Should bitcoin lower the transaction fee?

[matthewh3]

I was in mind of bitcoins continual prises rises.  Current fees of ~$0.005 are payable without regret by anyone in the west who can afford to pay for DSL.  Although if BTC rises to $100 a coin that's a 5% fee on a $1.00 transaction.  So then bitcoin loses its advantage on cash.

Mandatory fees on low priority tx likely would be lowered to be ~1 cent IF Bitcoin rose > $100 (just as they were when BTC rose above $20) .  

Still please point out to me where online you can spend $1 and pay less than 5 cents in fees?   Even at 5 cents per transaction bitcoin is cheaper than any digital payment platform on the planet.

So IF mandatory fee wasn't lower
AND
Bticoin rose to >$100
AND
user was unwilling to wait for a high priority transaction
AND
the mandatory fees on low priority tx weren't lowered
AND
the user wanted to spend only $1
AND
no off blockchain solution for micro tx existed
....
Bitcoin would still be the cheapest solution.  

BTW "cash" isn't free ask any successful business that deal in cash between the banking fees, disbursement fees, shrinkage (employee theft), risk of robbery/loss, and counterfeits cash isn't free.  Even if it was free it can't be used online.

UK online banking.  Transactions from £0.01 up to £10,000 a day for free.  Yes the accounts are free tho a lot of people pay overdraft fees or late/returned payment fees.  

edit:  And I'm not here trying to pick a fight with the bitcoin guru early adopters just discuss the benefits and/or pitfalls of bitcoin as a micro-transaction currency compared to cash.

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[Stephen Gornick]

Maybe OT's systems or walled-garden wallets can offer suitable cheaper transactions in the future but bitcoin is no way near mature/stable enough for that kind of adoption at the moment or in the very near future.

OK, how about simply changing who pays?  Currently the fee is paid by the sender.   There was a proposal where a third party could make a transaction that simply added to the fee paid on an existing transaction.  I believe luke-jr had documented how that could be done.  I don't remember the process.

That way for merchants who wish to pay the fee for any payments received, the customer then does not incur the fee (well, not true, as the fee simply gets baked into the price of the goods or services sold -- but a fraction of a penny or whatever, that isn't significant.)

[doobadoo]

Before I left for vacation, I submitted a pull request that makes the default policy for miners "more fees == more likely to get into a block."  That will be in the 0.7 release (the policy before was mostly "higher priority == more likely to get into a block"), and I've been encouraging the big mining pool operators to implement something similar if they have their own transaction-selection code.

When I get back from vacation I plan on writing code to watch the transactions that do or do not make it into blocks to derive an estimate of the average miners' fee policy, and use that to recommend a reasonable fee to the user.

Those changes will let fees float naturally-- users and miners will form a market and fees will rise or fall based on what users are willing to pay and what miners are willing to accept. I don't like the arbitrary, centralized setting of fees that we've had up until now.

Gavin that sounds brilliant...i hope it works in practice.

[freifallspoiler]

Still please point out to me where online you can spend $1 and pay less than 5 cents in fees?   Even at 5 cents per transaction bitcoin is cheaper than any digital payment platform on the planet.

Bank transactions in Europe (SEPA System) depend on your contract with your bank but are typically free in most EU countries. You also have many banks that offer accounts without base fee as well. So transactions here are 100% free.

[jl2012]

We should lower fee for normal transactions but increase fee for spams like Satoshi Dice

[DeathAndTaxes]

We should lower fee for normal transactions but increase fee for spams like Satoshi Dice

There is no mandatory fee for normal transactions.  If the network requires a fee it is because your transaction looks "spammy" (low priority).

A transaction will be sent without fees if these conditions are met:
It is smaller than 10 thousand bytes.
All outputs are 0.01 BTC or larger.
Its priority is large enough (see the Technical Info section below)

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

[Nagato]

I was expecting Gavin's suggestion to eventually be implemented by 3rd party sites like bitcoincharts/miners/blockchain as the block size limit is reached. Well, if it's in the reference client, all the better. Im really for a market determined floating fee. All we got to figure out is how to float the block size limit.

