Because society is like human, very adaptive, central banks print more and more money to stimulate, but have less and less effect since everyone has already adopted to it and need more and more to stimulate. Once central banks stopped printing, the whole thing will immediately fall back to even worse level than before

Someone had a forecast of bond bubble, e.g. bond are valued much more than they should worth and will be sold off. But since central bank can always print new money to buy the old bond, the bond price will not crash as long as fiat money's value don't crash

A total crisis will arrive when the confidence of fiat money collapsed, then bond will also crash hard together with fiat money, means hyperinflation. But so far there is no sign of confidence loss of fiat money, only those a few on the top start to question the fiat money system, its a long way until majority of people understand the fiat money scam, and by that time its value will already be close to zero

I guess most of the pool do, otherwise no one will join that pool

If bitcoin reach mass adoption, miners can always charge fee to get more coins, maybe more than 10 million bitcoins

https://bitcointalk.org/index.php?topic=1201304.0

I rechecked these charts, the "deadweight loss" part means that when there is a blocksize limit on the left of the Q*, some transactions will not be included in the block no matter how people adjust their fees

But my view is that supply and demand curve is not fixed, they would move once the Qmax moved, so that a new Q* will always appear at the left of Qmax regardless of Qmax's position

Imagine that Qmax moved to left of Q*, thus the tranaction capacity is not enough, so the natural reaction of normal user is to reduce the transaction frequency, so demand curve will shift down, and the supply curve will shift up: miners charge much more when the transaction capacity is less. So these two lines will cross at some where left of Qmax to make a new Q*

I think overall, the fee structure is decided by 3 factors:

1. If the infrastructure is capable

2. If the miners are motivated

3. If the users are satisfied


If technology does not allow free block space (to ensure decentralization through small blocks and fast propagation), then a fee market will automatically appear and raise miner's fee income

If technology advancement allows we to always have free block space to process the transactions, with diminishing mining subsidy and slowly changing bitcoin price, miners will need fee to be motivated to run the network to resist attack and confirm transactions. Otherwise more and more miners will quit and the network hash power drops and becomes insecure

So, as long as the users are satisfied, miners should get enough motivation, since they are maintaining the infrastructure. And they even have the mission to re-distribute the wealth in the ecosystem so that wealth concentration can be avoided

To measure user's satisfaction, you can look at the amount of bitcoins in each transaction. Now the majority of the transactions are larger than 0.1 bitcoin, we can predict that a fee of 0.0005 btc (about 0.5% of 0.1 btc) will satisfy majority of the users (In fact it is a fee that almost guarantee a confirmation in 10 minutes). For 2000 transactions in each block, you will get 1 bitcoin. With 8MB block in future, the fee income per block will reach 8 bitcoin, already quite significant.

However, if bitcoin price rise by 10x, then the fee income per block will drop to 0.8 bitcoin, since the average transaction value will drop to 0.01 btc. I guess the fee income depends on the minimal value of majority of transactions, so it could go higher if most of the transactions become larger

Exactly. It costs almost the same network/cpu resource to confirm a 100 bitcoin transaction or a 0.1 bitcoin transaction

If miners charge same fee to all transactions, then the fee will be extremely generous for those rich guys/institutions doing large transactions if the fee can also be accepted by casual users doing micro transactions

The decision of including a transaction is totally up to each miner. Even the block space is more than enough, a miner would still be motivated to exclude a transaction without fee, to reduce the chance of his block being orphaned

I remember that you have some reseach about the market behavior of fee setting, it says that supply and demand will find its balance

Miners might compete for a lower fee, but I don't think this vicious competition will last too long. Major miners will eventually reach some kind of consensus to promote an enough high fee to maximize their profitability, while still satisfy most of the users

For example, if they observed that majority of the transactions are larger than 0.1 bitcoin, then they will promote a minimum fee of 0.0005 bitcoin to not disturb the majority of the users and at the same time greatly increase their mining income

Of course, a small mining farm might include all the transactions with <0.0005 fee, but since his blocks are only mined every 24 hours, his block will always be full, have higher risk of being orphaned, and with very little fee income. Why should he do that? From user point of view, any fee less than 0.0005 bitcoin will take more than 24 hours to confirm, so they will just raise the fee to get a faster confirm. Confirm in time is much more important than fee

