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?

[1714831906]

1714831906

[1714831906]

1714831906

[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.

[jhansen858]

It was sent from my own client

The fee was not optional, it just wouldn't send it with out it.

I download it from http://bitcoin.bluematt.me/bitcoin-nightly/ubuntu-11.04/ because the regular client will not display on newest ubuntu.

[MoonShadow]

It was sent from my own client

The fee was not optional, it just wouldn't send it with out it.

I download it from http://bitcoin.bluematt.me/bitcoin-nightly/ubuntu-11.04/ because the regular client will not display on newest ubuntu.

I don't know, then.  Either it's a fee schedule imposed by the creator of that client fork, or you had a massive number of inputs.

[jhansen858]

well i was mining on an old shitting video card where i would get like 0.05 / day  so that represented a few weeks of daily 0.05 /day payments.

[MoonShadow]

well i was mining on an old shitting video card where i would get like 0.05 / day  so that represented a few weeks of daily 0.05 /day payments.

No, that would mean that you had about ten inputs for each transaction.  That shouldn't be enough to throw you into the 'large transaction' rule.

[FreeMoney]

The fee will go down. It's left over from when .01 was trivial to block spam. For some reason the drop needed to be phased in.

Remember that there is no Bitcoin company and you are free to get software that communicates with others any way you can. Eventually people will be commissioning custom clients I'm sure.

[djproject]

Hardcoded fees in the official client is a very bad idea.  In my opinion, the official bitcoin.org client needs to be updated ASAP to get rid of the .01 fee.  It is probably disincentivizing potential adopters.  Here are some things to consider:

* If somebody wants to DDOS the network, they aren't going to be stopped by a CLIENT-SIDE safety like this.  The fee punishes legitimate users and does NOT offer any real additional security.

* If anti-spam client-side safety IS going to be put in, it should simply be in the form of the client refusing to send more than X number of transactions per minute.  This, too, can be ignored by a determined attacker, of course...

* All the pro-bitcoin literature heavily emphasizes the way bitcoins can be broken down to 8 decimal places.  This is totally contradicted by a .01 hardcoded fee.  Sure, the fee will go down, you say...  but the damage is done, people trying the client TODAY are going to be thinking "WTF"

* What is the first thing someone wants to do when they get their first coins?  Give the currency a test drive!  Send .01 bitcoin to a friend or to yourself, just to see how things work.  Having an unexpected fee pop up at this particular time is simply a public-relations catastrophe.

* .01 is absolutely arbitrary.  What, did Satoshi do some multivariable calculus to find the optimal fee and it just HAPPENED to be a power of 10?  Yeah, right.  People see this arbitrary "magic" number and it costs the currency precious legitimacy.

In conclusion:  the automatic hardcoded fees need to be removed with high priority.  They are detrimental to the currency's uptake.  Lowering from .01 hardcoded to .005 hardcoded is a bandaid fix which does not really address the problem.  We need to go back to the earlier behavior of letting the user choose their own optional fee.

[MoonShadow]

Thanks for volunteering.  Keep us abreast on your progress.

[bitcoinminer]

Thanks for volunteering.  Keep us abreast on your progress.

double plus good

[innervisi0nn]

just wait after 100 confirmations

[Rob P.]

In conclusion:  the automatic hardcoded fees need to be removed with high priority.  They are detrimental to the currency's uptake.  Lowering from .01 hardcoded to .005 hardcoded is a bandaid fix which does not really address the problem.  We need to go back to the earlier behavior of letting the user choose their own optional fee.

I actually think removing all the transaction fees in the client is a bad idea for consumers.  Here's the reason:

If the fee isn't hard coded into the client, then the consumer using the client will probably set it to 0 not understanding how Bitcoins really works.  Those transaction fees are paid to the miners in the block that they are confirming.  Transactions with higher fees are given priority for confirmation over transactions without fees.  So, if the average consumer sets their transaction fee to 0, their transaction will have low priority to be confirmed, they will wait and wait for their transaction to be confirmed and get frustrated with Bitcoins as a result.

Hardcoding the fee allows for those new consumers to actually be handled with some expediency, thus giving them a more positive outcome.

Everyone agrees the fee needed to be lowered when Bitcoins were $30.  Now they're back to $10 again, do we raise it again?  (Obviously not)  We just let the fee be hardcoded at the new 0.005 rate and see how it stabilizes. 

