Bitcoin Forum

I understand that the miner's fee is just a few cents, but am I the only one that sees it as a potential problem?

Situation 1: I buy something and refuse to pay the fee.  I know that blockchain.info will put it back in my account after 24 hours if it isn't confirmed.  Thus, merchants may refuse to take BTC fearing these types of "charge backs."

"so merchants just insist on a miner's fee!" is the simple answer, but imagine a busy restaurant or store ringing up lots of transactions an hour, usually by the typical teenage or marginally trained employees.  A lot of no fee transactions may slip through the cracks.

Situation 2: People making small purchases (under $10) for fast food or coffee are not going to want to tack on a few cents every time.

 "People shouldn't be so cheap!" is the easy answer to that, but they definitely are. Go ask people if they are willing to pay a few pennies every time they use their debit cards and see what the reactions are. Consumers hate that.

Ideas? Solutions?

You need to go out of your way to remove the fees, basically going against recommendations.  For almost every site and every client the fees are automatic so the vast majority of users will not have those problems.  But if you do go out of your way to zero the fee, you will have poor results. 

Finding a solution for those two problems may not be necessary for mass adoption. Bitcoin is not well suited for face-to-face transactions because you have to wait for a confirmation. It is not also suited for small transactions where a few cents matters. That's just the reality. It doesn't mean that bitcoin is not useful to anyone.

But the miners fee is essential to keep the network going, especially when all the coins are mined.

The current fee of 0.0001 is about less than 2 US cents.

Merchants don't need to insist on a fee. But merchants will insist on a confirmation.

As I know, the fee-issue split europeans and americans.

In europe fees for transactions are rare. I had an account on a little and non-innovative bank where I had to pay fees (a little bit higher than 0.0001 btc) when I made more than 10 transactions. After some research I changed my bank and have now to pay no fees. I told a friend of me that I payed fees for over a year, and he couldn't believe it. In his eyes paying fees for transaction was absurd.

So yes, fees could become a problem.

I don't know if there exists any solution to this issue. When I look at mining-difficulty I fear fees will rise a lot when the next reward era begins.

You already pay a fee to use your current banking system, it is just hidden (and for this reason can be much larger in without you noticing).

If you have ever: paid for a product from your bank (insurance, 'premium' account etc) then this is subsidising your fees. Not to mention, if you have ever had any kind of penalty fee (late repayment of credit, 'charge' for using abroad etc etc) then again these kind of things cover your transaction fees.

Do you really think that banks just operate to provide you with a free service? Get real.

Only the most concientious of consumers can operate a high street bank without incurring any fees, by never going overdrawn or using any other services other than current accounts/deposits never incur any additional fees, but this is still OK for the bank, as this usually means that you have enough money deposited there that they are able to gamble with it and make money off you that way.

In reality, bitcoin payments should have the ability to be much more transparent (you can see your fee) and at the same time be much cheaper for most people:

For example, my UK bank charges £6 per day if you go overdrawn. I once went overdrawn (they had decreased my overdraft limit without telling me) and was overdrawn until I saw my next statement; 16 days that was, thats a £96 fine right there.

For comparison, that would have paid for over 8000 bitcoin transactions, and that is a single (albeit admittidly large) 'fee'.

A 'normal' £25 fee would still 'pay for' about 2000 BTC transactions.

Oh yeah, try sending >10,000£ from one country to another using the fiat system and take a look at the charges; that would still cost the flat block inclusion fee in bitcoin (amount does not matter)

I know, I know, you're completely right, what Banks take for insurances, for overdrawing etc. is obscene and a lot more than bitcoin fees. Also the bitcoin-network is a lot more effective than the banking-network ... but don't underestimate the fact, that (european) banks did find a way to get their consumer the feeling they don't pay fees for everyday-using money.

