Benefit of a Fee Market?

[plorph]

I'm seeing discussions how we need to keep the blocksize limit what it is until transactions can begin to compete with each other to create a fee market. I'm not understanding the benefit of transactions having to compete significantly more, that will just impede the flow of bitcoins which makes for an unhealthy economy. For a user of bitcoin, you have either high fees or slow confirmation time, on the other hand you'd have lower fees and less confirmation time. But to a miner it is the same, one is more transactions less fee sizes, but still the same mined fees.

[jl777]

I'm seeing discussions how we need to keep the blocksize limit what it is until transactions can begin to compete with each other to create a fee market. I'm not understanding the benefit of transactions having to compete significantly more, that will just impede the flow of bitcoins which makes for an unhealthy economy. For a user of bitcoin, you have either high fees or slow confirmation time, on the other hand you'd have lower fees and less confirmation time. But to a miner it is the same, one is more transactions less fee sizes, but still the same mined fees.

Imagine you are a miner. If the blocks are not full, everybody pays the minimum, so how much do you get? minimum txfee * average tx per block.

Now imagine the blocks are full. not only are there more tx per block, the people who cant wait for the next available spot will start outbidding the average price. Now you can get multiples of the minimum fee * max tx per block.

Of course the miners want to make more money. Somebody has to pay for all the electricity. Might as well be the users. In a miner controlled system, the miners control the system.

James

[Jet Cash]

I don't think everybody pays the minimum if blocks are not full. It is purported that there is a massive backlog of transactions, and yet miners are still submitting partly populated blocks, and even empty blocks. Maybe we should consider ways to move part of the mining operations to the nodes who are paying the transaction fees.

[jl777]

I don't think everybody pays the minimum if blocks are not full. It is purported that there is a massive backlog of transactions, and yet miners are still submitting partly populated blocks, and even empty blocks. Maybe we should consider ways to move part of the mining operations to the nodes who are paying the transaction fees.

If there was a way to force a miner to fill up the block if the tx are available, probably good to do that, but since the unconfirmed tx are unconfirmed, it would take some pretty tricky mechanism to create such a feedback process.

Something like an unconfirmed tx verifying set of peers, which then flag a mined block that could have included more tx. Unclean and messy, but could be done.

OK, we now have N of these peers spitting out feedbacks on the miners? But how do we link a miner of one block with another? Cant a miner just use a new address for each block they mine?

So now we need to follow where the funds go from the coinbase. How long to wait? And what exactly do we do once we find a misbehaving miner? His crime was to leave money on the table as it was more important to submit the block for the blockreward than the paltry fees.

Until the blockreward is much closer to the sum of txfees, it would take some horribly complicated system that problem wont ever really work. So going to 3 minute blocks would be a cleaner solution for this than any sort of reallocation system

[Jet Cash]

Until the blockreward is much closer to the sum of txfees, it would take some horribly complicated system that problem wont ever really work. So going to 3 minute blocks would be a cleaner solution for this than any sort of reallocation system

If 3 minute blocks with a 5 Bitcoin reward were introduced at the time allocated for halving, it would achieve much the same mining reward. It would also be less disruptive than mixing 1 and 2 Mb blocks, and giving half bitcoins in the PoW reward.

[jl777]

Until the blockreward is much closer to the sum of txfees, it would take some horribly complicated system that problem wont ever really work. So going to 3 minute blocks would be a cleaner solution for this than any sort of reallocation system

If 3 minute blocks with a 5 Bitcoin reward were introduced at the time allocated for halving, it would achieve much the same mining reward. It would also be less disruptive than mixing 1 and 2 Mb blocks, and giving half bitcoins in the PoW reward.

Not to mention the far more important 3 minutes vs 10 minute blocktime. The resistance would come from the miners who want to fill up the blocks to start a fee auction

[pedrog]

I wouldn't call artificially preventing growth a "fee market", most users aren't even aware of this and just pay whatever the particular wallet they use is set to pay.

[piotr_n]

I'm seeing discussions how we need to keep the blocksize limit what it is until transactions can begin to compete with each other to create a fee market. I'm not understanding the benefit of transactions having to compete significantly more, that will just impede the flow of bitcoins which makes for an unhealthy economy. For a user of bitcoin, you have either high fees or slow confirmation time, on the other hand you'd have lower fees and less confirmation time. But to a miner it is the same, one is more transactions less fee sizes, but still the same mined fees.

yes, fees will rise but evolution wise (so to say) it's a good thing.
there is plenty of technical solutions to overcome high transaction fees in the main chain.
by moving coins through side chains or using bitcoin banks.

when the fees go up, there will be profit in having these solutions, which will finance the development of the system.

imho, high transaction fees feeding the development can surely do miracles.
they will eventually come out with solutions thet we cannot even imagine these days.

[HostFat]

I think that an artificial forced fee market can be good only if there weren't alternatives to Bitcoin.

Bitcoin isn't enough widespread to playing bully on the market.

This will just push away current and mostly the new users .


What I wrote on Reddit

The fee market must be between the miners and not against the users. Miners must compete to give the service at the cheaper price to the users. (By including as much tx as they can) This is the reason that the limit was though as only an anti-dos system and nothing else. It was never thought as "the usual" way to make users compete to find a place in the blocks. Miners have already incentives to make blocks smaller, they spread faster and are faster to be checked by nodes and other miners. But even if a majority of miners think that they prefer to have smaller blocks, the last miner out of this group should be able to make a bigger block, to take more fees. This is the true fee market, between the miners.

Edit: And also here there is still the space for all possible 2 layer solutions as LN. Users want faster tx, they want to spend less time on waiting for confirmations. ( time is money ) An huge amount of them will prefer to use LN instead of waiting (with an on-chain tx) and using previous minutes of their life.

https://np.reddit.com/r/Bitcoin/comments/478zh1/its_official_yesterday_we_reached_the_highest/d0blna7?context=3