larem
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December 17, 2015, 04:37:36 AM |
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at the moment miners get $11,250 a block ($450x25btc) or another way of looking at it at the moment a block holds less than 1250 tx's per block https://blockchain.info/charts/n-transactions-per-blockthis leads to (based on bitcoins $ price divided by tx's) there being an average $8 per tx price https://blockchain.info/charts/cost-per-transactionanother way to look at it at 4.5cent a tx the most a miner would get (1250 tx or less) is <$50 right now in just tx fee's if people want to only pay under 4cent fee, once the reward is not there, then each block needs to store 400,000tx just so that upto $16k a block just through fee's can be obtained..(or $10k at average current 62.5% capacity) the solution would preferably that mining costs get cheaper, miners get less greedy so that the block limit doesnt need to increase to 200mb purely to pay them $10k plus every 10 minutes What's going to happen is little guys are going to quit mining. This allows bigger companies to mine less (use less electricity/hardware to secure the network), which eventually leads to centralization.
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johnyj (OP)
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December 17, 2015, 05:22:43 AM |
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Well hm.
Fact is miners live to make money, if there is no profit in mining people will stop doing it till mining is profitable. Right now there is a mad rush to buy .28w/gh mining gear (I'm not quite sure why) and probably a ton of .8-1.0w/gh equipment sitting on the sidelines.
But think about it: If the price of bitcoin suddenly dropped to 225, then the mining difficulty would drop to about 50 instead of where it is now. Because at a 25btc block reward, a difficulty 50 was enough to eek out a profit at 225 a bitcoin. Was the network any "less secure"? I don't really think so, your chances of breaking the chain were basically zero then as now.
So when the block reward halves, either one of three things will happen:
1) 50% of the miners will drop out. 2) The price of bitcoin will double 3) Fees will go sky high.
I think 2 is almost guaranteed, anyway this is bitcoin's anti-inflation promise: given same demand, the price will at least double every 4 years due to supply cut by half The block reward halving is a 100% sure thing, the market will already price in it several months before, when it arrives, almost nothing will change, this has been proved by 2012 reward halving Of course months following that event, some dumb miner which have done nothing will feel diminishing return thus start to shut down their rig, but the new miners with higher efficiency will be quickly deployed to compensate the loss in hash rate. Bitfury just announced that their new chip is 5x more efficient than the last generation, so a reward halving would still give them 2.5x increase in efficiency, resulting in higher difficulty Second, many miners are not mining bitcoin for profit, they mine it for transfer value. Mining equipment company currently are not regulated by financial regulations, unknown capitals can enter bitcoin mining and leave it in form of fresh mined bitcoin without any trace. I guess the large bitcoin bubble in china and forever increasing hash rate regardless of exchange rate has something to do with large scale capital fleeing China. If you think about the nature of these mining operations, the fee is the least concern for them So, difficulty will continuously rise due to fast changing mining tech, while total mining cost will still get higher and higher due to more capital entering mining and exchange to transfer value, these will all raise bitcoin's price, to more than enough compensate the loss in block subsidy
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RoadTrain
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December 17, 2015, 07:04:38 AM |
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So, as long as bitcoin scales well, the fee income for miners will never be able to rise to replace block subsidy
Although you ask a legitimate question, your argument does not prove this conclusion. Estimates will be easier to make once it becomes clear where transaction volume is going and how much volume is handled by the bitcoin blockchain itself vs. how much is being moved to something like the lightning network. This conclusion is based on the fact that the fee per block is decided by the orphan risk, and the loss from a orphaned block is decided by its subsidy. So as block subsidy goes down, the loss from a orphaned block also goes down, and the fee per block also goes down If orphan risk rises exponentially above certain threshold, for example 2MB block to take 10 minutes to broadcast to majority of nodes, then maybe fee will rise quickly to get close to block subsidy It's not a fact actually, not for now at least. The current fee level is heavily influenced by default fees (0.0001 or so). In the future, when fees are fully market-driven, yes, they can be decided by orphan risk. But we also need to consider several proposals that can and will make orphan risks lower, and, more importantly, independent ( O(1) ) from the blocksize (provided miner cooperation). Things like IBLT. So, the problem is even worse this way.
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enhu
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December 17, 2015, 07:27:43 AM |
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Probably. It's happened before. Probably will increase to about 0.0005 for average txes, not much. Or at most, 0.001 satoshi. That will more than cover the lost btc.
What i'm really scared for is when 2140 comes. If bitcoin is widely adopted, the price will be huge. But will the tx fee be 1+ plus bitcoin? Not that's a scary thought.