First and foremost, Bitcoin transactions are irreversible. Unlike purchases with Paypal and credit card, Bitcoin transactions are forever one-way tickets, so merchants are completely able to avoid the hassle by the name 'chargeback'. If you don't pay a fee, the only thing we know is it may take a while for your transaction to get confirmed. We don't know how long your transaction can get confirmed if no fee is paid. The only problem that merchants and retailers may face taking payments in Bitcoin is what Bitcoin creators defined as 'double-spend'. 'Double-spend' in some circumstances may happen but it can easily be avoided too. 

Transaction fee is and will never be an issue for Bitcoin in the sense that merchants may be willing to take that part for their buyers. After all, Paypal and credit card companies all require expensive fees too. Why do people still use Paypal and plastic cards every day? and who pays the fees when you use them?

As BTC appreciates in value why would you be concerned about a few cents?

We are very fortunate to be living now to see this BTC event.

that is the mindset of the longterm investor. the OP is thinking interms of instant payment merchants that were initially promised "virtually fee free"

i personally i find the fee system a bit of an unrequired feature for atleast a decade or two. the block 'reward' is more then enough... for now

but as long as GavinA keeps decreasing the amount of satoshi's the fee is, when releasing updates for the bitcoin-QT dependant on price, like he has done over the last couple years. and every other third party program follows,  so that fee's remain pennies. i see no massive problem just little irritations at a nearly flawless system

I don't see the fee as a barrier at all.  The payment systems just need to reflect the total to the user so there aren't any surprises.  Either the fee shows up in the running total just like tax or shipping would.  Or the merchant eats the fee by subtracting it from the transaction amount.  My guess is that it will evolve to the merchant eating the fee since that is how other payment systems work now.

but the whole idea of bitcoin is to be different.

merchants dont want to fill in paperwork to get merchant accounts with card providors. if the FIAT side of converting bitcoin to fiat requires AMLKYC then thats still paperwork

merchants dont want fee's that eat into profits, so i do see fee's as a problem, but as long as they continue to represent pennies, it wont be a massive problem, just an irritating one

The fee will be a token amount until the block size limit is reached and people start competing for space in a block. Then it will get interesting.

Very!  Both because it will be interesting to see what happens to the fees at that time, AND because it will be interesting to see how widespread bitcoin use will have to be to generate enough transactions every day to completely fill 144 blocks.

Like I said, it's just a guess.  But some of my reasoning is:  Since merchants do not directly charge (i.e. it is not listed as a cost) customers for fees incurred with credit card, paypal, or other systems, then doing so for bitcoin transactions would appear as an additional cost to customers.  Additionally, showing the fee would require updates to user interfaces for any web or POS sales.

You pay a fee when you use a credit card, albeit you don't see it, it is usually factored in by the merchant. Cheaper prices for Bitcoin (enough to cover the fee), could easily be used, similarly to cheaper prices when paying with cash.

Maybe I didn't explain what I meant very well.  By "eat" the fee, I just meant "hide" the fee.  Just like merchants currently do with credit cards and paypal.  And the main reason it would be appealing to do this is because customers are not used to the idea that they are paying a fee when they use credit cards now.  Many people probably realize (i.e. a lot of people don't realize) that part of what they pay goes to the credit card companies, but still fail to consciously associate it with the transaction right when they are making a purchase.  So showing an added fee for using bitcoin and not showing an added fee for a credit card would be perceived as a reason to not use bitcoin.

However, you imply a great point: Show a discount to the customer if they pay with bitcoin vs a credit card.  This could be something as simple as "Pay with bitcoin and save another 2%."

The problem, as I understand it, is that the purchaser can choose to pay or not pay the fee.  It is done on the "senders" end.  Thus, there is no way that I can see for a seller to "add the fee" automatically to the purchase.  True, he can add the fee to the total cost, but the person receiving the BTC cannot "force" the fee to be paid via the technology. Thus, the sender could simply not pay it.  

