Bitcoin Forum

Bitcoin(PoW) need hash race,and,many computer work,but just one computer's working is effective at one time.
Compare to mainframe used in banks,the cost of Bitcoin is much more higher.Now transaction fee is low because the cost of system is undertake by people who buy bitcoins,not people who use bitcoins.
One block gives miner 25 new coins now,but new coin's production rate is reducing,more and more people will find the cost of bitcoin is too high.


What about PoS？PoS is better,but not good enough.POS do not need hash race,but also one computer's working is effective at one time.And,it is not fair to miner,The output does not relative to hardware input.
If people use  virtual currency million times per second,the money spend on computing device、I/O device、electricity bills must not be ignored.Hardware cost/total cost higher,profit rate lower.the money spend on hardware is same,so rich investors will get higher profit rate.Only miner who has many coins is going to mine,it will lead to concentrate.

Following the same logic, maintaining armies for nation states requires large amounts of resources, but people still do it. The answer is simple - that's the cost of sovereignty to control the land. It's the same with PoW only we are talking about controlling the global money system.

It is needed in Bitcoin system,but not needed in bank or visa system.
So how does Bitcoin compete wiht banks and visa etc.

Banks and visas of this world can impose sanctions and freeze your accounts, Bitcoin allows you to stay independent if you are willing to put some effort into it, while still maintaining integrity of the whole system and keeping its global reach.

Of course,it is Bitcoin's advantage.But I I doubt how many people will be going to use Bitcoin if transactioin fee is 30 dollars in 2030.
And,it's not just advantage.Bitcoin is free currency,if Bitcoin is lost or hacked,no one can get it back.

Yes Decentralized currencies give you a great deal of personal freedom that banks can't compete with that has value.

Bitcoin also still currently costs 1/3 of the price of traditional payment options even when using BitPay to convert back to fiat.

POS of course is even cheaper. Personally I expect dollar stable assets which only charge 1¢ per transaction to revolutionize global remittance & payments this year

https://bitcointalk.org/index.php?topic=179695.msg10078463#msg10078463

I also expect this to reverse the crypto-currency downtrend because they solve the volatility problem.

https://bitcointalk.org/index.php?topic=920345.0

I'm not sure what is the actual cost to maintain the whole payment system compared to the conventional fiat system. Also I have never seen a detailed calculation made to date. However I have seen some proposals being put forward before on power generation companies utilizing the excess power towards maintaining the network. So in general there are bound to be solutions which we can use to address the issue  (if that is an issue in the first place)

Dollars might not be around that far into the future, at least in their current form with current debt figures. Transaction fees will be kept low as block size limit will increase throughout this year.


I believe there will be a few PoW coins and a few PoS coins and maybe a few PoI coins around competing with each other. PoW is better suited for PoWer players (as its name suggests) like nation states and big international corporations, PoS and PoI will be filling the niches for distributed asset exchanges and other fancy stuff for end users.


If mining is performed at nearly break-even point, then current cost of the system is simply the emission of new coins, it's part of their value equation. That's what makes PoW coins tangible in real world as they are literally a cryptographic proof-of-work. Later on mining might be performed at a loss if competition for control over the system is stronger than the monetary incentive, that's mostly politics and flexing the muscles at that point. The cost of mining over the long-term will be reflecting the disagreements of major players, which cannot otherwise be resolved at the round table.

So...go buy Litecoin and get it accepted?

Problem solved. For the rest of us, Bitcoin works.

338492    16 minutes    306    3,975.02 BTC    KnCMiner    134.8
338491    18 minutes    174    4,104.85 BTC    GHash.IO    99.3
338490    23 minutes    73    755.77 BTC    AntPool    62.36
338489    22 minutes    66    707.01 BTC    KnCMiner    36.18
338488    25 minutes    418    10,970.23 BTC    AntPool    521.66
338487    31 minutes    269    4,067.65 BTC    85.195.114.243    685.81
---------------------------------------------------------------------------------------
Average number of transactions per block:218
The value of 25 bitcoins:278*25=6950
The cost of per transaction:6950/218=31.8(dollars)

218 transactons per ten minutes,It can be processed by a Gameboy or APLLE II.But in Bitcoin system,it need 6950 dollars per ten minutes,30024000 dollars per month.

^That's obviously not fair. The network isn't being well-utilized, and Gavin's already started campaigning for increasing the block size limit 20x (to solve a currently-non-existent problem). -And you can't really look at the mining cost at all since Bitcoin could operate exactly the same with just one AMD K6 mining. Anyway, I think the scarier numbers to look at involve the costs to relay the transaction queue and blockchain, which definitely won't be trending toward zero any time soon.