For each user transacting different amount of money, the absolute value of the fee that they can tolerate is different. Typically a fee of less than 1% is considered acceptable by majorities, since that does not cause significant loss of the fund. If you transact 100 dollars, you are fine with 1 dollar fee, and if you transact 1 dollar, you don't feel that 1c is a pain. People's pain point is around 5%, that's why credit card company set their rate below that level and still be able to attract lots of merchants. In fact, many people using western union are paying more than 10% for the transaction fee and still be fine with it

The statistics showed that over 70% of the transactions are larger than 0.2 BTC, e.g. $40, so a fee of 0.002 ($0.4) will not cause panic for majority of the users, and is still much lower than credit card /international wire fee

Extremely low fee is not a selling point for bitcoin, because the exchange risk in and out of bitcoin is much higher than 1% daily, which makes any saving in fee totally non-existent

By the way, in some latest mobile payment solutions, you get instant confirmation and 0 fee, and you transact directly in your domestic currency without exchange risk. Bitcoin will never be able to compete with those solutions made by centralized financial institutions. So low fee is not going to bring bitcoin more users. Users who are attracted by bitcoin are not here because of its low fee

That's a very large topic, I will go for sleep now and analyze that later 

It's depends on how the software construct daily bar from hour bar or minute bar, and it also has something to do with the time zone. A computer using UTC time to construct bars will generate different bars from another computer using eastern time with the same set of data

In one word, it does not matter since all the data are continuous

This is cheating  

At first I thought: How is this possible when the speed of CMOS/CCD signal generation is much slower than the speed of light???

Then I watched the video, they were not capturing the whole process of light traveling through that bottle of water, but many different light traveling through the same bottle of water  and combined different snapshots together to make an animation

It is the fee for every block, and there can be thousands of transactions in each block (today it is about 1000, thus the fee per transaction will be 50/1000=0.05 bitcoin, a bit high when you are sending 1 bitcoin, but still manageable)

Bitcoin's fee is fixed per transaction regardless of transacted amounts, this greatly benefit the rich people who are doing large transactions while punish the micro transactions, this is good mechanism to reduce blockchain spam, but still not a balanced design suits human behavior: Human normally don't care about the fee less than 1%, regardless of transacted amount. From network point of view, the cost is bandwidth and CPU time, so it can only be set on size of transaction data

This has been debated during 2013 fork incident, let me recall this:

Suppose that all the blocks are full on the core chain and now miners are starting to raise the fee. People who want to do micro transactions cheaply will protest by moving to XT chain. XT chain acts like a side chain to reduce the load for the mainchain. So rich people who often do large transactions stays with core chain while poor people who do micro transactions go with XT

Because of the fork, all the prefork coins can be spent on both chain, the rich guys on core would like to dump their prefork coins on XT chain, and poor guys on XT would also like to dump their prefork coins on core

Because the XT chain participants are mostly poor, they can not support its exchange rate, it will just crash to single digits or even less. while the rich guys on core chain will be busy collecting coins dumped by XT guys

So a fork without super majority will never be able to grow and reach any meaningful size of economy

Ironically, the only detailed analysis of bitcoin transaction value distribution is from a 2014 paper by Federal Reserve, it seems central banks really have the over view  

http://www.federalreserve.gov/econresdata/feds/2014/files/2014104pap.pdf



This statistic is from 2014, and if you look at www.bitcoinmonitor.com or www.bitlisten.com, it seems majority of the transaction value is now above 0.1 bitcoin

More about miners' motivation:

If you are an industry miner, you would like to grab significant share of the total amount of bitcoin, in order to benefit from the growth of this decentralized financial system. It is quite similar to investing in a company's stock, a larger share of stock will give larger benefits to the stock holder. But the block reward halving every 4 years put bigger and bigger pressure on miners so that they can not get enough amount of share later on

Imagine a group of powerful enterprises researched about bitcoin later and discovered that 75% of coins are already digged out and there is no way to get significant fee from processing transactions. They might just turn around and never look back, because even if they command all the hash power in the world, they would still mine maximum 25% of all the coins, just maintain the network for early adopters, that is not attractive at all

However, if they discovered that miners could now receive 50 bitcoin fee per block, then if they command all the hash power, they would be able to mine 50% of the coins in just 4 years! This ability to turn around wealth distribution table sounds extremely attractive and democratic, they would gladly join the mining industry, deploy high efficiency mining farms and become part of the ecosystem

Of course 50 bitcoin is a bit exaggerated, but 25 would still make it very attractive: In 4 years miners could get 25% of the whole bitcoin money supply, especially it will be extremely expensive if you want to buy 25% of the bitcoins from open market