Even though banks in many countries offer free local funds transfers, it is not really "free". To have an account, you either have to pay a yearly charge or maintain a large enough balance to avoid any account fees, a balance which is always depreciating in real terms as the bank multiplies it via Fractional Reserve Banking to make fortunes off your money while allowing you to save a few cents in transaction costs.

[PrintCoins]

Before I left for vacation, I submitted a pull request that makes the default policy for miners "more fees == more likely to get into a block."  That will be in the 0.7 release (the policy before was mostly "higher priority == more likely to get into a block"), and I've been encouraging the big mining pool operators to implement something similar if they have their own transaction-selection code.

When I get back from vacation I plan on writing code to watch the transactions that do or do not make it into blocks to derive an estimate of the average miners' fee policy, and use that to recommend a reasonable fee to the user.

Those changes will let fees float naturally-- users and miners will form a market and fees will rise or fall based on what users are willing to pay and what miners are willing to accept. I don't like the arbitrary, centralized setting of fees that we've had up until now.

That is great to hear, the set fee seems way too arbitrary.

I was thinking a good way to calculate it is to take the minimum fee per KB of the last 10 blocks. If you want to get your transaction accepted by 20% of the mined blocks, you just need to beat the minimum of 2 of the last 10 blocks. Your client won't need to be totally up to date, and the 10 most recently known blocks should be good enough.

Admittedly this is rather simplistic, but it is more useful than a set number. It might also be meaningful to factor in ignored transactions as that would be helpful in the calculation. If the maximum ignored transaction had .0005 as the fee, and the minimum accepted fee was 0.001, then you know the breaking point was somewhere in between. This would require looking at all transactions passing through a node for both validity storing the fees per kb in a db, so this might be not worth the effort.

This all gets more complicated if you try to use coin age or include other factors in the calculation, but I don't see why anything else would be useful. When you create a transaction you are paying for space in the blockchain, and that space is measured in bytes.

[deepceleron]

Good work noob for a random necro, and the above commenter congratulating something that is already completed in Bitcoin.

What is further described above doesn't make much sense.

A full Bitcoin client knows about every pending transaction on the network, and knows what transactions would be included if it were to presently mine a block using standard Bitcoin rules. It would be very easy to calculate an appropriate optional fee to ensure likely placement in the next block.

[jl2012]

We should charge a high fee (e.g. 0.005) for each sub uBTC (0.000001) output. Transactions like this are just pollution:

https://blockchain.info/tx/b0c4969efaa40a98b2c20abef0822248d2080676dd694e93dac2a8d942ecf02d
https://blockchain.info/tx/b15b80a6d2b6ddf38c6d43d124dcd998abe4fef85bbd42e3fcbc684bbbb0f69e

[PrintCoins]

We should charge a high fee (e.g. 0.005) for each sub uBTC (0.000001) output. Transactions like this are just pollution:

https://blockchain.info/tx/b0c4969efaa40a98b2c20abef0822248d2080676dd694e93dac2a8d942ecf02d
https://blockchain.info/tx/b15b80a6d2b6ddf38c6d43d124dcd998abe4fef85bbd42e3fcbc684bbbb0f69e

Well, the first one paid 0.018 in fees for the privilege (almost $0.60) and the second one was about the same.

In the end, who cares what the values of the outputs are. The only thing that matters is the space transactions take up in the block chain, and if fees are based upon that, then this nonsense resolves itself.

This person spent a good portion of the bitcoins that make up the transactions in fees.

[jgarzik]

In the end, who cares what the values of the outputs are. The only thing that matters is the space transactions take up in the block chain, and if fees are based upon that, then this nonsense resolves itself.

A more relevant measure than space in the block chain is the size of the list of unspent transaction outputs ("UTXO", list of spendable bitcoins).  It keeps growing and growing, with near-zero-value outputs.

