Mining for fee only is unsustainable.

[omri]

  Fee rates will tend to go down with competition, since even a minority of miners willing to accept a lower fee will not unreasonably delay a transaction's acceptance rate. E.g. if 1/6 of miners are willing to accept your fee the time to get 6 confirmations is doubled on average. That way most users will only pay a fee that enough (but not most) miners will accept. These miners will make more profit (from transactions the majority reject) while only contributing a minority of computer power. So the rest of the miners will have to also accept these low fee transactions, and there is really no motivation for them not to, as the real cost to include a transaction is negligible. But then some miners will try to get an edge by lowering fee requirement even more, and the cycle continues.
  Once fees go way down, there is only profit in generating blocks if you can do that easily, but that will destabilize the whole BitCoin concept.
  The only thing that can save the day is the minimum fee of 1E-8, since there is no motivation to include a 0 fee transaction.
  My suggestion is to change the way block rewards work, so that mining goes on practically forever, and not stopping
~2138. But that's for another topic.

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[Vladimir]

Another guy who thinks that in 5 minutes he figured out what thousands of smartest people on the planet failed to spot in 2 years. Humility is surely even in more short supply than bitcoins among noobs these days.

[cschmitz]

You are free to create your own alternative that behaves in the way suggested.
Why do you assume that you can predict how anything looks in 5 years, let alone 20?

[dkaparis]

E.g. if 1/6 of miners are willing to accept your fee the time to get 6 confirmations is doubled on average. That way most users will only pay a fee that enough (but not most) miners will accept.

Incorrect. With 1/6 of miners accepting your fee, there is 1/6 chance your transaction will be included in the next block, thus on average your transactions will be 6 times slower.

[omri]

E.g. if 1/6 of miners are willing to accept your fee the time to get 6 confirmations is doubled on average. That way most users will only pay a fee that enough (but not most) miners will accept.

Incorrect. With 1/6 of miners accepting your fee, there is 1/6 chance your transaction will be included in the next block, thus on average your transactions will be 6 times slower.

It's 6 times slower for first confirmation, but from then on it's the regular rate, so it's only double the time for 6 confirmation.

[barbarousrelic]

It all depends on how full each block is, and thus, it depends on how popular Bitcoin becomes.

If each block is less than its maximum allowed size, it is in each miner's interest to accept all nonzero transaction fees.

If there are more transactions than can fit on a single block, then it is a miner's interest to only accept the higher-fee transactions and exclude all lower-fee transactions that won't fit on the block.

[dkaparis]

E.g. if 1/6 of miners are willing to accept your fee the time to get 6 confirmations is doubled on average. That way most users will only pay a fee that enough (but not most) miners will accept.

Incorrect. With 1/6 of miners accepting your fee, there is 1/6 chance your transaction will be included in the next block, thus on average your transactions will be 6 times slower.

It's 6 times slower for first confirmation, but from then on it's the regular rate, so it's only double the time for 6 confirmation.

True, just like if only 1 per cent of miners accept your fee, this will just double the time to get 100 confirmations.
I fail to see what's so interesting about the number 6, or 100, though, apart from the analysis that for higher number of confirmations you require, you should pay a lower fee.

[da2ce7]

Welcome to the BITCOIN NOOB ALERT!!!! Go to https://en.bitcoin.it/wiki/Main_Page for your bitcoin schooling so you may not make such a huge fool of yourself next time!

[cbeast]

Another guy who thinks that in 5 minutes he figured out what thousands of smartest people on the planet failed to spot in 2 years. Humility is surely even in more short supply than bitcoins among noobs these days.

I agree wholeheartedly. Bitcoin is the Google of finance. Lead, follow, or get out of the way!

[gene]

Another guy who thinks that in 5 minutes he figured out what thousands of smartest people on the planet failed to spot in 2 years. Humility is surely even in more short supply than bitcoins among noobs these days.

Perhaps I am falling behind, but wasn't the consensus that a likely outcome was the formation of cartels? And that these cartels would effectively control bitcoin as they control which transactions to confirm?

That situation seems eerily similar to the consolidation of power that we currently see in finance.

[mestar]

Another guy who thinks that in 5 minutes he figured out what thousands of smartest people on the planet failed to spot in 2 years.

I personally have no opinion if bitcoin is sustainable with transaction fees only, perhaps it is, perhaps it isn't.

But, why do you think that "thousands of smartest people on the planet" have solved this issue, or, even why do you even think that all of them have given this issue much thought at all?

My thoughts are that a vast majority of people simply saw that, hey, mining is hugely profitable right now, why not get involved.  And if it is sustainable after block rewards are gone, who cares what happens in 20 or 30 years. 

What would be your estimate of this percentage: of those thousands people, how many of them are *not* involved with mining?

[ttk2]

Perhaps I am falling behind, but wasn't the consensus that a likely outcome was the formation of cartels? And that these cartels would effectively control bitcoin as they control which transactions to confirm?

That situation seems eerily similar to the consolidation of power that we currently see in finance.

That will happen if and only if the cost of running a full node becomes prohibitive. I recently did some research into this and came to the conclusion that that if the bitcoin network reached the number of transactions per second of visa (2000) today it would cost about $1600 to build a node capable of storing the huge (multi-terabyte) block chain and processing the transactions (some changes to the client may be prudent to make 2000 transactions per second go more smoothly but not many and none justifying a split) . $1600 is not a large enough barrier for entry to allow the formation of cartels, and as time goes on and tech improves this barrier will continue to go down. Simply put with some creative coding and some technical skills coping with large block chains and transaction volumes is not difficult enough to create the cartel scenario.