You don't get stability from making lots of changes in a short period of time.

[lemonginger]

It could be made a choice (if sender sends without a tx fee, the receiver gets a notice that says you have been sent money from XXX, would you like to add a transaction fee to speed processing?)

It shouldn't be a pop up. Pop ups are annoying and scary and the current wording is confusing. What do you mean i can't send this transaction? If Transaction fee is hard coded, should just show up as transaction fee without ability to adjust it. So the client shows you are sending foo, the fee is bar, total money deducted from your account foo-bar.

Why wouldn't the transaction fee be dependent on amount sent to at least some extent? As mentioned transaction fees offer significant friction for small transactions. It could be a combination of percentage + minimum. If transaction is under XXX and use is not spamming, transaction is free, otherwise it is XXX or the greater of .05%.

[ctoon6]

Actually, fees should not be required, after a while when mining becomes less profitable, less people will mine, thus it becomes cheaper and easier to mine, so once all 21m coins have been distributed, you could just have the client make blocks for free.

So mining would not need to be done by a gpu because there would be no point, and the fee instead of Ƀ is cpu cycles.

[Rob P.]

It was sent from my own client

The fee was not optional, it just wouldn't send it with out it.

I download it from http://bitcoin.bluematt.me/bitcoin-nightly/ubuntu-11.04/ because the regular client will not display on newest ubuntu.

I don't know, then.  Either it's a fee schedule imposed by the creator of that client fork, or you had a massive number of inputs.

Transaction fees are imposed for two reasons:
1)  The "age" of the inputs being used
2)  The amount being sent

Had you just received these funds into an address and then immediately turned around to send them to another address?  Then that requires a fee, especially if the amount is "small".

The mainline code had the minimum transaction fee set to 0.0005 on June 5th:
https://github.com/bitcoin/bitcoin/commit/352b4ea5b924412f3485290123fdf538cfdd8aa8

From Gavin on Transaction fee charges:
https://github.com/bitcoin/bitcoin/issues/170

Low-priority transactions (where priority is determined by bitcoin amount and age of the inputs) require a fee. You sent a very-small (0.03 BTC) transaction that came from a few-hours-old transaction.

That is by design, to discourage sending lots of very-small transactions (also known as "penny flooding").

[MoonShadow]

It was sent from my own client

The fee was not optional, it just wouldn't send it with out it.

I download it from http://bitcoin.bluematt.me/bitcoin-nightly/ubuntu-11.04/ because the regular client will not display on newest ubuntu.

I don't know, then.  Either it's a fee schedule imposed by the creator of that client fork, or you had a massive number of inputs.

Transaction fees are imposed for two reasons:
1)  The "age" of the inputs being used
2)  The amount being sent

Had you just received these funds into an address and then immediately turned around to send them to another address?  Then that requires a fee, especially if the amount is "small".

The mainline code had the minimum transaction fee set to 0.0005 on June 5th:
https://github.com/bitcoin/bitcoin/commit/352b4ea5b924412f3485290123fdf538cfdd8aa8

From Gavin on Transaction fee charges:
https://github.com/bitcoin/bitcoin/issues/170

Low-priority transactions (where priority is determined by bitcoin amount and age of the inputs) require a fee. You sent a very-small (0.03 BTC) transaction that came from a few-hours-old transaction.

That is by design, to discourage sending lots of very-small transactions (also known as "penny flooding").

This is true, but some of the expected fees are 'soft', and should not force the sender to include them.  If the fee is not paid on a low priority transaction, then the transaction is simply ignored by the miners until it's old enough that it's priority is above the minimum.  I've done this many times when not under time pressure.  This fee must be required by his client for some reason.

[Rob P.]

This is true, but some of the expected fees are 'soft', and should not force the sender to include them.  If the fee is not paid on a low priority transaction, then the transaction is simply ignored by the miners until it's old enough that it's priority is above the minimum.  I've done this many times when not under time pressure.  This fee must be required by his client for some reason.

Again, the main bitcoin.org client imposes a transaction fee (currently 0.0005 BTC) based on the type of transaction (see above).  You can recompile the code to make your version of the client have zero fee, if you choose (your milage may vary).

Change, in main.h:

Code:

static const int64 MIN_TX_FEE = 50000;

To:

Code:

static const int64 MIN_TX_FEE = 0;

The reason is improved acceptance of the client / concept of Bitcoins, not because it's required.  If you don't want to include a fee on a transaction and you're willing to wait, then use a client that doesn't enforce a fee. 

