Are small transactions basically outlawed?? Fee to send $1USD higher than send.

[aj5577]

I'm using a blockchain.info wallet. I am building an app and am using the blockchain.info API to send/receive money. I have to test with real money before declaring my app to be functional.

I am using transfers of 1USD for testing.

I just did a send to many transaction from 1 address to 17 receiving addresses. ( $17 dollars to transfer, paid a custom fee of $4 to make sure it don't get stuck ). This worked fine and I guess is acceptable with all the network congestion.

But now I went to transfer the 1USD back into the main wallet, and the fee is about 90% of the value of the transfer ( transfer 1USD, fee is like 90 cents, so I'm left with 10cents after the fee )

Is this normal? Does bitcoin basically outlaw tiny transactions? If so then it will never catch on for everyday purchases.

Imagine going to buy a bottle of water or some candy, and paying $2USD for the item and then an extra $2-$4 USD just for the "privilege" of performing this buy/sell with bitcoin. WTF???

[DannyHamilton]

The Bitcoin protocol does not outlaw transactions.

The Bitcoin protocol does not care what size transaction fee you pay.

Most well written transaction building software will calculate a good fee for fast confirmation for you based on current market conditions.

Blockchain.info has a reputation for NOT being "well written transaction building software" and frequently suggests a fee that is too small for a transaction to confirm in the next few days.

The Bitcoin protocol currently limits the size of a block to 1 megabyte, and the frequency of blocks to an average of 10 minutes per block.

Therefore, if there are less than 1 megabyte of transactions waiting to be confirmed, then they can all be confirmed no matter what the fee is.  In that situation, you could potentially pay a $0.001 fee and still get your transaction confirmed in the next block.

If there are more than 1 megabyte of transactions waiting to be confirmed, then they can NOT all be confirmed in the next block.  The Bitcoin protocol allows the solo-miner (or mining pool operator) to choose which of the waiting transactions they want to confirm.  Since the miner (or pool) gets to keep the transaction fees of all the transactions that they include in their block, there is an incentive for them to include the 1 megabyte of transactions that pay the highest fee-per-byte.  This maximizes their revenue.

In times of VERY high transaction volume (such as right now), people who need their transaction confirmed quickly will use software that will track how high of a fee all the other transactions are paying, and will then make sure their transaction pays a high enough fee to be in the top megabyte of transactions (so they are highly likely to be in the next block).  The effectively creates a bidding war where people are offering higher and higher fees to beat out everyone else.

Eventually fees get so high that some people stop using bitcoin (mostly people that are trying to send very low value transactions).  This reduces the number of transactions that are waiting to be confirmed.  If too many people abandon Bitcoin for their transactions, then there will eventually be less than 1 megabyte of transactions and all transactions will get confirmed in the next block.  At that point people will stop paying a higher fee since it won't help their transaction get confirmed any faster.

This pattern will repeat over time until it settles in on an equilibrium fee amount high enough that just enough people are willing to use bitcoin to create an average of about 1 megabyte of transactions every 10 minutes.

In the future the protocol might change to provide more space for transactions in the block.  There are two methods being offered to do that right now, but there hasn't been an agreement on which method will be used.  One of those methods is known as "SegWit", which segregates a portion of the transaction into a new area that is added on to the block.  This shrinks the size of the transactions that need to fit into the 1 megabyte portion, and increases the new area for the "witness" portion of the transaction to 4 megabytes.  "SegWit" is being offered by a group that calls themselves "Bitcoin Core".  The other method is known as "Emergent Consensus", which provides a mechanism for miners to signal that they are ready and willing to accept blocks that are larger than 1 megabyte.  When enough miners are all ready and willing, then miners can create larger blocks.  These larger blocks will allow more transactions to be confirmed at once. "Emergent Consensus" is being offered by a group that calls themselves "Bitcoin Unlimited".

[carlfebz2]

I'm using a blockchain.info wallet. I am building an app and am using the blockchain.info API to send/receive money. I have to test with real money before declaring my app to be functional.

I am using transfers of 1USD for testing.

I just did a send to many transaction from 1 address to 17 receiving addresses. ( $17 dollars to transfer, paid a custom fee of $4 to make sure it don't get stuck ). This worked fine and I guess is acceptable with all the network congestion.

But now I went to transfer the 1USD back into the main wallet, and the fee is about 90% of the value of the transfer ( transfer 1USD, fee is like 90 cents, so I'm left with 10cents after the fee )

Is this normal? Does bitcoin basically outlaw tiny transactions? If so then it will never catch on for everyday purchases.

Imagine going to buy a bottle of water or some candy, and paying $2USD for the item and then an extra $2-$4 USD just for the "privilege" of performing this buy/sell with bitcoin. WTF???

I didn't even try to send smaller amounts because I do really know about the fee as of this day and if I were you don't be shocked on whats happening because we cant do anything about fees and if you are active on spending or sending small transactions then best advice is to make bulk amount transaction so that you wont feel the pain on setting up the fees. $17 on $4 fees is insane better to keep it a little more lower.Even myself cant afford to set that high fee.