Verification that the fee was paid seems difficult in busy environments with lots of sales ringing up.  Remember, the transaction gets returned to the wallet if confirmation doesn't take place in 24 hours.  

Any type of instant gratification purchase (grocery store, coffee shop, fast food) would be very vulnerable under these circumstances.  

I don't really see Bitcoin transactions as "instant" and impossible to "charge back" as described.  Confirmation is necessary, and sometimes it won't happen.  You don't have your BTC until the transaction is confirmed.  You can forget most businesses taking BTC under these circumstances.

Is there a way for the merchant to "force" the fee to be paid?  

As for the psychology of "paying the fee," it doesn't matter that we already pay fees to use credit and debit cards.  They are currently hidden.  It is all in the mind, I admit, but Americans wholeheartedly hate the idea of adding a few cents.  Debit/Credit "feels free" and that is what matters.

This is not true.


This depends on how the eventual implementation in the POS is handled.


This depends also on how the eventual implementation in the POS is handled.



This is not true.


0 confirmation transactions are "instant".

Transactions with confirmations are "impossible to charge back".

The merchant will have to decide what their fraud risk is and how much risk they will accept.  Solutions beyond the protocol are possible to increase usability (just like there are additional layers beyond TCP/IP for your internet usage).


And yet they accept credit cards and PayPal under these circumstances.  I think you have a very flawed understanding of what businesses are willing to accept in the interest of increasing profits.


Yes.


And bitcoin transactions can be handled that way as well.

Danny, if there is a way for the fee to be added, via the technology, so that when I send the BTC I cannot choose to not add the fee, then I will be happy to stand corrected.  I know that with blockchain.info I can choose not to add it.  It is entirely up to me, and if I say no, then it doesn't happen.  The person receiving the BTC has no say in it.  Maybe I am wrong, but I don't think that I am.  They can choose to not give me what I paid for until confirmation, but that is all.

Also, with Blockchain.info unconfirmed transactions get cancelled after 24 hours.

Thus, if I were to use that wallet to buy something at a store I could not pay the fee and I *might* get a free lunch. 

Zero confirmations is definitely not instant under these circumstances.  Zero confirmations simply means that the transaction may go through, and with no miner's fee paid there is a good chance it won't.

That's the simplest and easiest way. The price of the good/service already "includes" the tx fee and the buyer won't know the difference. Just like it is now ... nothing changes.

Emphasis mine. Why did everyone skip over the answer? Merchants could give a rats ass about the fee, a big fee, little fee, whatever. They just need to know that the network accepted the transaction, be it 6 or even just 1 confirmation. How many sites do you see that accept 0 confirmations and let you get something out of them with the chance of your OP scenario?

Read about:

"Child-pays-for-parent"

and

"replace-by-fee"


This is not true.  It is not possible to "cancel" a transaction after you send it.  You can stop broadcasting it and hope that all the existing peers will drop it from their memory pools, but the receiver can continue to re-broadcast it forever without your permission.


This doesn't sound any different than a credit card or PayPal transaction?

---

Bitcoin is still in its infancy.  There is SO MUCH more development and innovation that will come in the future.

You are basing your opinion on the only ways you are aware of currently to make bitcoin based transactions.  I think if you come back here and re-read your thoughts in 10 years, you will be surprised and perhaps feel a bit foolish.

Imagine internet users in the early days (when TCP/IP was less than 5 years old) trying to picture what the internet would be like today.

Fees are everywhere. You buy some groceries and you pay with your Visa, and Visa will collect a fee (paid by the merchant). And you paid first to get the Visa card. Paypal is quite successful and it charges much higher fees than BTC.

Maybe it would help if we hide the fee. Let's say you buy something for 10BTC, and you will pay that amount but the invoice will show that you've paid 9.995 for the product and a 0.005 fee. The software could work like this, instead of adding the fee, it could deduct it from the sum to send.

The only trouble is that the fee can vary according to the weight of the transaction. This could be a serious issue if your BTC has some dust in it.