My current version of the official client (under OSX) will allow me to set the transaction fee to 0.00.  However, I believe if I tried to turn-around and send coins I had just received, and was sending a sufficiently small amount, it would deny the transaction without the fee (though I haven't tested this).  Another client may accept it.

[djproject]

This is true, but some of the expected fees are 'soft', and should not force the sender to include them.  If the fee is not paid on a low priority transaction, then the transaction is simply ignored by the miners until it's old enough that it's priority is above the minimum.  I've done this many times when not under time pressure.  This fee must be required by his client for some reason.

Again, the main bitcoin.org client imposes a transaction fee (currently 0.0005 BTC) based on the type of transaction (see above).  You can recompile the code to make your version of the client have zero fee, if you choose (your milage may vary).

Change, in main.h:

Code:

static const int64 MIN_TX_FEE = 50000;

To:

Code:

static const int64 MIN_TX_FEE = 0;

The reason is improved acceptance of the client / concept of Bitcoins, not because it's required.  If you don't want to include a fee on a transaction and you're willing to wait, then use a client that doesn't enforce a fee. 

My current version of the official client (under OSX) will allow me to set the transaction fee to 0.00.  However, I believe if I tried to turn-around and send coins I had just received, and was sending a sufficiently small amount, it would deny the transaction without the fee (though I haven't tested this).  Another client may accept it.

I want to point out that by having this option available through re-compiling, but not through an options menu, we are effectively placing an unfair tax on users who do not have the skill (or desire) to mess with source code.

If we want Bitcoin to catch on, we can't afford something like this.

[bitcoinminer]

This is true, but some of the expected fees are 'soft', and should not force the sender to include them.  If the fee is not paid on a low priority transaction, then the transaction is simply ignored by the miners until it's old enough that it's priority is above the minimum.  I've done this many times when not under time pressure.  This fee must be required by his client for some reason.

Again, the main bitcoin.org client imposes a transaction fee (currently 0.0005 BTC) based on the type of transaction (see above).  You can recompile the code to make your version of the client have zero fee, if you choose (your milage may vary).

Change, in main.h:

Code:

static const int64 MIN_TX_FEE = 50000;

To:

Code:

static const int64 MIN_TX_FEE = 0;

The reason is improved acceptance of the client / concept of Bitcoins, not because it's required.  If you don't want to include a fee on a transaction and you're willing to wait, then use a client that doesn't enforce a fee. 

My current version of the official client (under OSX) will allow me to set the transaction fee to 0.00.  However, I believe if I tried to turn-around and send coins I had just received, and was sending a sufficiently small amount, it would deny the transaction without the fee (though I haven't tested this).  Another client may accept it.

I want to point out that by having this option available through re-compiling, but not through an options menu, we are effectively placing an unfair tax on users who do not have the skill (or desire) to mess with source code.

If we want Bitcoin to catch on, we can't afford something like this.

I may be alone in this, but anybody upset about a 20 cent fee on a transaction doesn't interest me in the slightest, either buying from or selling to, with bitcoins.

[djproject]

I may be alone in this, but anybody upset about a 20 cent fee on a transaction doesn't interest me in the slightest, either buying from or selling to, with bitcoins.

So I guess that's it for microtransactions?

Right now U.S. legislation is on the verge of capping credit card transactions fees at an amount effectively lower than 20 cents.  Imagine my face when bitcoin = more expensive than VISA.

You're right, though.  Imagine what a failure bittorrent would have been if they hadn't required 20 cent transaction fees for every download.

[bitcoinminer]

I may be alone in this, but anybody upset about a 20 cent fee on a transaction doesn't interest me in the slightest, either buying from or selling to, with bitcoins.

So I guess that's it for microtransactions?

You're right, though.  Imagine what a failure bittorrent would have been if they hadn't required 20 cent transaction fees for every download.

They're not required.

I haven't used them but once since I started mining, and it was to get coins out quicker.

If they're unable to change the text in the box on the standard bitcoin client (as I was) from "0.01" to "0.00" for the transaction fee, they're idiots.  We have no shortage of idiots in here already.

If they can't do the above, what are they doing getting involved with an electronic cryptocurrency for micro-transactions?

I know you're passionate about this belief of yours that it's mandatory, but it's simply not true.

