Who pays transaction fees

[jhansen858]

Is it just me or is the current system backwards...

Currently, the person who is paying is prompted to pay a fee.  Naturally my cheap ass thinks OMG i have to pay a fee to pay this guy... I'm going to wait grumble grumble.  

In every other single currency system on the planet that I can think of ever using, the person gets paid takes the hit.  

Why do we do it backwards? Was this intentional or just a fun way to make people hoarding instinct kick in to overdrive?

[grue]

Because telling you that you have to pay a fee is better than sending a tx with ammount-fee. but seriously, really? is 0.01 (0.005 later) btc that much?

In every other single currency system on the planet that I can think of ever using, the person gets paid takes the hit. 

Why do we do it backwards? Was this intentional or just a fun way to make people hoarding instinct kick in to overdrive?

consider this, next time you go to the supermarket.
apple is $1.30. But for each purchase, there's a $0.30 credit card fee. So the price of the apple is really $1.00, and the $0.30 is the credit card fee. Sure, it sounds better to pay $1.30 than $1.00 + $0.30 fee, but both are exactly the same.

[foo]

One of the purposes of the fees is to avoid spam on the network. If you made the recipient pay, anyone could drain someone's balance by spamming them with empty transactions, each one taking 0.01 from the victim's balance.

[Rob P.]

It's a transaction fee, and you're the one conducting the transaction.  It could happen to you just moving money between your own accounts.

Why a transaction fee?  Because without it, eventually no one would mine, and if there are no miners then no transactions will be confirmed.  If transactions aren't confirmed, then there is no Bitcoin commerce.  

Think of it as a tax to keep everything running.

[jhansen858]

I understand why we need transaction fees.

The question is assuming its technically possible to make the receiver getting the fee exactly the same as the sender paying the fee, then the question becomes:



1) long term does it make more sense to punish the people spending the BTC.

or

2) long term does it make more sense to punish the merchants who receive the BTC.

I agree someone has to pay it.

In my humble opinion serious consideration should be taken to that question.  Most merchants are used to paying fees to accept money, thats how all credit card processing companies work right now.  

It can also be said that customers are used to paying fees to spend money.  But I tell you, my personal feeling on this subject which I'm sure many of you can also share with me...

paying fees at atms and credit cards = its a fucking rip off, I hate it.  I only do it because I have no other option and i forgot to get cash out of the bank.

I say, put the fees on the merchants.  It should be 100% equivalent to do this rather then charge the payers for any technical reasons such as spamming prevention and what not.  Please educate me if i'm wrong about this.

Yes my argument is about 90% psychological in nature...

[grue]

1) long term does it make more sense to punish the people spending the BTC.

Is $0.25 really a "punishment"?

2) long term does it make more sense to punish the merchants who receive the BTC.

The only way this could work is have the money deducted from the payment. Now merchants have to charge 0.01 btc more (0.005 in the future).

In my humble opinion serious consideration should be taken to that question.  Most merchants are used to paying fees to accept money, thats how all credit card processing companies work right now. 

Actually, I would love for the CUSTOMER to pay the fees. If i pay cash, and the merchant doens't have to pay fees, why should i pay extra?

It can also be said that customers are used to paying fees to spend money.  But I tell you, my personal feeling on this subject which I'm sure many of you can also share with me...

paying fees at atms and credit cards = its a fucking rip off, I hate it.  I only do it because I have no other option and i forgot to get cash out of the bank.

You're already spending money when you're buying something. is 0.01 really going to make a big difference?

[jhansen858]

Well said, and I agree and acknowledge the fact that it is the same no matter which party you charge mathematically, the product would cost the same amount.

I now quote from the white paper from satoshi

If the output value of a transaction is
less than its input value, the difference is a transaction fee that is added to the incentive value of
the block containing the transaction. Once a predetermined number of coins have entered
circulation, the incentive can transition entirely to transaction fees and be completely inflation
free.

if the output is less then the input

then

excess = fee

Now it doesn't say who specifically who pays the fee here.  It only states that the fee gets taken from the difference of A and B.

So was this decision that the buyer pays the fee made after "careful consideration" of the impact vs seller paying it or was it just arbitrary?

Any of the coders who put the transaction fees in place originally thing have anything to say about that?

[gigitrix]

I just want fee transparency. You should be able to see the fee as you choose how much to send in the send payment box. It should update dynamically as new fee amounts are entered, and calculate it properly from the coins you own. What you see is what you'll pay/ by default, but you should be able to modify the fee if you accept a warning.

[Rob P.]

No problem.  Write your own client.

As to who pays the fee.  The originator of a transaction pays it.  But as the previous poster mentioned, it could also be deducted from the amount of the transaction, hence the receiver would always pay it.  But keep in mind, if you receive coins you'd pay it.  So if I'm paying you to do work for me, they would get deducted from your pay.

At that point you'll argue the employer should pay them.

So you're really arguing that YOU shouldnt pay them.   