We're all be dead by then. Bitcoin is sure widely use when that time come and so 0.0005 will be considered very little as well like how cheap we consider the transaction fee these days. You probably don't mind doing hundreds of transaction a day.
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medUSA
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December 17, 2015, 11:12:54 AM |
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We will have a consensus to the blocksize limit before block reward drops to a concerning level. When the blocksize is increased, there will be less rising pressure on fees because users do not need to fight for a place in the blocks any more. Lower fees and more transactions will keep the miners happy. If fees do rise to unreasonable level, there will be offchain settlement systems developed and users will use them more for smaller transactions. In general, I believe fees cannot rise to a level that completely replaces block subsidy in the near future.
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aeoncurrency
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December 18, 2015, 04:25:54 AM Last edit: December 18, 2015, 06:23:48 AM by aeoncurrency |
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Probably. It's happened before. Probably will increase to about 0.0005 for average txes, not much. Or at most, 0.001 satoshi. That will more than cover the lost btc.
What i'm really scared for is when 2140 comes. If bitcoin is widely adopted, the price will be huge. But will the tx fee be 1+ plus bitcoin? Not that's a scary thought.
We're all be dead by then. Bitcoin is sure widely use when that time come and so 0.0005 will be considered very little as well like how cheap we consider the transaction fee these days. You probably don't mind doing hundreds of transaction a day. Speak for yourself about dying so soon. Some of us plan to live much longer than that. If bitcoin is around in 2140 it means we reached mass adoption and solved the scaling problem.
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larem
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December 18, 2015, 05:34:53 AM |
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Well hm.
Fact is miners live to make money, if there is no profit in mining people will stop doing it till mining is profitable. Right now there is a mad rush to buy .28w/gh mining gear (I'm not quite sure why) and probably a ton of .8-1.0w/gh equipment sitting on the sidelines.
But think about it: If the price of bitcoin suddenly dropped to 225, then the mining difficulty would drop to about 50 instead of where it is now. Because at a 25btc block reward, a difficulty 50 was enough to eek out a profit at 225 a bitcoin. Was the network any "less secure"? I don't really think so, your chances of breaking the chain were basically zero then as now.
So when the block reward halves, either one of three things will happen:
1) 50% of the miners will drop out. 2) The price of bitcoin will double 3) Fees will go sky high.
I think 2 is almost guaranteed, anyway this is bitcoin's anti-inflation promise: given same demand, the price will at least double every 4 years due to supply cut by half The block reward halving is a 100% sure thing, the market will already price in it several months before, when it arrives, almost nothing will change, this has been proved by 2012 reward halving Of course months following that event, some dumb miner which have done nothing will feel diminishing return thus start to shut down their rig, but the new miners with higher efficiency will be quickly deployed to compensate the loss in hash rate. Bitfury just announced that their new chip is 5x more efficient than the last generation, so a reward halving would still give them 2.5x increase in efficiency, resulting in higher difficulty Second, many miners are not mining bitcoin for profit, they mine it for transfer value. Mining equipment company currently are not regulated by financial regulations, unknown capitals can enter bitcoin mining and leave it in form of fresh mined bitcoin without any trace. I guess the large bitcoin bubble in china and forever increasing hash rate regardless of exchange rate has something to do with large scale capital fleeing China. If you think about the nature of these mining operations, the fee is the least concern for them So, difficulty will continuously rise due to fast changing mining tech, while total mining cost will still get higher and higher due to more capital entering mining and exchange to transfer value, these will all raise bitcoin's price, to more than enough compensate the loss in block subsidy Bitcoin didn't double in 2012 because of block halving. It went up because it became more known.
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johnyj (OP)
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December 18, 2015, 06:32:02 AM |
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Bitcoin didn't double in 2012 because of block halving. It went up because it became more known.
Ok then you can expect the same thing in 2016, now it is even more well-known
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enhu
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December 18, 2015, 11:10:01 AM |
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Probably. It's happened before. Probably will increase to about 0.0005 for average txes, not much. Or at most, 0.001 satoshi. That will more than cover the lost btc.
What i'm really scared for is when 2140 comes. If bitcoin is widely adopted, the price will be huge. But will the tx fee be 1+ plus bitcoin? Not that's a scary thought.
