower. What will be exchanged will be Bitcoin certificates, not actual Bitcoins. History repeats itself. But this time you'll have a the choice, this time you will be able to safely store your digital gold yourself, you'll keep some money in an e-wallet and your savings in your brainwallet.

Does anyone know if Open Transactions is flexible enough to support multi-signature transactions?

Anyways, even if OT itself doesn't, it shouldn't be impossible to develop some sort of "certificate protocol" that does support it. So yeah, you're right davout, multi-sig is not incompatible with shared wallets. Intrabank transfers could be done outside of the blockchain - with the security of multi-signature. The blockchain would probably be used only for bank compensations.

Well... If Bitcoin is not supposed to replace cash, then there is no a problem.

It is technically not correct that the cash in your pocket carries no "fee." The production of that cash (especially issuing new cash due to wear and tear) carries a real cost. Currently that cost is socialized by the government so you don't see it, but it is there.

There is always a cost for moving information or materials around. However, Bitcoin provides a manner far cheaper than anything else for moving money.

Every payment method has costs.  With bitcoin, you as the customer are paying the costs directly.  With cash and credit cards, the merchant is increasing the price you pay for your purchase so that the costs of handling that cash or card payment is included in that price.

How does that cash you pay to a retailer end up being used by the retailer to pay the bills?   Perhaps an amoured car courier (e.g., Brinks truck) comes to pick up the merchant's cash deposit.   Who pays for that?   The consumer does, because the merchant adds the cost of the Brinks truck fee to the selling prices.

Taking this into account, the options at the counter might be:

Your purchase total: $50 USD
Pay with credit card: $50  [merchant pays 2.75% fee to Square])
Pay with cash: $49  [merchant passes on some of the savings from not having to pay Square]
Pay with bitcoin: $48.50 [merchant passes on some of the savings from not having to pay either the Brinks truck or Square]

Do you still see a problem that you are asked to pay a transaction fee that is valued about one penny?

I don't mind to pay fee. But I mind to do it a way that makes my brain to explode. Real cash is very handy. Bitcoin requires to have 100+ IQ.

Bitcoin is 3 years old. Clients will surely become simpler to use in the next few years.

Bitcoin may not be perfect, but it most definitely beats the snot out of paypal as a virtual wallet.

My bank charges me a small but aggravating fee every month for me to store my cash with them so that I can withdraw it at an ATM every so often.  Apparently they charge this for all their customers who don't have large balance, rather than based on having a 100+ IQ.  But we all seem to accept it and keep paying.

http://www.bitbills.com/

The fee you pay on fiat cash is the taxes combined with banking fees.

Everything has a production and processing fee in it. It's just hidden in different ways.


BTW: Aren't tx fees actually a bit too low (I don't mine, so it doesn't really bother me, but wouldn't a µBTC or so be a little more sensible especially with the generation revenues being halved soon)?

Really there isn't a market for transaction fees yet.  Most of the "fees" paid now are really anti-spam measures that just happen to use the fee mechanism.  But the system is inching closer and closer to supporting price discovery via market forces.  Soon^TM...

Cash is not as easy as you say. You can't just have $50 cash and pay for something that costs $50. You have to pay sales tax, too. So, if you want buy something with $50, it has to cost $46.19 so that you can add the $3.81 in sales tax to make it an even $50 (CA sales tax is very high). Or, you can buy something for $50 if have another $4.13 with you.

You think that is simpler than a 0.01 BTC transaction fee?

BTW, your "Bitcoin requires to have 100+ IQ" comment is funny because a 100 IQ is average. Only half the people in the world have a 100+ IQ, but the comment still made made me chuckle.

yea, i had a little jaw drop on the "100+ IQ" comment... if you're struggling with below average IQ, you got bigger problems then penny fees. then again, since you're likely unemployed (or on minimum wage) maybe it IS a big problem for you...

course i'm somewhat of an elitist ass when it comes to necessary intelligence. get smart or get out. heh.

This is the most interesting thing I read in this thread. Is there a mechanism now for combining a trx into a second spend without re-signing the original trx? I'm curious how this works as I'd like to see some protocol for it developed such that clients could start supporting it. Call it BiTrx or whatever and treat it like email where we can send funds direct to each other bypassing the blockchain until a merchant wants to settle some period (eg. one hour) of trx into a master transfer to their backend account.

If a MIME type was created for it then BiTrxs could be attached to emails and processed automatically by email software like electronic checks peer-peer. In that case a Bitcoin client add-on could be made for Thunderbird to allow pmts processed by email directly by users without a third party (other than the blockchain as settlement mechanism). Users wouldn't even have to deal with bitcoin addresses at all.

Merchant sends email invoice with address embedded. Customer signs transaction and replies with BiTrx pmt. If both users install certificates in their email client then it's encrypted and both ends identity is authenticated.

Basically, you create a transaction with no fees, and instead of broadcasting it on the network, you give it to the recipient directly (email, or whatever).  The recipient then creates a second transaction from it, exactly like they'd do if it came in over the network like what happens now, but the second transaction has a fee in it.  They then submit the pair of transactions to the network, and miners understand that the fee in the second transaction is intended to pay for the first transaction too.  (Also, they can't include the transaction with the fee in their block unless they also include the prior transaction.)

The mechanisms for this don't exist yet, but it seems like a pretty clever way to push the costs of a transaction to the recipient, so it should just be a matter of time.

Fees are an inevitable part of the Bitcoin network (especially in the far future when block reward is significantly lower), but it's important to recognize who is getting these fees:  anyone who wants to.  This is an extremely important distinction!

In most other systems, it's usually the central authority that is charging the fees (Mastercard, Paypal, Blizzard charging 15% fee for DiabloIII item auctions!?).  Because there is usually a lack of competition or a very steep cost-of-entry, they essentially have a monopoly and can charge whatever they want.  That's why consumers are losers  in all those services.

However, in bitcoin there is no way to have a monopoly on fees.  In fact, there is infinite room for competition in the bitcoin mining market.  I can go buy $10k worth of FPGAs tomorrow and hook it up to the network and start collecting fees right away.  I can do it completely anonymously and without getting anyone's permission to do it.  There is inherently no restriction on who can be part of the bitcoin equation.  Every single person in the world can be part of it.   That's a really powerful feature!

The "infinite room for competition" part is the critical piece of this puzzle:  there is no way for any party to try to lock out competition from the market.  The only way to influence the network fees is to offer lower fees than everyone else.  Anyone who wants to try to charge higher fees, will just be missing out on profitable, lower-fee transactions that are processed by all the other miners that are willing to include them.

Because of this dynamic, it is overwhelmingly likely that fees will never be higher than they need to be.  They will always be low as they can reasonably be, at least until/if super-computers + T1 lines are needed to do mining -- but even then, there's still plenty of investors who can participate.  Therefore, if there are fees, it's because the network has a non-zero cost to keep in operation.  But you can be assured that you're not getting overcharged.