[tehcodez]

We can sell yo mama's hair piece for transaction fees. It'll get one or two...especially with the "crust"...or we can make orphans shoe-shine for it. Either way, it gets paid and everyone walks away a winner.

[jhansen858]

well maybe i'm just complaining then.  Here was my real life example that made me start this post.


I sent two people .50 bitcoins each

The fee was 0.05...

thats 5%

Also,

I had to give up 2.5% to mining pool who sold the bitcoins

I had to pay .65% to mtgox to convert dollars into bitcoins

so i'm paying 8.15% in fees to spend 1 bitcoin??  I don't fully understand the fee structure so it seemed excessive.

[bitcoinminer]

well maybe i'm just complaining then.  Here was my real life example that made me start this post.


I sent two people .50 bitcoins each

The fee was 0.05...

thats 5%

Also,

I had to give up 2.5% to mining pool who sold the bitcoins

I had to pay .65% to mtgox to convert dollars into bitcoins

so i'm paying 8.15% in fees to spend 1 bitcoin??  I don't fully understand the fee structure so it seemed excessive.

How much did you pay for that 1 bitcoin?  And how much did you sell it for?  Did you sell it for more or less than 8.15% above what you paid for it?

[jhansen858]

well I paid $18 for that bitcoin in cold hard cash which included the fees previously mentioned.  Then I paid additional 5% or $0.90 to spend the coin for the purpose of some technical support.  I ended up figuring it out my self but gave the payment for the effort. 

So in dollars, my technical support cost me $18.90 when I promised to pay them $18.00


Did my $18.00 transaction really cost the network $0.90 to process?  I think that is more expensive then visa and mastercard.

[bitcoinminer]

Now, had you taken that 1 BTC, held on to it for another couple of days, and sold it, you would have ended up with 5-15$ profit.  Thus 90 cents is sort of irrelevant at that point.  Or, if you had spent exactly 1 BTC you bought at $18 for something that costs $40 USD, the 5% BTC wouldn't have mattered either.

[dana.powers]

this doesn't make much sense. like sales taxes, the cost is shared by both parties due to supply and demand pressures.  the problem with transaction fees is not who pays them, but the inefficiency caused due to foregone transactions (they're never made because fee makes them too expensive).  for example, who would pay anyone 0.001 BTC for a good or service if it required paying add'l 0.01 BTC fee?  and eliminating those transactions causes inefficiency because, presumably, the trade would be pareto optimal (i.e., both sides better are better off after the trade than before it) thereby denying a potential increase in social welfare.

[bitcoinminer]

Who is selling things for 0.001 BTC?  Do you really think the transaction fee would stay at 0.01 if it were $1000 for 1 BTC?

Fancy lawyer latin talk aside, transaction fees even when paid by the seller, are ALWAYS transferred to the buyer, directly or indirectly.  This is economics 101.

[dana.powers]

Who is selling things for 0.001 BTC?  Do you really think the transaction fee would stay at 0.01 if it were $1000 for 1 BTC?

good point. and in bitcoin the fee is optional.  but I assume the market will set a price based on supply/demand of transaction processors.

Fancy lawyer latin talk aside, transaction fees even when paid by the seller, are ALWAYS transferred to the buyer, directly or indirectly.  This is economics 101.

Of course, but they're also born by the seller in lost profits from customers that drop out at the margin.  i admit it's been a long time since econ 101 though.

[bitcoinminer]

One could argue that if you carry more physical coins, when you drive to the store, you use slightly more gas, and it takes more gas to go from the store to the bank when they cash out.

[MoonShadow]

well maybe i'm just complaining then.  Here was my real life example that made me start this post.


I sent two people .50 bitcoins each

The fee was 0.05...

This should not have been required.  Did you send these from your own client?  Did the client ask for a fee, or refuse to send without one?

[MoonShadow]

if the output is less then the input

then

excess = fee

Now it doesn't say who specifically who pays the fee here.  It only states that the fee gets taken from the difference of A and B.

So was this decision that the buyer pays the fee made after "careful consideration" of the impact vs seller paying it or was it just arbitrary?

It's not arbitrary, it's just that the sender's client is the one that creates the transaction.  But, under most circumstances, a fee is voluntary.  This permits the costs of processing transactions to be borne in another fashion.  For example, if in a future that Bitcoin is very successful, and you are shopping at (for example) Wal-Mart; it is generally assumed that Wal-Mart is not going to expect you to pay the transaction fee, but the client may or may not be able to respect the vendor's request that the fee be deducted.  It doesn't much matter, though, because it's in the interests of Wal-Mart to have those transactions processed quickly whether there is a fee paid or not; so Wal-Mart has a strong economic encentive to either run their own datacenter to process Bitcoin transactions sent to themselves, or contract this activity out to a professional mining datacenter for the same ends.  Thus, Wal-Mart bears the transaction costs and also keeps any savings (or fees) gained by mining for themselves.  All other consumer or retail businesses have similar encentives, and therefore we can expect that "bitcoin banks" serving business interests will be responsible for processing the free transactions to or from their own clients/customers.