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Author Topic: Transaction Fees: The community must be aware that THEY can change them.  (Read 1182 times)
Tacticat
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March 24, 2013, 11:09:12 AM
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Traditional payment methods grew us used to a system of fixed fees where the user had no vote to decide which amount he considered to be appropriate. This is not the case of Bitcoin, where the transaction fee can be enterily decided by the community and where the standard is set by consensus.

The problem? Right now people don't know that they, as a Bitcoin users, as a community, can have an impact on transaction fees.

For most people the default transaction fee is something that is decided by devolpers at a certain point of time. Actually, some clients such as Bitcoinspinner or the Reddit Bitcointip bot do not allow any type of decision whatsover. This is potentially bad, because bitcoin was designed as a system where transaction fees would be flexible and changed over time depending on the block size, amount of transactions and other "market situations".

Most users face the following decision: Either include a 0.0005 fee and have the transaction processed in a fast manner, or include no fee at all and risk having the confirmation delayed.They don't know that they could choose any other amount they consider to be fair. For example, given the recent increase in Bitcoin value I might think that an appropriate transaction fee should be 0.0001 and explicitly tell my client to send out this fee.

If everybody did this, if everybody would be aware that they can decide the amount they consider to be just, there would a market balance without need for developer intervention.

Miners would lower or increase the fees they accept by the decision of the community, because otherwise they wouldn't make a profit on these precious fees. Obviously, they have no incentive to accept 0 fee transactions, but if a majority now started using a lower 0.0001 fee, this would become the current standard. Bitcoin users should know of the importance they hold in this issue.

Bottom line: Bitcoin is not a traditional payment method, nor a traditional currency and as such this is an issue long overseen because there wasn't no need for it until now. But like many other things in the Bitcoin world, we must raise awareness about user-decided fees.

Post scriptum: This post is not intended to attack miners. I know that miners depend on these fees and someone might think that lowering would hurt them. But right now, the majority of a miner's profit still comes from block rewards and with the value of these rewards being 5 times higher than they were last december, there is no need to think that lower transaction fees adjusted by community decision would hurt them.

And even in the case that a fee is so low that miners don't like it, they too have a voice and vote by deciding which fees are included in their blocks and which not. Just like Bitcoin price is decided by the pressure of buyers and sellers, asks and bids, this is a similar mechanism. 

What do you think? Oh! Please don't forget to say what fee (given the actual Bitcoin price) you deem appropriate.
What will you tell your client to set as default fee?

Cheers!

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March 24, 2013, 11:14:22 AM
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I would file this under "duh."  Defaults = trivial thing to make your transaction go through reasonably quickly and are, by default, meant to help the novice.

Hardfork aren't that hard.
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March 24, 2013, 11:19:45 AM
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To me, the bigger fee, the more miners. And more miners is better, right?

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March 24, 2013, 11:23:26 AM
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I would file this under "duh."  Defaults = trivial thing to make your transaction go through reasonably quickly and are, by default, meant to help the novice.

Indeed, But it's not the default fee that I critisize, but the actual situation in which it seems that people don't know they can change fees and have an impact.

Even the blockchain.info client doesn't allow for a custom fee to be set in the "Settings" menu. Only when sending a custom transaction can one decide to include a 0.0001 fee (for example) and vote on this issue. It seems to me that 90% of the people I've met don't know this or don't consider this.

If people are not properly informed, then the mentality of "fixed fees" we've got used to from traditional payment methods will take over and people will just resign to accept whatever the default option in their wallets is, despite if they consider it just or not.

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March 24, 2013, 11:37:42 AM
 #5

This is a great OP. The transaction fees are similar to how in science p<0.05 is arbitrarily used as a cutoff for "interesting" or "not interesting" results just because a guy wrote it as an example a long time ago. Deciding the fee you are willing to pay based on how quick you want your transaction processed should be advertised as a feature.
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March 24, 2013, 11:52:26 AM
 #6

 Excellent point. I wonder if one could find in real time the actual clearing level of transaction fees vs time to process a transaction,  based on miners' "price list".  For example 0.0005 =  instant, 0.0002 = 1 minute, 0.0001 = 2  minutes,  etc,  and people could decide on the spot depending on the urgency of a particular transaction.  Competition between miners would ensure the prices would be low and would get lower as the volume of transactions grows.

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March 24, 2013, 12:28:27 PM
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Just thinking out loud here, but I wonder how things would work if the fees paid for bitcoin transactions were a completely separate currency.

Imagine if you will, a "Transaction Coin", let's call it TXC, where 1 TXC gives you the right to send exactly transaction on the bitcoin network.

If that were the case, I wonder what a free market would be like where an exchange facilitates TXC / USD trade.