Umm... Do the Bitcoin ATMs kiosks "transaction facilitators" more than a couple companies want to become ubiquitous not count? Do all the full nodes operating not count? Online wallet services? What about block explorers?

I doubt mining takes up more than ~20% of electricity consumption if Bitcoin were looked at as carefully as other trade mediums in that article.

I don't know it is real or not,but if Bitcoin developed,Bitcoin also need ATM.
Bitcoin is a clearing network,should not be confused with ATM.

So, when the block reward is cut in half will the cost to run the network half as well?

How many coins are rewarded each block for the PoS, Litecoin system?

You mean transactions' processing is not contained in mining?
It's seem to be different from my understanding.
Just 218 transactions per 10 minutes,cost is 6950 dollars,is it because of PoW,will it happened again after 20 years later?
For example,there are some transactions,it need one computer to process,but in Bitcoin system,it need 200 computers to hash race,20 computer to process transactions itself,and just one computer's working is effective.So how can bitcoin's cost be lower?

I don't think there will be many POW coins.  The vast majority of coins today are POW, yet they are constantly declining in market share and soon Bitcoin will be the only POW in the top 7 if Litecoin continues it's descent.

I think POW has been proved inefficient by the market already.

That's not to say Bitcoin can't maintain it's position, it still dwarfs all the competition put together.

However if my hypothesis is true that Bitcoin is trending constantly down without a catalyst due to being too volatile for businesses, then I imagine even Bitcoin will be replaced by a 2.0 offering stable dollar & currency options but backed by unstable crypto-currency.

It will be two possibility：transactions fee higher or security lower.
The biggest part of Bitcoin system'cost is for defending from 51% attack.

You've confused the block reward and the transaction fees. The 25 bitcoin reward is paid to the miners by the bitcoin network and that will halve in 2016. The transaction fees are what is paid over and above the 25btc block reward. At the moment it is usually less than 1btc per block and that it all that is paid by the users as transaction fees.

Even with PoS, the cost would be the same per block.

I'm pretty sure that only PoW coins are agile and flexible enough to grow into some really Big Badgers that would then take on the Big Brothers of this world and eat them good ;D. That's the main reason they were created, the rest is just noise in a form of bells and whistles. In that sense, Bitcoin and Litecoin are brothers badgers for life!

The cost of using Visa and MC is huge. Shops must buy a dedicated terminal which costs at least $300, and there's a higher fee to pay for each transaction. Then there's Visa which I'm sure has back office with servers in every country the service is offered. We're talking of a network with several thousands dedicated servers in it. This wasn't made in a day, and it took billions to build...

1.
In Bitcoin system,the number of transactions per ten minutes is about 200 times.In Visa clearing system,the number is millions.
2.
Bitcoin system is clearing system,but visa is not just clearing system(BASE II).
For example,if you lost your visa card,you can contact to visa,let them handle the problem.
you can also save money when you go shopping.
It need money,but it is not the cost of visa clearing system.
3.
Servers in visa clearing system just process transactions,but in Bitcoin system,Servers also do hash race,and just one servers' working is effective at one time.
If there is no block reward,the transactions fee would be about 30 dollars in Bitcoin system.

Developers can set transaction fees to any number,and the system will be no change,because the cost of Bitcoin system is not paid by transaction fees,but by block reward now.
If the block reward is zero,to keep the same security level,the transaction fees will be about 30 dollars.

1.
I just talk about an example,which shows the real average cost of Bitcoin system.
2.
In fact,it has gone up too if you use it now.
The system cost is relative to the price now,because it is paid by block reward(25 coins).
And the security level is relative to the system cost.
3.
If the block reward is zero,to keep the same security level,the transaction fees will be about 30 dollars.

it is actually not expensive because you could maintain the network with less miners.

the point it that more and more miners are insanely increasing the network power

yes it waste too much energy.

Freedom doesn't come cheap!

