Lower Transaction Fees = Liquidity

[delboy1978uk]

Transaction Fees are currently 0.0001 BTC or 10,000 Satoshis.

Now consider this.
IF, Bitcoin was the only currency in the world, and all 21 Million Bitcoins were evenly distributed between all seven Billion people, we would all find ourselves with 300,000 Satsoshis.

Given that a single transaction would cost 10,000 Satoshis to process, you would soon be completely out of money very quickly. This is unworkable in reality.

The only solution therefore (and clearly Mr Nakamoto thought this through) is to lower the transaction fees. In a world that ran solely on BTC, the transaction fee would be 1 Satoshi.

I believe that its now time for the Bitcoin developers to reduce the transaction fee to 0.00005 BTC. Doing so would do two things.

Firstly, with lower fees, we would see a greater liquidity in the market, instead of all this hoarding that we see.

Secondly, it would do the opposite of what the Federal Reserve does. They print more money, devaluing the Dollar each time. This would not create more Bitcoins, but rather would double the value of the ones currently in circulation over time as the market adjusted!

Just my 0.00000002 BTC ;-)

[DeathAndTaxes]

The min mandatory fee is only on low priority txs.  It exists as a DOS prevention mechanism.  The min mandatory fee on high priority txs is 0 BTC. 

The min has been reduced many times over the history of Bitcoin.  Currently it is ~$0.01.  Lowering the fee to 1/20th of a cent would do absolutely nothing to improve liquidity.  Nothing.  If there anything you were looking to buy or sell with Bitcoins and said "damn I can't because that fee worth about 1 US cent (only on some txs) would be prohibitive?"  I doubt it.

[delboy1978uk]

yeah but if all the exchanges and developers worked together on this then 0.00005 would BE a cent! Just because some people threw fiat cash into the system doesnt mean fiat cash should control it. If the 0.0001 dropped to 0.00001 and the exchanges whacked the price up x 10 you think anyone would notice? ;-)

[DeathAndTaxes]

yeah but if all the exchanges and developers worked together on this then 0.00005 would BE a cent! Just because some people threw fiat cash into the system doesnt mean fiat cash should control it. If the 0.0001 dropped to 0.00001 and the exchanges whacked the price up x 10 you think anyone would notice? ;-)

Fiat cash doesn't control.  Value it in Gold, Steam Games, electricity it doesn't matter.  The fact is the min mandatory fee (which exists ONLY on low priority txs) is a denial of service prevention mechanism.  Dropping it to 5% of what it is now would allow one to attack the network with 20x as much tx bloat for the same cost.  The min mandatory tx fee strives to make those sorts of attacks uneconomical while not preventing real transactions with excessive fees.

If you want free transactions then ensure your transactions are high priority.  The fee likely will be reduced in the future eventually but likely not be before 1 BTC breaks $500 or so.

[coinprize]

In fact, I am curious about where will the transaction fees go to finally.

Version 0.8.1's lowest fee is 0.0005.
Now the version 0.8.3's lowest fee is 0.0001.

1 million transaction would cost nearly 100 BTC.
They can't just disappear.

[notme]

In fact, I am curious about where will the transaction fees go to finally.

Version 0.8.1's lowest fee is 0.0005.
Now the version 0.8.3's lowest fee is 0.0001.

1 million transaction would cost nearly 100 BTC.
They can't just disappear.

They are awarded to people who run transaction processing hardware and software that verifies the transactions.  Colloquially these people are referred to as miners.

[DeathAndTaxes]

In fact, I am curious about where will the transaction fees go to finally.

Version 0.8.1's lowest fee is 0.0005.
Now the version 0.8.3's lowest fee is 0.0001.

1 million transaction would cost nearly 100 BTC.
They can't just disappear.

Well no the lowest fee is 0 BTC (for high priority transactions).  Only low priority transaction have a mandatory fee as a denial of service prevention mechanism.  All tx fee (both mandatory or optional) go to miners.

[molecular]

Well no the lowest fee is 0 BTC (for high priority transactions).  Only low priority transaction have a mandatory fee as a denial of service prevention mechanism.  All tx fee (both mandatory or optional) go to miners.

Excuse my sounding like a newb, but this escaped me. What are low/high priority tx?

[notme]

Well no the lowest fee is 0 BTC (for high priority transactions).  Only low priority transaction have a mandatory fee as a denial of service prevention mechanism.  All tx fee (both mandatory or optional) go to miners.

Excuse my sounding like a newb, but this escaped me. What are low/high priority tx?

It is calculated by a combination of transaction size, transaction value, and input age.  Smaller size transactions with old coins will be high priority.  Larger size transactions with new coins will be low priority and will require a fee.  Larger value increases the priority.

https://en.bitcoin.it/wiki/Transaction_fees#Technical_info

priority = sum(input_value_in_base_units * input_age)/size_in_bytes

[DeathAndTaxes]

Well no the lowest fee is 0 BTC (for high priority transactions).  Only low priority transaction have a mandatory fee as a denial of service prevention mechanism.  All tx fee (both mandatory or optional) go to miners.

Excuse my sounding like a newb, but this escaped me. What are low/high priority tx?

Notme posted the exact formula but a  general rule of thumb is "one bitcoin day" for high priority.  By one bitcoin day I simply mean the value of the input (in full BTC) times its age (how long ago the coin was received).   If your inputs are "one bitcoin day" or greater then your tx is high priority and no mandatory fee is required.  You  may still wish to include an optional fee to faster processing but the tx will be relayed by all nodes as having sufficient priority for no fee.



For example.  
1 Bitcoin received 1 day ago (144 blocks) is high priority  (1 BTC) * (1 day) >= 1 bitcoin day
0.5 Bitcoins received 2 days ago is high priority.  (0.5 BTC) * (2 days) >= 1 bitcoin day
2 Bitcoins received 12 hours ago is high priority. (2 BTC) * (0.5 days) >= 1 bitcoin day

Times values in hours or days are just illustrative all age is by blocks 144 blocks = 1 day on the network (regardless of it being shorter or longer than one calender day).

[notme]

Well no the lowest fee is 0 BTC (for high priority transactions).  Only low priority transaction have a mandatory fee as a denial of service prevention mechanism.  All tx fee (both mandatory or optional) go to miners.

Excuse my sounding like a newb, but this escaped me. What are low/high priority tx?

It is calculated by a combination of transaction size, transaction value, and input age.  Smaller transactions with old coins will be high priority.  Larger transactions with new coins will be low priority and will require a fee.

https://en.bitcoin.it/wiki/Transaction_fees#Technical_info

priority = sum(input_value_in_base_units * input_age)/size_in_bytes

Likely a typo in there (smaller and larger mixed up).

I meant smaller/larger size_in_bytes, but I'll clarify it.

@molecular.  A general rule of thumb (because nobody except the client is going to use the formula) is "one bitcoin day".  If your inputs are "one bitcoin day" or greater then your tx is high priority and no mandatory fee is required.  You  may still wish to include an optional fee to faster processing but the tx will be relayed by all nodes as having sufficient priority for no fee.

The actual threshold is one bitcoin day per 250 Bytes.  So your rule of thumb works as long as the total transaction doesn't have too many inputs/outputs.