Bitcoin's success rely on no barrier of entry, it should have total free entry for everyone, no technical,monetary or political barrier. Block reward halving created a monetary barrier of entry (so called early adopters advantage, the same barrier exists for land/gold/stocks etc... ) The fee is a way to remove this barrier

Miners have a huge cost, if they collect 100 coins fee in each block, they might have spent 90 coins in infrastructure/management/electricity. In fact, miners might raise the fee to compensate for their income if the bitcoin price is not improving, this can be market based behavior

The fee, although small from individual transaction point of view, is huge from all the transactions combined point of view. Imagine that average transction is 0.5 btc, and every one is totally fine with 0.2% of fee, and a large block in future can handle 100000 transactions per block, then the fee collected by miners per block will be 100 bitcoins, is there any problem?

The biggest benefit of bitcoin monetary system is total limited money supply. This character will never change even the miners are collecting more fees. Satoshi has indicated that in future mining fee will replace the block reward, but he never said the fee should be lower than block reward, maybe he has envisioned a future of 100+ bitcoins per block fee

Imagine that in future, the transaction fee income for each block raised to 50 bitcoins, while the block reward almost decreased to zero, then every miner would become the early adopter: They can mine bitcoin exactly like early CPU miners at 50 coins per block, and if they want to accumulate coins, after 4 years they would have accumulated 50% of the total coin supply!

Technically, that scenario is not unrealistic: Given average transaction size of about 0.5 bitcoin and a transaction fee of 0.005 bitcoin (1%) is tolerable, you only need to process 10000 such transaction in each block to collect 50 bitcoins in fee, which can be filled within a 4-8 MB block, still manageable even at today's technology

This means, we can bring back the good old days of 50 bitcoins per block already in a couple of halvings!

The benefit? The miners will always redistribute the coins in bitcoin ecosystem to constantly rebalance the wealth distribution, so that centralization of wealth is prevented. At the same time, mining is a risky business, miners have to constantly striving for more efficiency to stay profitable, thus any kind of wealth concentration around miners are only temporary. They also need more incentives to keep investing in mining infrastructure

There is another even bigger benefit: This solved the biggest concern/doubt about bitcoin being a ponzi / pump and dump scheme that early adopters are riding the wave and trying to profit from the late adopters. In fact, if the block reward is 50 bitcoins or even 100 bitcoins in future, late adopters can mine more bitcoins than early adopters, thus make the whole system very long term sustainable and attractive for any participants from future

You can think this way: If in future the transaction fee income raised to 50 bitcoins per block while the block reward almost decreased to zero, then every miner would become the early adopter: They can mine coin exactly like early CPU miners at 50 coins per block, and if they want to accumulate coins, after 4 years they would have 50% of the total coin supply

Technically, that goal is not unrealistic: Given average transaction size is about 0.5 bitcoin and a transaction fee of 0.005 bitcoin (1%) is acceptable, you only need to process 10000 such transaction in each block to reach 50 bitcoins, which is doable with 8MB blocks, quite manageable

However, in fiat money system this is impossible, the faster you make money, the faster the fiat money will be printed at magnitudes higher speed, so you always end up with a very small percentage of the total money supply

It is not an argument but a fact. Look at those thousands of alt-coins, they all have great transaction capability and can do a lot, but they worth nothing and almost no one cares. This tells that what money does is least important if the money does not have value of its own. Trying to downplay the importance of money's value and replace it with transaction demand is bank's scheme to mask the fact and print themselves some more money at mean time

If merchants have enough knowledge of money, then the moment central banks start to print money, they will raise the price of their goods/services at same rate, in order to protect them from being robbed by the banks. Currently only a few merchants understand this (those who only accept honest money) but I guess the number of them will rise over time once more and more people have gained such insight

I think one day VISA is going to integrate bitcoin payment for micro transactions. From their view, it is just another foreign currency that they need to integrate into their payment network, nothing more. And from bitcoin's point of view, it will save lots of work that VISA has done. VISA is currency independent, it works with all the currencies

Since it is bitcoin, they don't need to cooperate with banks, but bitcoin exchanges/online wallet providers. Since most of the user in each country usually only use domestic currency, the merchant need to install a special bitcoin POS terminal so that you can get a bitcoin quote to charge your VISA bitcoin cards (, maybe people would still like to be quoted in local currency, then using bitcoin works like traveling abroad: you only get a quote in local currency anywhere around the world)