To re-pose your torrent question, imagine how the music industry would be doing if they had caught on to $0.99 per song instead of $20 for a shitty album with one good song on it 10 years ago...

[djproject]

I may be alone in this, but anybody upset about a 20 cent fee on a transaction doesn't interest me in the slightest, either buying from or selling to, with bitcoins.

So I guess that's it for microtransactions?

You're right, though.  Imagine what a failure bittorrent would have been if they hadn't required 20 cent transaction fees for every download.

They're not required.

I haven't used them but once since I started mining, and it was to get coins out quicker.

If they're unable to change the text in the box on the standard bitcoin client (as I was) from "0.01" to "0.00" for the transaction fee, they're idiots.  We have no shortage of idiots in here already.

If they can't do the above, what are they doing getting involved with an electronic cryptocurrency for micro-transactions?

I know you're passionate about this belief of yours that it's mandatory, but it's simply not true.

To re-pose your torrent question, imagine how the music industry would be doing if they had caught on to $0.99 per song instead of $20 for a shitty album with one good song on it 10 years ago...

Ahh, I see, it is a friendly misunderstanding.

In the latest version of the standard Bitcoin client (currently downloadable from the frontpage of bitcoin.org), there is no way to disable the transaction fees.  (They apparently only pop up, though, for microtransactions.  Maybe that is why you did not see them)

Now you know.

I hope you will join me in asking the developers to get rid of this mandatory fee.  As a miner, you'll benefit by Bitcoin catching on for more merchants.  It'll catch on for more merchants if there isn't a mandatory fee.  That's most of the appeal of Bitcoin for merchants: escape from credit card/PayPal fees!

[jgarzik]

RE microtransactions:  this is a FAQ.  It is even in satoshi's original paper and crypto postings.  Bitcoin was never intended to be a useful microtransaction network.  Bitcoin is not optimal for microtransactions, and probably never will be.

RE fees:  the rapid increase in value caught everyone by surprise.  Months ago, we were dealing with "penny flooding" on the network.  Now, 0.01 BTC is a non-trivial amount.

Right now we are releasing new versions of the software as fast as possible, trying to fight the biggest fires ("triage") impacting users on the network.  We know fees need work, and there are already pull requests trying to deal with this:  https://github.com/bitcoin/bitcoin/pull/289

Longer term, we want the community to participate in a discussion about how to best balance (a) rapidly changing bitcoin value with (b) protecting the network.

Right now most transactions do not require a fee, but the default client requires a fee in a few situations:

1. Transactions smaller than 0.01 BTC
2. Transactions whose byte size larger than the 27k free transaction area (very rare)

So, to answer the question "why not make it easy to ignore fees?" is really unspending is very difficult.  If it's just a checkbox for users, a lot of users will uncheck it, their transactions will not get relayed or confirmed, and their coins are simply lost in limbo: never confirming, and no way[1] to recover.

Losing coins is a horrible user experience, far worse than having to pay 0.0005 BTC.

But we are open to all suggestions about transaction fees.  You just have to understand the "unspend" problem in its entirety, and the support nightmare that goes along with it.

     Jeff




[1] Technically, this is not really true.  You can "unspend" by restoring a wallet backup or some other esoteric means, but this is not something within the reach of your average user.

[jhansen858]

alright i'll give it time, its just aggravating.

Another example


I try to send .05 bitcoins today, first time i click it says i need to pay 0.03 fee
I say no and cancel

2nd time i click it says i need to pay 0.02 fee
I say no and cancel

3rd time i click it says i need to pay 0.01 fee
I say no and cancel

4th time i click it says i need to pay 0.03 fee...

I mean WTF mate.

This is one of the most aggravating things about it for me

That and the fact I can not seem to get more then 0 or 1 connections anymore...

[jhansen858]

I take it back, for some reason I had wrong port forwarded to my machine.  Once i fixed it my connection problems went away...

[djproject]

Thanks Jeff.  Just sent you a small tip.  We really do appreciate you guys' work, even if we seem like whiners sometimes    You said you welcome suggestions, so here goes.

