Bitcoin Forum

Hey,
what is the current status regarding the transaction cost problem?
Is the team working on a solution?

Yes. The lightning network.
 
https://lightning.network/ (https://lightning.network/)

Yes this is a major problem on BTC and has put me off using the coins when the cost can be over $20 per transaction and at the start of the year the cost was
something like $0.00001 and the miners should take profit by mining new coins and competing to add new blocks the the block-chain.

Unlike 99% of people I am not a big fan of the block chain because it's too slow and complicated to stop double spending when you have to process and check
history on all the inputs to a transaction in a database that is already 200gb in size and have all the energy and GPU power being wasted as machine compete
with each other to find out who is fastest at counting grains of sand to win a prize for the miners.

Cost something like 120KWH of electric just to confirm a single transaction so yes the block chain solves one problem and made ten more as I see it

The current satoshis needed per byte to make a normal transaction successful is around 293 which give around $10 for an average transaction.
The high fee is an issue which everybody is pissed of. Bitcoin is not meant for any micro payments at the moment. Although it will be done in the future with the help of the lightning network it is just a waste of money to spend high fees on micro transactions. It is better to avoid small transactions and just hold the BTC until the lightning network is fully established. The development is going with a successful testing recently. I think people should stand together and join hands towards the development of BTC. Why should just a small group of people do all the hardwork and let the other enjoy it's benefits.

Is there any estimate how long it will take to establish the lightning network?

No, it's not.  It's a designed feature.


Yes. Bitcoin has gained popularity in the past year.  Higher demand for a limited resource results in higher costs.  This is the way the world works with ALL resources.


They do.

However, the miners receive the transaction fees of the transactions that they include in their blocks.  If someone is willing to voluntarily pay a higher fee, then why should their high-fee transaction be ignored to include a cheaper transaction instead?  That wouldn't be fair and wouldn't make sense. You are suggesting that low fee transactions should confirm quickly and that high fee transactions should wait longer?


It is clear that you do not understand how the system works.


Check your math.  You seem to have made an error in that calculation.

That electricity is being used for much more than just "confirming a single transaction".

Yes sky high transaction fees we agree but you need to check your understanding on how much electricity it costs per transaction
and bring yourself up to date and if you think that is bad then did you know that the cost of mining a coin is between $1000 - $2000

High fees might suite miners but it will drive the public away and they have plenty of alternatives to pick from


I know about IOTA using Tangle instead of block-chains and that the Lightning Network being used to plug the speed issue has many critics
and i cut code for a living so maybe I am closer to the truth than you think

Honestly its kind of the same question as why has Cryptokitties broken the ETH chain.
People use it and everyone loses their minds...

Are you dividing the number of transactions in a single block by the amount of revenue that block earns for the miner?  If so, then you are assigning too much value to "how much electricity it costs per transaction".

Mining a block serves a purpose beyond the transactions that are in that block, and you are failing to account for that.
 

An AntMiner S9 uses 1372W to generate 14TH/s.

At the current difficulty and a mining rate of 14TH/s it would take approximately 451.914 days to mine a block.  That's about 10846 hours.

The average bitcoins earned per block is the 12.5 BTC subsidy plus about 2.43 BTC in fees for a total of 14.93 BTC.

Dividing the 10846 hours by the 14.93 BTC gives us about 726.46 hours of mining per bitcoin earned.

726.46 hours at 1.372 kW is:
726.46 X 1.372 = 996.7 kWh per BTC.

The "cost" of mining that bitcoin will depend on what you pay for electricity.

Assuming that you can get electricity rates around $0.09/kWh...
996.7 X 0.09 = $89.70

Looks like the "cost of mining a coin" is a LOT less than "$1000 - $2000".

Perhaps you need to take a closer look at your own maths?  Did you calculate that "$1000 - $2000" yourself?  Or are you just parroting some nonsense that you read on the internet somewhere?


High fees also suits the users.  If it didn't, they wouldn't pay it.


If the public moves away, then the quantity of transactions will drop.  If there are less transactions, then it won't cost as much (in transaction fees) to get your transaction confirmed.  If it doesn't cost as much, then the public will choose to use Bitcoin.  If the public chooses to use bitcoin, then the nuber of transactions will increase.  If the number of transactions increases, then it will cost more (in transaction fees) to get your transaction confirmed.  If it costs more to get your transaction confirmed, then the public will move away.