We're all be dead by then. Bitcoin is sure widely use when that time come and so 0.0005 will be considered very little as well like how cheap we consider the transaction fee these days. You probably don't mind doing hundreds of transaction a day. Speak for yourself about dying so soon. Some of us plan to live much longer than that. If bitcoin is around in 2140 it means we reached mass adoption and solved the scaling problem. Wait a minute you mean you'll live that long? good for you, hope you won't suffer skin decease at the aged 60+ till 2140 and that you scratch your ass every minute of your entire life in the home of the aged.
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fbueller
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December 18, 2015, 03:42:03 PM |
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First, a fee market will develop. Bitcoin users have to compete (by the fee / kb, maybe including actual validation cost) for block space, which is a finite resource. This means, when blocks start to get full on average, the average fee will probably rise, and become dynamic. It'll be market driven - miners will then have to compete to set the lowest acceptable rate for a transaction to be included in a block. So, it's impossible to answer your question ![Smiley](https://bitcointalk.org/Smileys/default/smiley.gif) When the subsidy halves a few times, probably, but who knows what the price will be then.
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johnyj (OP)
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December 18, 2015, 04:34:36 PM |
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First, a fee market will develop. Bitcoin users have to compete (by the fee / kb, maybe including actual validation cost) for block space, which is a finite resource. This means, when blocks start to get full on average, the average fee will probably rise, and become dynamic. It'll be market driven - miners will then have to compete to set the lowest acceptable rate for a transaction to be included in a block. So, it's impossible to answer your question ![Smiley](https://bitcointalk.org/Smileys/default/smiley.gif) When the subsidy halves a few times, probably, but who knows what the price will be then. Even if there is no block space limitation in software, the bandwidth limit would still limit the amount of transactions that can be included in a block For example, if I include only 100 transactions, I can include all of them for free since they don't add too much latency. But if I include 10000 transactions then my block will be orphaned all the time. So if all the miners will mine small blocks which only include 100 transactions, the transaction fee can be at 0 forever. Then you will have more and more transactions piled up in the mempool, and some of them would like to add some more fee to incentivize miners to include them So when the fee rise to 0.03 btc per transaction, a miner would possibly include 8000 transactions and have only 1 out of 10 mined blocks entering the blockchain (rest all being orphaned), since if he succeeded the mined block will bring him 265 bitcoins in one single block ![Grin](https://bitcointalk.org/Smileys/default/grin.gif) But there is a risk, if his block get orphaned almost all the time, then all those 8000 transactions would be included by other miners with smaller blocks, e.g. 2000 transactions per block, and he can not be sure there will be endless transactions with high fee. So I guess miners would not do that kind of high risk blocks Still, no matter how high the fee is, the amount of transaction a miner can maximum process is limited by the whole network speed (or a software block size limit), so you eventually will have more and more transaction queued up in the mempool without any hope of being included, unless the internet infrastructure had a large degree of upgrade all over the world
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larem
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December 19, 2015, 06:21:01 AM |
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Bitcoin didn't double in 2012 because of block halving. It went up because it became more known.
Ok then you can expect the same thing in 2016, now it is even more well-known It will go up in 2016 due to a separate thing: fear in the markets. Fiat is crashing and economies are plummeting. Bitcoin is a route of safety. But again, that has absolutely nothing to do with halving.
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fbueller
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December 19, 2015, 11:27:18 PM |
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Even if there is no block space limitation in software, the bandwidth limit would still limit the amount of transactions that can be included in a block
For example, if I include only 100 transactions, I can include all of them for free since they don't add too much latency. But if I include 10000 transactions then my block will be orphaned all the time.
Well, you could pay for better connectivity. If not, someone else will, and will enjoy the fee's from 10000 transactions. This situation is just a miner being priced out, which happens for other reasons already.
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johnyj (OP)
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December 20, 2015, 03:16:45 AM |
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Even if there is no block space limitation in software, the bandwidth limit would still limit the amount of transactions that can be included in a block
For example, if I include only 100 transactions, I can include all of them for free since they don't add too much latency. But if I include 10000 transactions then my block will be orphaned all the time.
Well, you could pay for better connectivity. If not, someone else will, and will enjoy the fee's from 10000 transactions. This situation is just a miner being priced out, which happens for other reasons already. You can not have better connectivity since you already have the best available, the bottleneck is on intercontinental internet backbone. In fact the speed between Chinese miners inside china is very fast, so the rest of the world is struggling catching up with their blocks since the connection into and out of china is miserable and they have the largest hash power
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larem
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December 20, 2015, 05:03:15 AM |
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Even if there is no block space limitation in software, the bandwidth limit would still limit the amount of transactions that can be included in a block
For example, if I include only 100 transactions, I can include all of them for free since they don't add too much latency. But if I include 10000 transactions then my block will be orphaned all the time.