Some merchants do zero-confirmation transactions..... the last bitpay invoice I paid cleared the second I sent, so I'm sure it was zero-confirmation. I wonder what the percentage rate of zero-confirmation transactions that are received and then rejected by the blockchain? Anyone know?

Nobody is denying that 0 confirmations is susceptible to fraud.

0 confirmations can be instant if the buyer sends the transaction through the sellers network, so that the seller can see the transaction.

Also, the seller can simply accept that the buyer has paid without proof. There are examples where trust is a reasonable risk. All of my direct bitcoin sales are 0 confirmation, and some people don't even bother to wait to see the transaction on the network.

I know that if you try to send from Blockchain.info without a miner's fee you get a warning that if there are zero confirmations after 24 hours it will no longer be sent.  Danny, try for yourself if you don't believe me.

As for acceptable risk, tell the average Wal-Mart shopper that not sending a miner's fee may lead to them getting to keep their money and see how many choose to pay the fee.  Yes, there is an acceptable level of risk, and then there is mass exodus from miner's fees.

I know how blockchain.info works, I also know how the bitcoin protocol works.  You appear to only be aware of one of those two things.


Tell the average Wal-mart shopper that they can report their credit card stolen, or pass a bad check, or manufacture some fake U.S. currency, or simply walk out with the merchandise without first paying for it and get to keep their money.  What's the difference?  Fraud is fraud, doesn't matter if it's with credit cards, counterfeit cash, paypal, checks, or bitcoin.

I think that sellers of physical items that will be shipped would not mention the confirmation cycle.  They can simply hold shipment until they see the desired number of confirmations.  To the every-day honest buyer it will look the same as any CC purchase does now.  For downloadable digital purchases, it seems that the merchant would be best served by establishing a download queue.  They would show the user something like this: After you click "Confirm" your purchase will be available in your download queue in a few minutes. (click here to see why).  Then they move it to the download queue after they see the desired number of confirmations.

I think it all depends on the items being purchased and other circumstances specific to each industry and seller.

No you clearly don't understand and your facts are wrong.

It's appealing, but it's not how Bitcoin clients work.  If the merchant charges you 1.0, you pay 1.0001 out of your wallet.  If they charge you 0.9999, you pay 1.0 out of your wallet. 

If you wanted the merchant to pay the fee and hide it from the customer, there would have to be more communication between the merchant and the Bitcoin client, which seems silly to me.

yea - I realized that after I posted it.

Maybe this is something that needs to go into the payments protocol discussions.  (maybe it's already in there?)

i don't see this being that much of a problem, but maybe i am missing something.  :)

Just quoting this because it is exactly what I was going to type out. Also - credit card companies charge 1-4% PERCENT of every transaction to merchants who pass it along to the consumer. Merchants accepting Bitcoin would not have to do this.

I use Bitcoin-Qt, I find it interesting that people talk about Fee vs no fee likes the Fee is some kind of absolute. With QT people can change their default fee. If you feel .00001 is too high, then make it .000001. Several times i've used .00000005 as a fee just to see how long it would take to clear and i saw no noticeable delay.

So, paying a lower fee is a third option.

The problem with the fees is that they'll go up as the price of BTC goes up, so even though it's a few cents right now the fees could end up rivaling CC fees someday. 

Many miners will include "free" transactions.  The client however enforces a min mandatory fee on LOW PRIORITY tx.  There is no min mandatory fee on HIGH PRIORITY tx.  This rule is important as an anti denial of service mechanism.  It limits the amount that a malicious user is able to bloat the blockchain at no cost.  Without it one could simply send a tiny amount of BTC from one address to another and ensure all blocks are "full" continually.  Higher paying tx would get through but the attacker at negligible cost could ensure all blocks are "max" size.  Even with the 1MB "limit" that would still make the blockchain to date excessive large.