RE "who cares what the values are"  One follows from the other.

If your purchases are typically 4-5 decimal places at most, and the remainder has sub-$0.001 value, the remainder is simply less likely to be swept up and spent... thereby taking up space in the block chain without being prunable.

This is why losing SatoshiDICE bets are so harmful to the system.  You get back 0.00000001 or so on a losing bet.  With such high transaction volumes, SatoshiDICE is handing out lots of difficult-to-spend dust spam.

[Peter Todd]

This is why losing SatoshiDICE bets are so harmful to the system.  You get back 0.00000001 or so on a losing bet.  With such high transaction volumes, SatoshiDICE is handing out lots of difficult-to-spend dust spam.

I'd say it's the opposite of harmful. If one gambling website can harm Bitcoin, there is a problem with the system that needs addressed.

No-one is saying there isn't a problem with the system that doesn't need to be addressed. We absolutely do need a way to somehow discourage the creation of small-value outputs, and the fact that we don't yet is a flaw in Bitcoin.

One possible solution would be to simply make any transaction with an output value less than the minimum fee non-standard, so that those transactions won't be relayed or mined by miners. After all, if the value is less than the minimum fee, there isn't any rational reason to spend the output. (the fee is zero with sufficient priority mind you, but zero-fee tx's probably won't get mined forever)

The bigger problem is that it's only the size of blocks that is the limited resource - the incentive structure should make transactions that reduce the UTXO set cheaper, but actually coming up with rules that effectively do that without causing other problems is hard.

[MoonShadow]

This is why losing SatoshiDICE bets are so harmful to the system.  You get back 0.00000001 or so on a losing bet.  With such high transaction volumes, SatoshiDICE is handing out lots of difficult-to-spend dust spam.

I'd say it's the opposite of harmful. If one gambling website can harm Bitcoin, there is a problem with the system that needs addressed.

No-one is saying there isn't a problem with the system that doesn't need to be addressed. We absolutely do need a way to somehow discourage the creation of small-value outputs, and the fact that we don't yet is a flaw in Bitcoin.

Actually, we do have such a system.  It's the priority score system.  Been there for some time, and the effects of Satoshi Dice would be far worse in it's absence.

One possible solution would be to simply make any transaction with an output value less than the minimum fee non-standard, so that those transactions won't be relayed or mined by miners. After all, if the value is less than the minimum fee, there isn't any rational reason to spend the output. (the fee is zero with sufficient priority mind you, but zero-fee tx's probably won't get mined forever)

We have this rule, also.  Or rather one like it as part of the priority system.

The bigger problem is that it's only the size of blocks that is the limited resource - the incentive structure should make transactions that reduce the UTXO set cheaper, but actually coming up with rules that effectively do that without causing other problems is hard.

Actually, not hard, and being done.  The many-outputs-transaction type is one such example, as it permits anyone that desires to pay a lot of different people at once to do it in a single transaction, which does reduce netowrk resource usage on a per-payee metric.  This one does require a fee bsed upon it's total bytesize, but it's demontratablely lower than if one had to pay a minimum transaction fee for a set of transactions to pay to the same number of output addresses.  Obviously, we won't really see this kind of thing being used much until there is a real market to get into blocks; but once we do sttart seeing them, they could be useful for weekly payrolls or monthly bill payment clients (like paying for your rent, heat, water, etc in one motion rather than a different transaction for each payee)

[jgarzik]

No-one is saying there isn't a problem with the system that doesn't need to be addressed. We absolutely do need a way to somehow discourage the creation of small-value outputs, and the fact that we don't yet is a flaw in Bitcoin.

Actually, we do have such a system.  It's the priority score system.  Been there for some time, and the effects of Satoshi Dice would be far worse in it's absence.

Most 0.00000001 outputs pay a fee, which exempts them from the priority system.  Priority is used for calculating how to fill the ~27k free transaction area, in the absence of a fee bidding for the non-free block space.