* Go back to the optional fees in the earlier client.  If they enter 0 for fee and try to make a low priority transaction, pop up the following message:  "You are about to send a low priority transaction with no transaction fee.  Please be aware that this transaction will take a very long time to go through, and cannot be cancelled.  The transaction is considered low priority because it is such a small amount.  [Button: Cancel Transaction]  [Button: Enter Transaction Anyway]  [Checkbox:  Never Show This Message Again]"  (If they check the box, then, of course, stop popping up the message and henceforth allow feeless transactions without complaint)

As a blogger, I'm eager to welcome micro-donations.  Tiny tips (in the ~1cent range, or even smaller!) would absolutely revolutionize blogging.  Now, as such, I am willing to accept very long confirmation times as a necessary evil.  I think I speak for a lot of bloggers when I say this, and probably many merchants too.  I would even accept confirmation times of an entire year!  Just let my readers send the tiny tips with no fee      

One other thing.  I currently have a 1BTC transaction in my history (first withdrawal from MtGox, for testing) and it has over 700 confirmations and visibly growing.  It was made days ago.  I'm not advocating total communism, but I think at least *some* of that work could have gone toward fee-less transactions...

RE microtransactions:  this is a FAQ.  It is even in satoshi's original paper and crypto postings.  Bitcoin was never intended to be a useful microtransaction network.  Bitcoin is not optimal for microtransactions, and probably never will be.

RE fees:  the rapid increase in value caught everyone by surprise.  Months ago, we were dealing with "penny flooding" on the network.  Now, 0.01 BTC is a non-trivial amount.

Right now we are releasing new versions of the software as fast as possible, trying to fight the biggest fires ("triage") impacting users on the network.  We know fees need work, and there are already pull requests trying to deal with this:  https://github.com/bitcoin/bitcoin/pull/289

Longer term, we want the community to participate in a discussion about how to best balance (a) rapidly changing bitcoin value with (b) protecting the network.

Right now most transactions do not require a fee, but the default client requires a fee in a few situations:

1. Transactions smaller than 0.01 BTC
2. Transactions whose byte size larger than the 27k free transaction area (very rare)

So, to answer the question "why not make it easy to ignore fees?" is really unspending is very difficult.  If it's just a checkbox for users, a lot of users will uncheck it, their transactions will not get relayed or confirmed, and their coins are simply lost in limbo: never confirming, and no way[1] to recover.

Losing coins is a horrible user experience, far worse than having to pay 0.0005 BTC.

But we are open to all suggestions about transaction fees.  You just have to understand the "unspend" problem in its entirety, and the support nightmare that goes along with it.

     Jeff




[1] Technically, this is not really true.  You can "unspend" by restoring a wallet backup or some other esoteric means, but this is not something within the reach of your average user.

[bitcoinminer]

I hope you will join me in asking the developers to get rid of this mandatory fee.  As a miner, you'll benefit by Bitcoin catching on for more merchants.  It'll catch on for more merchants if there isn't a mandatory fee.  That's most of the appeal of Bitcoin for merchants: escape from credit card/PayPal fees!

There still isn't a mandatory fee.  Repeating that there is doesn't make it true.

As far as escaping fees or adding merchants, etc. I have to confess, I'm a capitalist and not a marxist.  I'm not doing this for the Proletariat Masses or for the betterment of society, I'm doing it because I want my computer to make me money while I'm at another job making more money, so I can afford to buy a bigger, newer TV that I don't need.  Fees allow the transactions to process faster, because more people want to make BTC processing transactions as mining winds down.  You can't go to starbucks, pay with bitcoins, and tell the barista "Ok, those BTC should clear in 1-4 hours once there are 120 free confirmations".

As mining produces less coins, and at higher difficulty, processing transactions is where the architecture is headed to make more money.

If you want to buy a server, and let the whole world use all your servers for free to instantly get 1 of the 120 confirmations needed, so be it.  Just convince 119 of your friends to buy servers, and pay for internet, electricity, and hardware out of their own pockets, and process these transactions for the whole Revolution of the Proletariat Masses for free.

I'd say you could get a decent server for about $5k with software, and probably $300 a month for colocation on a fast backbone.

So for you and your friends, about $600k for the hardware and software, about another $300k for someone to set them up, and then $300 a month times 120 is $36,000.  For just under a million you could build an entire network to process free transactions, and for only $36,000 a month plus maintenance and IT staff, you could keep the whole thing running.

I think you're on to something here, and I really appreciate you volunteering all of this.  I'd be willing to help you with the equipment - I can get you servers for 10% above cost, and $100 an hour for remote labor to set it up.

Or, you could pay the fucking 20 cents.