And with that we've come back to the beginning.

You see, there is a feedback loop built into the incentive structure of Bitcoin.  The amount of the transaction fees will ALWAYS be as high that the users are willing to pay, and will NEVER be higher.  The usage will bounce around a bit, but will eventually settle on a price where there are enough users willing to pay that price to keep the blocks full, and bitcoin will continue to operate successfully.


Well, if you "cut code" for a living, you should perhaps take some time to look at the Bitcoin code and get a better understanding of how it actually works.

There are, and have been for a while now, thousands of alternatives out there.  They all do something different.  Still, Bitcoin seems to be fine.

Blocksize is simply too small.
2nd layer solution will help, but also with LN the 1mb limit (or about 1.7 in a full-segwit scenario) is too small. Also, 2nd layer solutions will need to do some on-chain transaction to work (ex. transactions to open/close lightning channels).
If bitcoin will get 10x users then today, opening a LN channel will cost something like 100-200$....not very pratical.
Devs must be realistic, there sould be a rule like "blocksize is doubled every x years" or something similar, so only 1 hard fork will be needed.

PS not a fan of Bcash and similar, just realism and math

Hi Danny (and all the others that are well informed)

Hope you can help spread some light on a few questions.

From what I understand of the Bitcoin and cost of transaction:
1. Any transaction has to be hashed in a new block to be considered valid.
2. The amount of resources needed to mine a new block will increase exponentially in the future.

Will this not make it really cumbersome to use bitcoin as means of payment on a larger scale?

If your calculations are accurate about the cost of mining a bitcoin aprox $90 USD, how come they are trading at approx $17000 now?
Even if we say the cost is $2000 its still alot less than $17000
Maybee Im missing something obvious but please enligthen me.

Im very new here and its not my intention to offend anyone but the topic seemed right for my question, hope you don't mind.

No.  A transaction is checked to be "valid" by each node as the node receives it before the transaction is ever relayed to any other node.

I think what you meant to say is that a transaction must be included in a block in the blckchain to be considered "confirmed".


No. A block generally requires the amount of resources that are used.

If it takes more than an average of 10 minutes to complete blocks (due to insufficient resources being used) then the protocol automatically reduces difficulty so that future blocks will be completed in an average of 10 minutes with the available resources.

If it takes less than an average of 10 minutes to complete blocks (due to extra resources being used) then the protocol automatically increases difficulty so that future blocks will be completed in an average of 10 minutes with the available resources.


No. 


My calculations were based on a few assumptions...

1. That an intelligent miner would be mining with the most efficient equipment available.  Some people may choose to spend extra money on mining, but that isn't a requirement.
2. That there are places in the world where electricity is less than $0.09 per kWh.  Some people may choose to mine with more expensive electricity, but that isn't a requirement.

In addition, the exchange rate for bitcoins is based on supply and demand, and not based on the cost of production.  The demand for bitcoins has grown much faster in the past few years than the supply has, therefore the exchange rate has increased substantially.

Do you mean in the philosophical sense?

If the actual, it's not too far off. Rounding some numbers:

Current network hash rate = 13.4 EH/s
13.4 EH / 14 TH per S9 = 960K units
960K * 1.4 KWatt = 1.34 GWatt
Average block time = 1/6 hours
Average transactions per block = 3000

1.34 GWh / 6 / 3000 = 74 kWh.

I assume not everyone uses the S9, so let's add 25% to get 90 kWh/tx.

yes it a problem in trisection of bitcoin

No i stand by my numbers and your calculation did not deal with miners who did not win a coin

See http://www.digitaljournal.com/tech-and-science/technology/op-ed-bitcoin-mining-consuming-more-and-more-power/article/509257

You will also find calculations for the estimated cost of each transaction using google (fixed search results)

The actual cost is way over $2000 per coin and the reason for this is the capital cost of the equipment to compete for coins that is often
forgot about when miners talk about the profit they have made.

Typical array of 8 1080 GPU rigs tend to take 2-3 years to pay back the hardware costs that go on top of the electrical costs
and that is without factoring in GPU's over heating and going wrong since many of them are over clocked to run faster and this
results in more heat being produced.