[Prattler]

One possible solution would be to simply make any transaction with an output value less than the minimum fee non-standard, so that those transactions won't be relayed or mined by miners. After all, if the value is less than the minimum fee, there isn't any rational reason to spend the output. (the fee is zero with sufficient priority mind you, but zero-fee tx's probably won't get mined forever)

A very good idea! I hope this gets implemented and used by the major mining pools.

[jl2012]

We should charge a high fee (e.g. 0.005) for each sub uBTC (0.000001) output. Transactions like this are just pollution:

https://blockchain.info/tx/b0c4969efaa40a98b2c20abef0822248d2080676dd694e93dac2a8d942ecf02d
https://blockchain.info/tx/b15b80a6d2b6ddf38c6d43d124dcd998abe4fef85bbd42e3fcbc684bbbb0f69e

Well, the first one paid 0.018 in fees for the privilege (almost $0.60) and the second one was about the same.

In the end, who cares what the values of the outputs are. The only thing that matters is the space transactions take up in the block chain, and if fees are based upon that, then this nonsense resolves itself.

This person spent a good portion of the bitcoins that make up the transactions in fees.

$0.6 is really cheap to spam thousands of full nodes, forcing them to store garbage forever.

[MoonShadow]

We should charge a high fee (e.g. 0.005) for each sub uBTC (0.000001) output. Transactions like this are just pollution:

https://blockchain.info/tx/b0c4969efaa40a98b2c20abef0822248d2080676dd694e93dac2a8d942ecf02d
https://blockchain.info/tx/b15b80a6d2b6ddf38c6d43d124dcd998abe4fef85bbd42e3fcbc684bbbb0f69e

Well, the first one paid 0.018 in fees for the privilege (almost $0.60) and the second one was about the same.

In the end, who cares what the values of the outputs are. The only thing that matters is the space transactions take up in the block chain, and if fees are based upon that, then this nonsense resolves itself.

This person spent a good portion of the bitcoins that make up the transactions in fees.

$0.6 is really cheap to spam thousands of full nodes, forcing them to store garbage forever.

The data storage is actually the easy part.

[solex]

In the end, who cares what the values of the outputs are. The only thing that matters is the space transactions take up in the block chain, and if fees are based upon that, then this nonsense resolves itself.

A more relevant measure than space in the block chain is the size of the list of unspent transaction outputs ("UTXO", list of spendable bitcoins).  It keeps growing and growing, with near-zero-value outputs.

RE "who cares what the values are"  One follows from the other.

If your purchases are typically 4-5 decimal places at most, and the remainder has sub-$0.001 value, the remainder is simply less likely to be swept up and spent... thereby taking up space in the block chain without being prunable.

This is why losing SatoshiDICE bets are so harmful to the system.  You get back 0.00000001 or so on a losing bet.  With such high transaction volumes, SatoshiDICE is handing out lots of difficult-to-spend dust spam.

This is a very important point.
so (open question). has anyone asked SatoshiDICE whether they can change their model to internalize their transactions?

[mmortal03]

This is why losing SatoshiDICE bets are so harmful to the system.  You get back 0.00000001 or so on a losing bet.  With such high transaction volumes, SatoshiDICE is handing out lots of difficult-to-spend dust spam.

I'd say it's the opposite of harmful. If one gambling website can harm Bitcoin, there is a problem with the system that needs addressed.

I'm not necessarily arguing with you, but it's not just "one gambling website". It's one gambling website making use of a particular flexibility in bitcoin, which can have legitimate future purposes, for a flawed purpose -- using a micro-transaction for every lost bet as a confirmation message of sorts. Using micro-transactions as confirmation or notification messages, if they blow up the size of the blockchain, is a particular category of problem, regardless of whether it's a gambling website or any other sort of business. Like others have said, discouraging micro-transactions with some sort of fee until those decimal places are legitimately needed sounds like the practical sort of solution. Hopefully it just won't continue to be so arbitrarily set or centralized.