Well, you could pay for better connectivity. If not, someone else will, and will enjoy the fee's from 10000 transactions. This situation is just a miner being priced out, which happens for other reasons already. You can not have better connectivity since you already have the best available, the bottleneck is on intercontinental internet backbone. In fact the speed between Chinese miners inside china is very fast, so the rest of the world is struggling catching up with their blocks since the connection into and out of china is miserable and they have the largest hash power This is an interesting claim, but my understanding was that mining takes long enough that the latency isn't an issue (the chance of two mining blocks at the exact same second are almost non-existent). I personally have a sub-50ms ping to EU/Asia.
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johnyj (OP)
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December 21, 2015, 08:09:36 AM |
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Even if there is no block space limitation in software, the bandwidth limit would still limit the amount of transactions that can be included in a block
For example, if I include only 100 transactions, I can include all of them for free since they don't add too much latency. But if I include 10000 transactions then my block will be orphaned all the time.
Well, you could pay for better connectivity. If not, someone else will, and will enjoy the fee's from 10000 transactions. This situation is just a miner being priced out, which happens for other reasons already. You can not have better connectivity since you already have the best available, the bottleneck is on intercontinental internet backbone. In fact the speed between Chinese miners inside china is very fast, so the rest of the world is struggling catching up with their blocks since the connection into and out of china is miserable and they have the largest hash power This is an interesting claim, but my understanding was that mining takes long enough that the latency isn't an issue (the chance of two mining blocks at the exact same second are almost non-existent). I personally have a sub-50ms ping to EU/Asia. Try to open a couple of chinese website like youku.com or tudou.com you will understand what I mean
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teukon
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December 21, 2015, 10:32:31 AM |
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So the only thing (not precisely calculated from Poisson distribution, just an example, 10 minutes delay means the block will have a 50% chance of being orphaned)
Far from attacking your argument, I just want to share a little-known fact: - Under normal conditions, the probability than the next block arrives in less than 10 minutes is about 63%.
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johnyj (OP)
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December 21, 2015, 11:14:18 PM |
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So the only thing (not precisely calculated from Poisson distribution, just an example, 10 minutes delay means the block will have a 50% chance of being orphaned)
Far from attacking your argument, I just want to share a little-known fact: - Under normal conditions, the probability than the next block arrives in less than 10 minutes is about 63%.
Thanks, take your number instead
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Jet Cash
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December 22, 2015, 10:39:16 AM |
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Just a comment on current banking. I can transfer sterling to any UK bank account virtually instantly, and I can do that via a mobile or over MacD WiFi, and there are 4 levels of security for the transaction. There is no fee for this transfer. However with the arrival of NIRP there will be a charge for keeping fiat currency with a bank. This is not to knock Bitcoin. There are massive advantages in using Bitcoin as most members are aware. At the moment, I relish the thought of having a choice, and also in being able to move away from fiat currencies. I make this post because I believe that competitive pressures will keep charges low. My free bank transfers are probably the result of the arrival of Bitcoin for example.
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Offgrid campers allow you to enjoy life and preserve your health and wealth. Save old Cars - my project to save old cars from scrapage schemes, and to reduce the sale of new cars. My new Bitcoin transfer address is - bc1q9gtz8e40en6glgxwk4eujuau2fk5wxrprs6fys
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larem
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December 26, 2015, 10:09:41 PM |
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Even if there is no block space limitation in software, the bandwidth limit would still limit the amount of transactions that can be included in a block
For example, if I include only 100 transactions, I can include all of them for free since they don't add too much latency. But if I include 10000 transactions then my block will be orphaned all the time.
Well, you could pay for better connectivity. If not, someone else will, and will enjoy the fee's from 10000 transactions. This situation is just a miner being priced out, which happens for other reasons already. You can not have better connectivity since you already have the best available, the bottleneck is on intercontinental internet backbone. In fact the speed between Chinese miners inside china is very fast, so the rest of the world is struggling catching up with their blocks since the connection into and out of china is miserable and they have the largest hash power This is an interesting claim, but my understanding was that mining takes long enough that the latency isn't an issue (the chance of two mining blocks at the exact same second are almost non-existent). I personally have a sub-50ms ping to EU/Asia. Try to open a couple of chinese website like youku.com or tudou.com you will understand what I mean Doesn't work in my case. Where I live is right by a major Internet backbone so regardless of where I'm connecting to, I always have extremely low pings (as in sub-32ms EU/Asia, sub-16ms in the west).
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