[jhansen858]

Its not about being cheap.  I specifically stated that the fees should be paid.  The purpose of this thread is to decide if it makes more sense for the merchant to pay the fees as they do with traditional credit card and other merchant fees or to keep the fees with the customers as it is currently set up.  Or maybe some hybrid of the two where the fees are split between the merchant and the purchaser.

I think it makes more sense for merchants to pay it.  Yes it makes products more expensive. But requiring customers to pay fees would put merchants who accept bitcoins at a huge disadvantage vs credit cards.  If you make the merchants pay the fees, then the customer who is buying isn't automatically going to whip out the visa because there _IS NO FEES_ to the customer if you buy with VISA.  You can explain it to them all day that the cost is more expensive bla bla bla but at the end of the day, people will not think that and will only think that credit cards are better because there is no fee...
 
Think about it.

[mp420]

I have been giving some thougt into fees and I think the default behaviour should be:

1) have a fee in EVERY transaction, inversely proportional to the value of the transaction and linearly proportional to its size
2) make .00000001 BTC (the bitcoin atomary unit) the minimum fee

Obviously people will disagree about fees, and a "feeless" or "optional fee" clients will eventually be available, but I think as a starting point this would be much fairer than the current behaviour, which only collects fees from the smallest value transactions.

[jgarzik]

RE merchant (receiver) paying fees:  not really workable in bitcoin.

RE always pay fees:  it is silly to discourage bitcoin users with fees that are not necessary.  The vast majority of transactions do not need a fee, as the miners receive the block reward for securing these transactions.

a "feeless" or "optional fee" clients will eventually be available

It is available today from bitcoin.org.  Isn't that wonderful?

[jhansen858]

RE merchant (receiver) paying fees:  not really workable in bitcoin.

Its true I don't understand the protocol as well as I should but it seems to be just a matter of subtracting the fee from the transaction rather then adding it?

Right now to send 10 btc I have to send 10.03 for example

Why cant i send 10 btc and the merchant get 9.97 instead? 

Care to elaborate on why its unworkable?

[ene]

1) The merchants would just raise all their prices by 0.03 BTC to ensure they get the right amount of money. But not all fees are 0.03 BTC exactly, so the merchant wouldn't always be paid the same amount for the same product.

2) I send you 0.05 BTC without realising there will be a fee attached, you get 0.04 BTC and a message that 0.01 BTC was deducted for fees. But you needed 0.05 BTC! So now you try to cancel the transaction to reject the fee, but the only way to cancel a transaction is to resend the money back to the address it came from. But then a fee needs to be deducted again. So we both lose out, because I didn't know you wouldn't get as much money as I sent.

[MoonShadow]

So we both lose out, because I didn't know you wouldn't get as much money as I sent.

Well, you know the rules now.  You won't make that same mistake twice, will you?  Relatively cheap tuition at the University of Life.

[ene]

creighto, I was talking about jhansen858's "hidden fees" proposal, not how things are now.

[MoonShadow]

Oh, sorry.

[jhansen858]

Well

I accept credit cards, ACH transactions and what not as a course of doing business on a daily basis.  To accept $20,000 in a month for example I'm paying somewhere in the neighbourhood of $300 - $500 in fees to visa.  But I would rather do that and get paid now then wait for a check in the mail...

When setting this up, I researched and understood the fee structure before deciding on accepting those payments. Its not hidden.  I think its safe to say that the fee structure could be known in advance with bitcoin as well, at least to an acceptable point if not exactly.  And I expect to take it in the backside when I accept credit card payments.  I just look at it as removing a barrier to getting a sale.   When I accept credit cards it allows me to do something I was not able to do before.  Get paid from a great distance instantly. 

Now if you were to come along and tell me that I could do that exact same thing but the fees were only half as much and there is no international fees that I have to deal with and oh by the way, its impossible to get charged back on, I would be very much open and accepting of that idea.  Its not only accepted by most merchants they will be paying a fee to do transactions its an unspoken truth.  Now lets look at the case where they have a 0.25 fee to do an ATM transaction.  Well what does the merchant do?  They fucking charge a 0.45 surcharge on it.  They make money on the fee.  With visa, your not allowed to do this but nothing says that merchants couldn't just decide to double the expected fee and make a little extra on the thing.  I as a consumer could decide to not purchase from them due to this policy or I could just pay the fee anyway.   Some merchants will eat fees as a cost of doing business some will do a surcharge.   