Too me mining is like getting lots of computers to count grains of sand in a cup and the first one to get the correct result wins a price
after the other computers reach a consensus on the correct number. Block-chain has solved a few problems but has created more in the process
not that i am saying that I could come up with a better plan without taking years to do so   

Always a pleasure for me to read @DannyHamilton's reply on the forum!

But this way, fewer people can use it. Isn't it better allowing more people to use bitcoin?

The current status regarding the transaction cost problem is going bad .
The current scenario is pretty bad . My last transaction took like 3 days to get confirmed .  This is all due to the raging load on the block chain and sudden increase in  the number of transactions . The transaction fees is so high and it is quite  obvious when the load too much . This is the time where there are way many transactions then the number of mining pools to handle . I hope the team is working to build some more pools to divide the mining load .           

You can "stand by your numbers" as much as you want.  It won't make them correct.


Yes. It did.

Perhaps you don't understand how proof-of-work works?


Did you think I wouldn't bother clicking your link?

From that same article:


Don't believe everything you read on the internet.

Learn math.  Learn how Bitcoin works. Do the calculations yourself.

You'll find that there are a lot of false reports on the internet that make outrageous and demonstrably false claims about the amount of electricity and/or cost involved in mining.

Are you here to learn?  Or are you just here to parrot nonsense that you've read without giving it any critical thought?


Perhaps Lightning Network will make that possible.  The design of Bitcoin since 2010 was always going to limit the number of people that have direct access to the blockchain.  This was explained to Satoshi when he added the 1 megabyte limit.  He didn't care.  He decided that it should be limited, and we are stuck with his decision now.  If we don't like it, our only choice is to create an altcoin with a better solution.


Nonsense.  This has nothing to do with the number of transactions a mining pool can handle. Building more pools will not make any difference.

Bitcoin is designed to limit the number of transactions per block. That limit is exactly the same regardless of whether there is 1 person mining with 1 AntMiner S9 or if there are a billion people mining with a billion AntMiner S9 units each.

Bitcoin is also designed to limit the speed of blocks to an average of 10 minutes per block. That limit is exactly the same regardless of whether there is 1 person mining with 1 AntMiner S9 or if there are a billion people mining with a billion AntMiner S9 units each.


When a miner adds a block to the blockchain, it doesn't ONLY add 1 confirmation to the transactions in their block.  It ALSO adds 1 confirmation to every transaction in the blockchain.

New transactions are only possible because the earlier transactions are immutable.  The earlier transactions are only immutable because of the continuing proof-of-work process.  This is why empty blocks are still valuable and useful.  The electricity being used is sustaining an international permissionless trustless immutable decentralized record keeping system.  It is securing every transaction that has ever happened, and making possible all future transactions that ever may happen.

So, if you want to use:
Average transactions per block = 3000

Then to be intellectually honest about it, at a minimum, you need to also use:
Total number of blocks in the blockchain: 499273 (as I'm typing this)

Therefore the electricity used should be divided by 3000 X 499273  and not just by 3000.

https://bitcointalk.org/index.php?topic=2381234.0

When a miner adds a block to the blockchain, it doesn't ONLY add 1 confirmation to the transactions in their block.  It ALSO adds 1 confirmation to every transaction in the blockchain.

New transactions are only possible because the earlier transactions are immutable.  The earlier transactions are only immutable because of the continuing proof-of-work process.  This is why empty blocks are still valuable and useful.  The electricity being used is sustaining an international permissionless trustless immutable decentralized record keeping system.  It is securing every transaction that has ever happened, and making possible all future transactions that ever may happen.

So, if you want to use:
Average transactions per block = 3000

Then to be intellectually honest about it, at a minimum, you need to also use:
Total number of blocks in the blockchain: 499273 (as I'm typing this)

Therefore the electricity used should be divided by 3000 X 499273  and not just by 3000.

I like people that question what they are told by the mejia and i fit into this group myself because I think that the block-chain solved a few
problems but created many more which as a developer I have been saying for about a year and now it looks like i am being proved right.