[BitcoinzB]

The Bitcoin protocol does not outlaw transactions.

The Bitcoin protocol does not care what size transaction fee you pay.

Most well written transaction building software will calculate a good fee for fast confirmation for you based on current market conditions.

Blockchain.info has a reputation for NOT being "well written transaction building software" and frequently suggests a fee that is too small for a transaction to confirm in the next few days.

The Bitcoin protocol currently limits the size of a block to 1 megabyte, and the frequency of blocks to an average of 10 minutes per block.

Therefore, if there are less than 1 megabyte of transactions waiting to be confirmed, then they can all be confirmed no matter what the fee is.  In that situation, you could potentially pay a $0.001 fee and still get your transaction confirmed in the next block.

If there are more than 1 megabyte of transactions waiting to be confirmed, then they can NOT all be confirmed in the next block.  The Bitcoin protocol allows the solo-miner (or mining pool operator) to choose which of the waiting transactions they want to confirm.  Since the miner (or pool) gets to keep the transaction fees of all the transactions that they include in their block, there is an incentive for them to include the 1 megabyte of transactions that pay the highest fee-per-byte.  This maximizes their revenue.

In times of VERY high transaction volume (such as right now), people who need their transaction confirmed quickly will use software that will track how high of a fee all the other transactions are paying, and will then make sure their transaction pays a high enough fee to be in the top megabyte of transactions (so they are highly likely to be in the next block).  The effectively creates a bidding war where people are offering higher and higher fees to beat out everyone else.

Eventually fees get so high that some people stop using bitcoin (mostly people that are trying to send very low value transactions).  This reduces the number of transactions that are waiting to be confirmed.  If too many people abandon Bitcoin for their transactions, then there will eventually be less than 1 megabyte of transactions and all transactions will get confirmed in the next block.  At that point people will stop paying a higher fee since it won't help their transaction get confirmed any faster.

This pattern will repeat over time until it settles in on an equilibrium fee amount high enough that just enough people are willing to use bitcoin to create an average of about 1 megabyte of transactions every 10 minutes.

In the future the protocol might change to provide more space for transactions in the block.  There are two methods being offered to do that right now, but there hasn't been an agreement on which method will be used.  One of those methods is known as "SegWit", which segregates a portion of the transaction into a new area that is added on to the block.  This shrinks the size of the transactions that need to fit into the 1 megabyte portion, and increases the new area for the "witness" portion of the transaction to 4 megabytes.  "SegWit" is being offered by a group that calls themselves "Bitcoin Core".  The other method is known as "Emergent Consensus", which provides a mechanism for miners to signal that they are ready and willing to accept blocks that are larger than 1 megabyte.  When enough miners are all ready and willing, then miners can create larger blocks.  These larger blocks will allow more transactions to be confirmed at once. "Emergent Consensus" is being offered by a group that calls themselves "Bitcoin Unlimited".

Thanks for the simple explanation of what's going on right now with Bitcoin transactions.
I've personally been away from the Bitcoin world for more than 3 years and I just decided to invest again on it.

I have a question - if I were to send 0.002 bitcoin from a single address to 30 different addresses, would the fees be high? would the transaction go on even if I set a low fee? would it take really long?

[DannyHamilton]

if I were to send 0.002 bitcoin from a single address to 30 different addresses, would the fees be high?

That depends on how you received that 0.002 bitcoin.  If you received it in a single payment, then it could be used as a single input to the transaction that you send.  If you received it as 4 separate 0.0005 BTC payments, then it would need to be used as 4 inputs to the transaction that you send.

A transaction starts as 10 bytes for the framework of the transaction.
Each input adds 148 bytes to the transaction.
Each output adds 34 bytes to the transaction.

Lets assume that you received the 0.002 bitcoin as a single payment and therefore can use it as a single input to the transaction.

That means that your transaction will have 1 input and 30 outputs.
10 + (1 X 148) + (30 X 34) = 1178 bytes.

According to https://bitcoinfees.21.co/  if you want fast confirmation (in the next block or two) of a transaction that you send right now while I'm writing this post, then you'll need to pay a fee of about 0.00000360 BTC per byte

1178 bytes X 0.00000360 BTC per byte = 0.00424080 BTC fee.

would the transaction go on even if I set a low fee?

That depends on how low of a fee, how long you are willing to wait, and whether or not you, your wallet software, or one of the recipients will re-broadcast the transaction regularly.

would it take really long?

That depends on how low of a fee, how long you are willing to wait, and whether or not you, your wallet software, or one of the recipients will re-broadcast the transaction regularly.

[BitcoinzB]

I got it now, thanks again.

I remember being able to send very small amounts of bitcoin to 20+ recipients (and getting confirmations in few minutes) for really low fees - back in 2014
https://blockchain.info/tx/b30188f17942d47cdeb9a422bf6562768e59c2865eff9b6f78ca46606dbe863b
That isn't possible anymore I guess as of today