The min mandatory fee has gone down four times as the value of BTC has risen.  Today (in BTC terms) is is 1/1000th of what it was originally.

What were the historical minimum fees before? I was around when the minimum fees were 0.0005, then it became 0.0001.

Sorry to disapoint you here, but look carefully to debit cards/bank fees, it's a lot bigger than you may think imo !

Miner's fee is nothing compared to the potential problem we face if we start using the term "millibitcoin" or "millibit" as the standard denomination for bitcoin.  Talk about a branding nightmare.  

It's not ideal, but it shouldn't really be a problem as long as your wallet makes it clear and lets you switch.  It would be an improvement for small in-person transactions, even now.  But, Bitcoin should probably still be used as the brand name any time that you're not discussing a particular payment amount.

I totally agree. Look what the terms "c-note", "benjamin", "buck", "quarter", "dime", "nickel", "penny", and "cent" have done to the dollar! I don't think it will ever recover. ;)

Don't forget:

large, grand, G's, jackson, sawbuck, tenner, ten-spot, fin, bones, beans, greenback, clams, simoleons, smackers, two bits.

I suspect with a bit of searching, regional nicknames can be found as well.

The solution is to have a fee of about $1-5 per transaction.  Thus about 0.01 at todays rate.  You want to get all the bastards like satoshi dice from spamming the chain.  What you do is you have 3-4 major exchanges acting as wallets for petty cash.  You would need no confirmation and pay like 0.5% fee to them for every transaction. Thus you put a bitcoin on the exchange for .01 fee thus you have $200 in value on there.  From there you just buy and sell and the exchange get a small amount of additional revenue.  If the site goes broke or skips town you lose your $100.   However, they have the incentive to stay with their fee.

These exchanges could even use a common wallet thus everyone would be using the same wallet.  Sort of like cirrus networks. Everything would be full reserve so you would not have to be worried about them using your money for loans to losers.  This main wallet would only have an extremely small amount of bitcoin there and would be sent as needed to fill the needs of merchants that want to cash out into real bitcoin.  This is actually already being done today in many ways.

Higher fees is the solution not the problem.  If you buy a $20,000 car or house, a $5 fee is not a problem.  You might even want to use a wallet for that for a paper trail and proof you paid.

Congratulations you just invented banking.  When 3 or 4 clearing houses handle 90% of transactions it will be no different than banks today.   Bank fees don't HAVE to be high.  Credit Cards don't HAVE to cost 3%.  They are high because the banks WANT to profit on the backs of their users. 

No you are not forced to use the clearing houses.  There are no fees and anyone can set-up their own system. It also is not banking as banking involves loans.  It is a simple means to get the transactions off the blockchain.  Can bitcoin handle a million transactions a second?  Any clearinghouse charging more than 0.5% fee will not be used.

I thought I saw a post 'round hereabouts that indicated that the peak transaction volume seen by the Visa network was on the order of 25,000 transactions a second. I took it to be a statement from true knowledge, though I did not verify this for myself.

I guess my point is that it would seem that bitcoin will not have to handle a million transactions a second even if it should become the standard worldwide currency of retail trade - at least for a generation or so.

Of course, I _could_ be repeating the claim of a charlatan.

So, let's say bitcoin is worth $1,000,000. To send a hundred satoshis, is it still going to cost me many hundreds of times that much in transaction fees? Off-chain only for transactions < $50,000?  ???

obviously the fee isn't something that's going to remain static

also, individual pools/miners can change it if they like, just as i've changed it from ed: 0.0001 to 0.0005.  if it was worth $1,000,000, i'd adjust it to much less

the main point is to keep spam like horse staple  battery from being kept in your tx pool

You know, if we do business, I could care less about what fee you paid, as long as your transaction confirms. I'll accept most deals below a few hundred bitcoins on one confirmation, but usually it ends up taking a few more because of time delays and banking and preparing whatever it was that you bought.

This will cut of some usabilities of bitcoin, so I think its a bad idea.