But when BTC was a mere $0.15 then it was more or less just a test network used by students so your theory is not valid since we are talking about prices today
were volumes and winning prizes are much, much higher

Trying to work out an actual number for the cost of producing one BTC must be a guestimated number since the number of nodes will go up or down
but i see no reason to argue with the many, many sites that put the number between $1k-2k in energy alone and not all the sites saying this
are working for green-peace or seem to have a vested interest in BTC

Haven't heard clear solution in process when it comes to transaction fee specially on bitcoins but what I observed transaction fee seems like pumping together with btc lol. Currently my wallet is charging me around 40$ for single transaction reagardless the amount of transaction so it really sucks but my own temporary solution so it won't be much burden in my part I always leave btc balance in my poloniex account so if I need to make btc transaction like sending fund to other wallet it only cost me 10k sats or around 1$.

All these things are reducing the daily usage of BTC I think its becoming even costly for the campaign and bounty managers to pay off their participants. Considering the lightning network what if people or miners continue to oppose it? in search of hefty fees which could earn them more money? We saw very much the same thing with segwit2x. If we want to see btc as a mode of settlement it should send small amounts with relatively less fees.

Due to I don't want to pay 15$ or more for one transaction, I preferred to change btc into eth before sending, but of the cryptokitties this is not a good idea nowadays, so I have to look for other coins which are supported by most of the exchanges and have low fees.

Okay, so you did mean in the more philosophical sense. In that case, the problem with the current system versus traditional ones is that maintaining the historical ledger has high continuous power requirements. And potentially the requirements increase over time, although they might plateau at some point.

The poor guy two up has been forced to pay $40 for a transaction and anything over $0.60 in my book is high and that's much more than
what it cost on the BTC network back in Jan of this year.

I think they have a test rig for using the Lightning Network up and running but BTC for years worked just fine until recent times so I
am sure the tests might produce good results but I am not alone when I see trouble with a two tear system where one is using channels
and the other is not.

Myself being a small time gambler it does not make me nervous to see a radical re-write of the whole system from start to end
but it does a lot of people around here and lets face it something radical about these transactions fees is going have to be done and done quite soon

P2P without brokers and a real decentralized system of miners where ten big names don't control 90% of the market is needed and we must
also cover micro-transactions in a much more efficient way than putting everything on this magical thing called the block-chain because that's become
what programmers call "Blocking" due to the size of the 200gb database and having to access leaf data from hundreds of leafs to workout ownership of each part of
a coin

And how does that compare to the costs of operating all the banking buildings in the world?  All the banking employees?  All the vaults, safes, and armored cars?  All the payment processing systems? The production of all the currency? All the forces necessary to protect, regulate, and enforce that system?

This is my point.

People are looking at the entire cost of everything necessary to keep the bitcoin system running, and dividing it by the number of transactions in a single block.  That is not a reasonable way to do it if you want to compare to the "traditional system".

I do not know. It would be interesting to find out, assuming someone has ever attempted to estimate it.

Traditional banking with clerks and all that indeed seems wasteful, though they are transitioning more and more to the internet. But the scope of traditional banking is currently wider than what Bitcoin does.

But I agree with what started this thread: transactions costs are too high. And I mean the baseline network fees, not even talking about the artificially high fees of exchanges and web wallets.

Currently Transaction fees is about 323sat/byte which is too high to make transaction.
Lightning network is the only solution to this problem, it helps you make Scalable, Instant Bitcoin/Blockchain Transactions.

LN don't do "instant blockchain transcations". 'Cause it works out "blockchain". Only genesis (open channel) and final (closing channel) transactions will be written into blockchain.

There is a simple solution to High transaction fee.

Just create a Tether like coin for BTC,  like BTCS.

Exchange 10000 BTCS with BTC. Each BTCS would be always be worth of 10000 Satoshi.
Whatever amount of BTCS issued, maintain a public wallet, with exact equivalent value to BTC.

People will do micro transactions in BTCS.  This will reduce load on BTC, and make it faster too.

how about we make the transaction fee a fixed percentage of the transaction value? like 1%  ;D

The block is too small to cover a lot of transactions but still more and more transactions with higher fees goes in the blockchain = increase of regular speed for fees.
there is a thing called the lightning network which is something that may speed up the transaction speed and lower the fees I think they are using smart contract.

Bitcoin is not really for small transactions at this moment. i think that as time goes the higher and higher fee.