I'm just trying to illustrate how there can be nothing but goodness that comes out of merchants paying fees.  They get a new capability they never had before (accepting money from different countries with out the exchange rates fucking them) the fees are lower then what they are already used to paying, and the customer are not preferring to use visa over bitcoin because its cheaper for them to do so.   Basically right now were automatically putting bitcoin at a disadvantage against its main rival visa/mastercard and paypal as an electronic payment solution due to the current fee structure.

I'm sure everyone can easily see this point even if you don't think its a big deal??

[bitcoinminer]

those $300-$500 in fees "you" are paying:

a.) You're soaking up the cost, making you a bad businessman
or
b.) You're passing them along to the consumer, as is intended.

Visa does it back with their rewards - they have customers sign instead of pin entry, which incidentally assesses you as a vendor a higher fee for those vs. debit transactions.

jhansen, I really think nobody here can make you understand the basics of bitcoin until you complete at least a freshman college level Economics course, in all seriousness.  Marxism just doesn't work.

[jhansen858]

Your obvious trolling aside, I have made my points clear.  Those who needed to hear them have.
I really cant make my case any stronger so I leave it up to the developers to consider what I have said.

[ene]

Maybe you could respond to my point instead of saying all of that irrelevant crap?

[MoonShadow]

Your obvious trolling aside, I have made my points clear.  Those who needed to hear them have.
I really cant make my case any stronger so I leave it up to the developers to consider what I have said.

In the end, the customer is always paying the transaction fees.  Bitcoin, by it's nature, just makes that explicit.  I can't see any way to hide the cost of transactions from the sender anyway.

[bitcoinminer]

Your obvious trolling aside, I have made my points clear.  Those who needed to hear them have.
I really cant make my case any stronger so I leave it up to the developers to consider what I have said.

In the end, the customer is always paying the transaction fees.  Bitcoin, by it's nature, just makes that explicit.  I can't see any way to hide the cost of transactions from the sender anyway.

I wouldn't bother moonshadow.  This is a person who is interested in a decentralized cryptocurrency who wants to regulate it and have it free of fees, and just have everybody process transactions for free, and provide their electricity and machines to him.  I don't know how someone can be so sure about issues of economics, who doesn't understand these basic principles.  I guess we're BOTH "trolling" now lol!

[Rob P.]

I'll just add as a final point:

Folks do understand that fees have a very real and very needed purpose?

When coins are no longer coming into the network (21,000,000 coins in 2030).  Why would anyone mine? 

They mine, because they get the transaction fees in the block they add.

If there are no transaction fees, there will be no miners, and no transactions will ever be confirmed. 

No transaction fees = No miners (at some point in the future).

Consider it a "sales tax".  You pay that on every transaction you use your credit cards for, and it's WAY higher than the fees we're talking about here for Bitcoin.  They serve a purpose, at some point they will be the only reason to mine.  Without miners we have no Bitcoin economy.

[bitcoinminer]

I'll just add as a final point:

Folks do understand that fees have a very real and very needed purpose?

When coins are no longer coming into the network (21,000,000 coins in 2030).  Why would anyone mine? 

They mine, because they get the transaction fees in the block they add.

If there are no transaction fees, there will be no miners, and no transactions will ever be confirmed. 

No transaction fees = No miners (at some point in the future).

Consider it a "sales tax".  You pay that on every transaction you use your credit cards for, and it's WAY higher than the fees we're talking about here for Bitcoin.  They serve a purpose, at some point they will be the only reason to mine.  Without miners we have no Bitcoin economy.

The guy is a total clown... he has no concept of economics or of the purpose of BitCoin.  In his world, transactions are powered by Sunshine and Rainbows.

[lemonginger]

The guy is a total clown... he has no concept of economics or of the purpose of BitCoin.  In his world, transactions are powered by Sunshine and Rainbows.

Errr you're being a jerk. OP explicitly stated that fees have to be paid, but just wondered for buyer's psychology sake if we could point that burden on merchants.

I think there needs to be a lot more work making transaction fees clear and transparent to users, but i don't think it matters much who pays them. If they become more standardized I would assume that merchants will price items so that with fee it is a nice round number, like my local ice cream shop prices their cones at like 2.87 or whatever so they can sell them for 3 bucks.

[jhansen858]

I understand why we need transaction fees.

I agree someone has to pay it.