Why not reward those using the qt with free transactions? This would be an incentive to store the allday-growing blockchain and could be the foundation of micropayment-services

How would the network know that I sent a transaction using QT? There isn't a protocol for it now and any client can pretend to be the reference client, and the miners ... ... would not have any incentive to process transactions without a fee if they are low priority.

don't know, am no IT / technician. Just thought it could be a solution?

But ... qt builds a node, so first notize of tx happens instantly only in qt, couldn't this be a proof?

I think the nodes don't know if the other nodes hold the full blockchain or not, just that they got a transaction forwarded to them. It's up to the node to inspect the transaction to see if it's legit.

Also, nodes don't mine. Miners do the work of confirming. Of course, miners probably run full nodes (they have to, I believe.)

The way fee's work are being redesigned by Gavin at the moment. I would expect and hope that they will be lower in future. The biggest problem at the moment is they don't float. If the BTC/USD exchange rate doubles, effective fees double as well.

The OP is right the fees are ridiculous, it essentially makes microtransactions impossible

Since bitcoin's entire purpose was to make microtransactions possible...

Everything we pay for includes fees - the price of every item we buy is the sum of the effort needed to process that item plus any profit the merchant wishes to take from the sale.
When you pay with cash, the merchant has already priced in the effort required to process that cash into the price of the merchandise.

Bitcoin is easier to process than cash, and cheaper than paypal and credit cards for the merchant.

So next time you pay with Bitcoin ask the merchant if he wouldn't mind giving you a penny discount on the price since you are saving him so much time and effort- though he may point out that the time it takes him to answer this question and process your discount costs him more than one penny.

Not true.


I see payments (transactions) but not micro.

Also it depends on the definition of microtransactions.  If you mean sub $1 tx Bitcoin works fine.  If you sub $0.01 tx then Bitcoin will never be viable.  No public ledger system will.   Any system has a per transaction cost and it is somewhat dubious to try and build a global model which works for sub cent transactions.

Current fee is 0.1 mBTC or about 1.5 US cents.  A company selling a $1 digital good generally finds current payment systems to be incompatible.
Credit card: $0.30 + 3%  = $0.33 fee or 33% of gross.
Bitcoin: $0.015 fee or 1.5% of gross.

Yeah looks pretty good for micro transactions. 

Bitcoin is also cheaper than cash.  Most business account charge for cash deposits beyond a token amount.  Usually something like 0.5%.  Larger businesses needing armored car service are looking at costs approaching 1%.  Throw in potential losses for counterfeiting (or detection equipment cost/time) and sure it is cheaper than Credit cards but despite consumer perception cash isn't "free" for the merchant (on anything larger than a hobbyist scale).  Ever wonder why when using a debit card most stores will give you cash back and they don't charge a fee for it (unlike say an ATM)?  Simple they don't charge because it improves their bottom line by ~1% or so for every dollar a customer takes in cashback.

I think your sarcasm detector is off.

You might be right although I claim Poe's law as my defense.  I have seen too many times people legitimately claiming Bitcoin needs/should work for microtransactions and if it doesn't then it will fail.

When the btc will be all mined the tx fee will keep the network up :)

With the current transaction fees. transactions worth 1 USD are still ideal with bitcoin. It's the lower ones that pose a problem, which is solved by those paying them withholding until a minimum threshold is reached, which can still be $1.

All non-bitcoin microtransactions now do this. Google Adsense, Affiliate Commissions, even bitcoin pool mining. They don't send each and every small bit on-chain. They collect them off-chain, and eventually send a lump sum to you.

Offchain services or internal accounting for whatever service you are using, as long as there are no transaction fees, can send microtransactions with almost no problems. I'd still put a minimum amount though.

The new gambling sites are an example. They allow you to bet 1 satoshi. But you never see that on the block chain. (Either you cash out after a session, or you busted to zero, but that's another topic.)