I know this is not how bitcoin is programmed, but it gets me wondering exactly how much USD the floating market would settle on for 1 bitcoin transaction.
Tacticat
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March 24, 2013, 12:36:56 PM
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Excellent point. I wonder if one could find in real time the actual clearing level of transaction fees vs time to process a transaction,  based on miners' "price list".  For example 0.0005 =  instant, 0.0002 = 1 minute, 0.0001 = 2  minutes,  etc,  and people could decide on the spot depending on the urgency of a particular transaction.  Competition between miners would ensure the prices would be low and would get lower as the volume of transactions grows.

It wouldn't be counted in minutes, but probably in blocks (which occur on average every 10 minutes).

In my opinion, two things are needed for a variable, democratic TX fee system to take place:

- Bitcoin clients must allow their users to set a custom fee in an easy manner as well as inform them of the importance of this action.

- A website that collects the community's opinion on what the standard TX fee should be. Something like... BTCfeeSentiment.com (example)
On such a website users could vocally express their opinion on what they consider to be a fair fee, and adjust their clients according to the consensus.

Let's not forget that Bitcoin is designed to make this possible. If we don't tell users that they have this possibility and that their consensus can have an impact just because we want to earn more money, then we're not better that VISA or Paypal (Yes, I know that's a bit harsh).

I'm going to set my client's fee at 0.0001. You can set yours to whatever you believe is fair and necessary... and if everybody does this, a balance point will be found.

 

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March 24, 2013, 12:45:08 PM
 #9

a calculator on the wallet would be good. something that can work out the fee for you as the price goes up and down so the miners always get there same dollar value and the user has the same. This way the wallet could be set to fee or no fee and you don't need to adjust the amount unless you want to do a custom fee.
good food for thought. 
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March 24, 2013, 12:51:52 PM
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This is a great OP. The transaction fees are similar to how in science p<0.05 is arbitrarily used as a cutoff for "interesting" or "not interesting" results just because a guy wrote it as an example a long time ago. Deciding the fee you are willing to pay based on how quick you want your transaction processed should be advertised as a feature.

Uhhh...no. The p value of 0.05 means the probability of the study results occurring due to random sampling error is 1 in 20. It doesn't mean the result is true...and when p=0.1, the result may be true but the probability it's due to chance is double that of the 0.05 cut off.

Hardfork aren't that hard.
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March 24, 2013, 01:02:42 PM
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- A website that collects the community's opinion on what the standard TX fee should be. Something like... BTCfeeSentiment.com (example)

How about just "bitcoinfees.com"  Grin
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March 24, 2013, 02:06:25 PM
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My suspicion is that, eventually, transaction fees shake out to be similar to tipping in a restaurant.

Tip nothing on your bill, and you're a total asshole (or the waitress got fired).  Good luck getting any service next time.

It would be interesting if somehow transaction speed for any given send was based on the fees you paid for your previous send.  Or for an average over time.

The transaction fees paid by any given public address are information that can be gotten from the blockchain.  Some bright lad will figure out a way to make money from a website which offers that information to those considering transacting with specific individuals.

bitcointipper dot com?

Dankedan: price seems low, time to sell I think...
Tacticat
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March 24, 2013, 02:22:21 PM
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My suspicion is that, eventually, transaction fees shake out to be similar to tipping in a restaurant.

Tip nothing on your bill, and you're a total asshole (or the waitress got fired).  Good luck getting any service next time.

It would be interesting if somehow transaction speed for any given send was based on the fees you paid for your previous send.  Or for an average over time.

The transaction fees paid by any given public address are information that can be gotten from the blockchain.  Some bright lad will figure out a way to make money from a website which offers that information to those considering transacting with specific individuals.

bitcointipper dot com?

I don't think that will work, as addresses are constantly changing and it would be difficult or impossible to track one single user's fee history.

As for the bitcoinfees.com website which has been proposed, I'd really like to see it become reality. A place where people decide what fee they consider appropriate and a consensus is reached.

Maybe loosely similar to http://www.bitcoinmonitor.com/, every user could add a dot to the number they deem to be a reasonable fee so that a dot graph can be formed which indicates a pattern that represents the community's thoughts on this issue.

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March 24, 2013, 02:38:48 PM
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I don't think that will work, as addresses are constantly changing and it would be difficult or impossible to track one single user's fee history.


That's true of the Satoshi client - but I believe that most online wallets send transactions from one address per user, don't they?  I know that's true of Instawallet:  you get one 'send' and one 'receive' address forever.

What percentage of transactions on the blockchain are by users with hosted clients connecting to server-side blockchains?  I have no idea what that number is, but I suspect it's gotten quite a bit larger in the past six months or so...

Dankedan: price seems low, time to sell I think...
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