I doubt that the fee will remain higher all the time, because there are developers who may urge the miners to stop their monopolies and start taking low-fee transactions into the block (Someone please correct me here if I'm wrong) as I think that pools have the ability to choose what fee/byte transactions they are interested in involving into their block. Just as the price is breaking records, so are there the unconfirmed transactions. This debate is not going to end anytime soon, but I believe that as the miners came up with and agreed to SegWit, they will possibly hear to the concerns and help out the community if they are interested for the better of Bitcoins.

P.S.: To those thinking of doing micro-transactions, try to use exchanges and sell your coins for alts and then sell those alts to traders as it will save you a lot of fee. I recently sold my BTC and bought QTUM, sold QTUM to a mediator who sold them to a trader and gave me the money. I saved more than $13 as fee on this transaction as the fee I was being asked to pay was 0.001 BTC, and when I sold QTUM and sent it to the escrow's address, it charged me only 1k satoshis, see the difference.

The issue with forcing low transaction fees is it will make the network prone to 51% attack. Why? As we all know, there is a finite number of coins. Once all coins are mined, the only financial benefit to miners will be transaction fees. If you force low fees, then it won’t be beneficial for miners to keep running, many would stop - it wouldn’t make sense if you’re losing money. If the mining pool is decreased then the likelihood of a 51% attack increases substantially.

Additionally, regardless is the cost of running the LN to reduce fees. The LN just doesn’t seem practical to me. I actually experienced a real world example of how this would work. I had the option to put away $5,000 to spend solely on health care related purchases, however, this required me to put the money in a separate account to use strictly with a small subset of items. This is how the LN is built, you would need to store say $100 in the Channel with your coffee shop, and only use that money for that merchant. Something I’m certainly less included to due when it’s micro purchases, yet alone health care purchases.

The transaction cost is not a problem for the moment. People invest in bitcoins because it's the king of the cryptos not because they will be able to buy things with bitcoin or because they want to share money. They have bitcoin because it's an investment. Like gold or silver. I think that later with the work of the team transcations will be cheaper and faster.

If there is already many exchanges/ miners to confirm our transaction it could be possible that we will have a cheap transaction fee. Of course we are encountering high fee now because we have high value of bitcoin so the rate or the basis also goes up as well us it was also depending on the number of volumes of the exchanges.

This is a great misconception about Bitcoin, that a lot of people are suffering. I think this should be a sticky here and on bitcoin.org, also because I am tired to explain this over and over again.

Could someone point me to a good document with explanation how will lightning network work? I've read some official docs, but looks like it's a deep alfa project and we won't have it soon. Did I miss something?

Bitcoin network is now congested due the high demand of bitcoin this year and especially in these past two months. DannyHamilton is straight to the point about this congestion, this is totally realistic and common thing that whenever the demand is increased too high while the resources are still on the same level (limited) then the price tends to increase rapidly.

But have you seen anywhere hard data on the cost of using "tangible money"? I can't completely rule it out, but neither am I convinced it's true.
And again, Bitcoin is currently more comparable to credit card companies than physical money.

Your comparsion is pretty weak. Creditcard Companies are centralized and Bitcoin is decentralized. Your "tangible money" is guaranteed to lose value over time and Bitcoin will most likely raise in value, because of the demand for a secure, personal and decentralized store of value.
As Danny Hamilton explained, the current world wide banking system is wasting A LOT more energy, than the Bitcoin network. If you don't believe it, start calculating.

You have to choose what to compare to.

DannyHamilton's comparison to physical money (vaults, armored cars, production costs...) isn't a good match either. The scope of traditional money and its related services and uses is much larger than Bitcoin. I would still be interested to know the related costs, but calculating that is far from trivial.

Which is why trivial calculations that claim Bitcoin is wasteful, or that try to assign a "cost" to processing bitcoin transactions, can be so frustrating.

Bitcoin unlike physical cash is decentralized so over time it adds more value unlike same amount of cash just put away without investing it. But the cost of transaction should be be cut down based on value of the transaction.

Because calculating the running costs of Bitcoin is relatively trivial, even if there's no known data to compare it against, still, instinctively, in absolute terms it seems wasteful. I think this notion is going to remain until someone does an energy/resource consumption analysis on the "competitors", and that analysis ends up finding they are equivalent or worse.

Is there any ETA to this on when the lightning network implement this fast confirmation.