Who pays transaction 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.