[unk]

I personally have no opinion if bitcoin is sustainable with transaction fees only, perhaps it is, perhaps it isn't.

But, why do you think that "thousands of smartest people on the planet" have solved this issue, or, even why do you even think that all of them have given this issue much thought at all?

yes, i was going to say the same thing. first of all, how many developers and economic thinkers of even above-average abilities (for, say, an open-source project) do you think are associated with bitcoin development? my estimate is 6, and in any event it's less than a dozen. second, the issue has been quite contentious, and unresolved, for some time.

'we've talked about it already; see these several discussions...' would be more accurate, and probably more helpful too. bitcoin doesn't stand to benefit from overly grand claims.

(even the 'biggest supercomputer in the world' claim falls flat once you think about it for a second. if you consider mostly uncoordinated enumeration and verification as a 'supercomputer', more cycles per second are used on any number of other loosely distributed activities throughout the world. bitcoin has a few thousand graphics cards behind it; say that instead rather than aggrandising the claim. like all aggressive marketing, it's a turn-off, at least to me.)

[da2ce7]

yes, i was going to say the same thing. first of all, how many developers and economic thinkers of even above-average abilities (for, say, an open-source project) do you think are associated with bitcoin development? my estimate is 6, and in any event it's less than a dozen. second, the issue has been quite contentious, and unresolved, for some time. [citation needed]

lulz oh you are so funny.   

[unk]

yes, i was going to say the same thing. first of all, how many developers and economic thinkers of even above-average abilities (for, say, an open-source project) do you think are associated with bitcoin development? my estimate is 6, and in any event it's less than a dozen. second, the issue has been quite contentious, and unresolved, for some time. [citation needed]

lulz oh you are so funny.   

and you're childish, at least judging from your reply.

see http://forum.bitcoin.org/index.php?topic=6284.0, for a start. i concur with the original poster's summary:

The thread is beginning to show something I find frightening. There exists no generally accepted model or even set of rules for Bitcoin in the future. A portion of people claim that removing the transaction limit will do no harm, the others use it as the last argument why Bitcoin will not enter the failure scenario described.

[ottodv]

This community will be doomed if it doesn't welcome newcomers. How else can a community grow?
Newcomers don't know all and ask questions, what's the problem?

There's been discussion on maintaining the minting of new Bitcoins before, there will be in the future.

As I understand it if the largest mining pools decided together to continue to mint 50 new BTC beyond 2012, there isn't much the non-mining bitcoin community can do to stop them. Correct me if I am wrong.

(Not that I want that to happen btw)

[gene]

Perhaps I am falling behind, but wasn't the consensus that a likely outcome was the formation of cartels? And that these cartels would effectively control bitcoin as they control which transactions to confirm?

That situation seems eerily similar to the consolidation of power that we currently see in finance.

That will happen if and only if the cost of running a full node becomes prohibitive. I recently did some research into this and came to the conclusion that that if the bitcoin network reached the number of transactions per second of visa (2000) today it would cost about $1600 to build a node capable of storing the huge (multi-terabyte) block chain and processing the transactions (some changes to the client may be prudent to make 2000 transactions per second go more smoothly but not many and none justifying a split) . $1600 is not a large enough barrier for entry to allow the formation of cartels, and as time goes on and tech improves this barrier will continue to go down. Simply put with some creative coding and some technical skills coping with large block chains and transaction volumes is not difficult enough to create the cartel scenario.

A "node," in bitcoin parlance, is a miner. This issue remains unresolved.

[da2ce7]

I'm half childish... and half bored... I guess It comes down to the fact that I have extensively researched the above 'transaction fees only' system and have come up to with two simple observations:

First:
We cannot tell where the natural fee-support of the network will be without a full game-theory analysis... that is both non-trivial, and impossible because of the wildly changing dynamics that the future holds.


Second:
'Security' is a relative term... who is to say that the network will not be secure with a extremely low hash-rate?  For example, you may have a locked up house in a bad neighbourhood, and be less 'secure' than the completely open house in a safe neighbourhood.

The bitcoin network is like that.... the free market automatically put as LITTLE resources into securely as necessary.   There might be OTHER barriers to attacking the bitcoin network in the future, so extremely low fees and unlimited block size is still counted as a very secure system...

The thing with every single thread about this system that claims that the mining fees are unsustainable make a huge assumptions on the ENVIRONMENT that bitcoin will be in the future... the fact is WE DON'T KNOW, and CANNOT KNOW!

I have always maintained that we should be focused on making bitcoin as secure as possible NOW not 50 years in the future.

[NetTecture]

A "node," in bitcoin parlance, is a miner. This issue remains unresolved.

No. GPU Miners are not nodes Sorry. The normal client is, but then it's processing power is not really usefull.

At the moment - Miners are NOT NODES.

[gene]

A "node," in bitcoin parlance, is a miner. This issue remains unresolved.

No. GPU Miners are not nodes Sorry. The normal client is, but then it's processing power is not really usefull.

At the moment - Miners are NOT NODES.

Let me be even clearer, for those of you who insist on missing the point. A "node" is a part of the network which processes transactions. It is true that a person at home running a GPU mining instance is not a node. In this case, the pool is the node. This example actually makes my point more concrete: that nodes are becoming increasingly centralized and vulnerable to attack or consolidation into cartels as competition for transaction fees increases.