When you calculate the cost per transaction, it is generally accepted that the cost to process a bitcoin transaction is lower when you calculate the estimated electric cost. If you use the value of found blocks (including block subsidies) then visa is cheaper
You would actually contact the issuing bank to replace your lost/stolen credit card. The same goes with any payment disputes. The payment network would generally be unaffected
If there was no block subsidy (not reward) then yes the cost per transaction would be higher, although it would not quite be $30 per transaction. The theory is that over time the number of transactions will increase enough so that TX fees will rise enough to cover the reduced block subsidies. 

http://media.coindesk.com/2014/07/Picture-5-630x210.png

http://media.coindesk.com/2014/07/Picture-23-630x227.png

http://media.coindesk.com/2014/07/Picture-7-630x316.png

http://www.coindesk.com/microscope-conclusions-costs-bitcoin/

I think that the number of transactions will decrease enough so that TX fees cover the reduced block subsidies.
Zero transactions. Zero tx fees. Zero blocks. Zero subsidies. Zero value.  ;D

Yes, but by then there should be more transactions in every block... at the moment they are pretty empty. The system was designed this way to reward miners so they would build up the necessary network security. It is the plan that the block reward will be offset by transaction fees as the network grows and more people use it. It is organic and has worked pretty well so far.

includ government bailouts, inflation loss etc. in your comparison and suddenly the bitcoin network seems cheaper to maintain than the banking sector

Bitcoin is first a monetary system and then a payment network, it is not appropriate to compare a monetary system to a payment network like VISA. There is big difference here. VISA does not care how much USD worth, but bitcoin network must decide how much bitcoin worth through mining

The banking system's biggest cost is to force their zero-cost fiat money to circulate by passing a law. The cost to make that law is almost the wealth of the whole nation. If Russia trys to force everyone in US to use Rubble, you will see how huge that cost will be  ;D

For a voluntarily monetary system like bitcoin, its value is not forced upon its users by law, but through market behavior, e.g. the lowest cost to get bitcoin will decide its value. So mining cost works as a reference baseline for bitcoin's value. If there is a shortcut that you can get cheap coins like in PoS coins, then everyone will take that route to get coins and no one will pay for it (there is no law forcing you to accept PoS coin), the coin's value will plummet to the cost of that cheapest method

omg! really?
visa does care how much one transaction costs. because visa also pays for hardware, electricity, salary and taxes.

Maybe the word "care" is not accurate, can I say that VISA is not responsible for any currency's value? Do they care that USD just rose against Rubble for more than 50% thus the transaction cost in Russia is 50% higher if counted in Rubble?

Both arguments are correct, but they don't relate to the cost of the currency used. Visa operates with about every currency in the world. If a given currency goes down, they'll just raise their operating costs in that given currency.

Less miners,less security.
If all bitcoin worth 1 million and attacker is going to using 10 thousands to attack the Bitcoin system,
then,when all bitcoin worth 10 millions,the attacker is going to using 100 thousands to attack the Bitcoin system.

Completely irrelevant.

Mining bitcoins is by definition never expensive, or even 'too' expensive. If it's worth it to mine bitcoins, more people will do so, and difficulty will increase. Until it becomes not worth it anymore, then some people will stop mining, and difficulty will decrease. This dynamic equilibrium will automatically maintain itself due to the very nature of Bitcoin.

Saying that the cost of the Bitcoin system is "too high" is just plain retarded, and completely ignorant of fundamental Bitcoin basics.

1 and 2,I don't  get your point.
3
Just as I said,Bitcoin(PoW) need hash race,and,many computer work,but just one computer's working is effective at one time.
So,what you said will not happen.

Organic?So why is system's cost so high when transactions is just 200 times?
A plan?Bitcoiner say Bitcoin is a cheap payment for transaction fee is just 0.0001,why?
25 bitcoins,0.0001*200 bitcoins,there is a big difference.
And,a truth is, Bitcoin(PoW) need hash race,and,many computer work,but just one computer's working is effective at one time.
So,I don't think there is a way to fill it.
And I also have another question.If the transactions number is millions per ten minutes,will Bitcoin system work well?It seems no evidence.

First,I don't know where these coindesk's number come from，and,which part is counted.
Second,I think some number should not put together.
For example, glod mining and Bitcoin mining,It is different.
It's not fair to both glod and Bitcoin.

I included the link to the article that goes into detail on where they got the numbers. And those numbers are conservative.

I checked it again,I just can't find their method.Did I miss something?
It seems these details is the conclusion based on these number,but not the evidence of these number.

Yes. You have missed that these digits are bitcoin promotion.
We can compare expenses of bitcoin network and bank system.
But.
We should compare the cost per transaction, not total expenses.

OP seems to actually know nothing about the bitcoin protocol, or, for that matter, anything about why bitcoin got so successful in the first place...

In fact,the cost of any digital currency's prodction is zero,whatever the digital currency come from(banks,bitcoin system、 a game etc.)
The only thing can be  compare with the cost of bitcoin system is the clearing network.
Because Bitcoin network is just a clearing network.
The cost of bitcoin system is the cost of bitcoin clearing network and its security of the bicoin clearing network.

~ USD $20 per one transaction for bitcoin network today. May be even more.

We were just talking about where those numbers come from.