This is a person who is interested in a decentralized cryptocurrency who wants to regulate it and have it free of fees, and just have everybody process transactions for free, and provide their electricity and machines to him.  

Did you even read what I said? /sigh  If you disagree with my logic, then give a logical response.  Don't just make some shit up that I clearly never said.

So far the best answer I have gotten was from jgarzik who stated that it wasn't really doable.  But he never said why.

[bitcoinminer]

I understand why we need transaction fees.

I agree someone has to pay it.

This is a person who is interested in a decentralized cryptocurrency who wants to regulate it and have it free of fees, and just have everybody process transactions for free, and provide their electricity and machines to him.  

Did you even read what I said? /sigh  If you disagree with my logic, then give a logical response.  Don't just make some shit up that I clearly never said.

So far the best answer I have gotten was from jgarzik who stated that it wasn't really doable.  But he never said why.

I did.  Remember when I listed the hardware necessary, and the money to build such a transaction network, coming in around a million dollars?  That was the why.

[ene]

Did you even read what I said? /sigh  If you disagree with my logic, then give a logical response.  Don't just make some shit up that I clearly never said.

So far the best answer I have gotten was from jgarzik who stated that it wasn't really doable.  But he never said why.

Looks like you missed my post: http://forum.bitcoin.org/index.php?topic=14789.msg218966#msg218966

You still haven't explained how your system would work. Remember that bitcoins, like cash, are sometimes exchanged between two ordinary people, not just between a "merchant" and a "consumer". How would it work in this case?

[bitcoinminer]

Did you even read what I said? /sigh  If you disagree with my logic, then give a logical response.  Don't just make some shit up that I clearly never said.

So far the best answer I have gotten was from jgarzik who stated that it wasn't really doable.  But he never said why.

Looks like you missed my post: http://forum.bitcoin.org/index.php?topic=14789.msg218966#msg218966

You still haven't explained how your system would work. Remember that bitcoins, like cash, are sometimes exchanged between two ordinary people, not just between a "merchant" and a "consumer". How would it work in this case?

Bitcoin doesn't differentiate between the two.  You really, really can send BTC without paying transaction fees, honest.  I do it 3 times per 24 hours.

[gentakin]

Bitcoin doesn't differentiate between the two.  You really, really can send BTC without paying transaction fees, honest.  I do it 3 times per 24 hours.

That's right, however the official bitcoin client - at least version 0.3.21 and a RC for 0.3.22 - FORCED me to add a fee on every transaction I've made so far. There is apparently no way in the settings to disable this behaviour.

Of course, these transactions were in the ~1BTC range and the coins I sent were only a few minutes old.

I realize it's possible to patch the client to get rid of the forced fees. I'd prefer if the client only suggested a fee, and not force it.

[Rob P.]

Bitcoin doesn't differentiate between the two.  You really, really can send BTC without paying transaction fees, honest.  I do it 3 times per 24 hours.

That's right, however the official bitcoin client - at least version 0.3.21 and a RC for 0.3.22 - FORCED me to add a fee on every transaction I've made so far. There is apparently no way in the settings to disable this behaviour.

So you understand the fees.  You understand why the fees.  You understand the circumstances under which the official client "forces" you to pay the fees.

You just don't like them, and would like to see them at zero (and or in the GUI have the ability to set them to zero).

Point noted.  Submit a feature request here:
https://github.com/bitcoin/bitcoin/issues

That's how open source works.  Just whining in the forums and continuing to disagree with the "whys" people have provided, will never change anything.

The other alternative is to use a different client and/or write your own (which you've said you don't want to do).

Time to move on.

[bitcoinminer]

That's how open source works.  Just whining in the forums and continuing to disagree with the "whys" people have provided, will never change anything.

The other alternative is to use a different client and/or write your own (which you've said you don't want to do).

Time to move on.

I think I love you.

[gentakin]

The other alternative is to use a different client and/or write your own (which you've said you don't want to do).

I patched the official client to allow zero fees, so it's not a problem for me.
I simply wanted to state in my post that I disagree with forced fees, even though it might prevent newbies from sending a transaction that will "never" be confirmed. No whining intended.

[Rob P.]

I patched the official client to allow zero fees, so it's not a problem for me.
I simply wanted to state in my post that I disagree with forced fees, even though it might prevent newbies from sending a transaction that will "never" be confirmed. No whining intended.

Gratz.  Moving on.