Hello,
i enjoyed the videos of the scaling bitcoin conference. But one thing that is all the time NOT talked about is what i call the economic law of bitcoinsecurity:
the cost of the network = the fees for the consumersThe security of the network depends on Hash-Power which costs money. Right now the consumers of bitcoin don't "see" those true costs because they are masked by the block reward mechanism. If you sum up all the fees for transactions for a day then its on average not more than 25
BTC which is the reward for one block. Or in other words:
if you compare the 3600
BTC that come per day through mining with the transaction fees of 25btc/day, one can see that 99.3% of daily income of miners consists of block rewards.
Even if you take the next halving of the block reward to 12,5btc/block into account you arrive at 1800
BTC/day vs 25 btc.
On the other hand its obvious that one can not maintain the hashpower of the network, with investment for the gear, electricity cost, personnel etc. for 25 btc per day for the whole network:
that means longterm when the block reward halves itself out of existence, either the hashing power needs to go down, or the price of the transactions need to go up.
I don't want to make predicitons about the future here, just have a look at bitcoin today, how it would look with 0 blockreward.
The total income of miners a day of 1825
BTC would have to come from transactions.
To not bore you with the calculations, here just the result what it means for the fees (if you are more interested how it was calculated, you can find the calculation below):
0,025btc/KB From a customer perspective if he says i want to pay a fees of max 0,3% (for a european bankwires nationally are for free and arrive within 1,5 days) that leads to the fact that a customer who wants to pay with bitcoin needs to send for an average transaction:
2,5BTC/transaction !!!or he needs to accept a higher fee percentagewise per transaction, which might be to much to ask for many transactions. Besides this there are only 2 other possibilities:
- Hashing power of whole network goes down
- cost per GH needs to go down
One might argue that hardwarecosts in the future will fall and that will will lead to lower cost /GH from alone. This forgets, that the hardwarecosts are the security of the network - the network needs to be "expensive" that no one can easily aquire 51% of the networks hashing power.
Conclusion: The fee market as discussed today is at best only solving the problem that miners need to be able to collect a certain amount of btc to maintain their operations.
It does not adress the underlying deeper problem, that the transaction fees which maintain the network, are from consumers perspective costs. Therefore a real solution can only be cost per GH need to go down. This can be achieved with much more transactions (which means a larger block size), or more efficient mining operations. both lead to more centralization in one way or another. I think therefore that it would be more reasonable for the bitcoin-community to come to terms with a reasonable form of decentralizaition, to much decentralization means otherwise simply that consumers will turn to other payment options, since prices for a transaction are to high.Calculation:The typical block is about 50% full (pre-Stresstest-Levels see:
https://tradeblock.com/bitcoin/historical/1d-f-txval_per_tot-01071-blksize_per_avg-01071, so 144 Blocks with 500KB each, leads to 72.000 KB/day with transactions.
1825
BTC/72.000KB=0.25
BTC/KB
the mean transaction is: 0.3KB in size, therefore the average cost is: 0.3*0.25
BTC=0.0075
BTCTransactionsize in
BTC to achieve 0,3% cost threshold= (0,3*0,025)/0,003=2.5
BTC
Show Posts
I don't know why hotmail makes such scary looking links...
