Understanding fees

[kaiwahine]

I've received Bitcoins to my Bitcoin-Qt client, but have not sent any yet. I saw the discussion about changes to the Bitcoin-Qt client to add fees, and I was wondering if I still need to add an extra fee to the transaction for it to be accepted by the network?

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[Tirapon]

Adding a fee will move your transaction higher up the priority list, so it should confirm more quickly. You can send a transaction without fees if you wish, provided it is under the size limit. It could end up taking a long time to confirm though.

[kaiwahine]

Thank you so much for that explanation. 

[franky1]

right now with 25bitcoin reward equalling $3000 (£2000) for 10 minutes work makes the transaction fee's not yet an essential thing, especially when the workers hardly ever see the fee as extra income. it is usually the pool owners that keep this as their incentive to continue managing the pools. (whilst the pool owners also take a cut of the workers income out of the reward aswell.)

i think that the fee's are too high right nowand not esential. too many people think the only way to make money in bitcoin is by mining it. yet in reality of the fiat world more profit is made by retailers selling products instead of mining gold for investments.

0.0005 fee is 4p(UK) 6c(US) which is kind of ridiculous when you go back and watch the original bitcoin videos on weusebitcoins stating virtually free money transfer.

in the UK banks have a service called "faster payment" which all UK banks customers can send money to each other for FREE near on instantly, so trying to convince anyone in the UK that bitcoin is better is a tough thing to sell.

i know shops like poundland (UK equivalent to the dollar store) would never take on bitcoin with a 6% network fee for a £$1 dollar item and then a 1% bitpay fee just to convert the bitcoin into fiat.

bitcoin is becoming too greedy to be used for every day items. buying a simple coffee at starbucks or a loaf of bread has now been priced out of bitcoin due to a atleast 6% mark-up.

transaction fee's should be added in i would say a decade, once the 10 minute income per block reward equals less then $3000 or a set amount.

using some maths of for example BTCGuild
20000 workers right now have 35% of the network. meaning they roughly get 2out of 6 block rewards an hour. this equates each worker getting over $0.3 an hour.
and going by the averages of a few blocks. the transaction fee's add up to roughly $25 per block so that makes btcguild owner keeps $50 per hour for its pplns workers pool.

alot of people will argue that miners are getting ripped off for doing all this hard work and blah blah blah. but $3 an hour is alot more then the electrical costs for just having a pc turned on. which as i say above is taking away all of the possibilities of retailer adoption of bitcoin.

at the expense of the greed of mining pools and miners. mainstreaming is not happening. all because of the transaction fee's.

a better business model is for instance.. just taking the worker numbers of btcGuild as an example of a third of the mining population.
instead of having 20,000 workers shooting themselves in the foot mining for profit causing the difficulty to rise. have just 5,000 miners and then 15,000 workers be entrepreneurs opening retail businesses to make profit per hour instead of mining. that is where bitcoin would survive. then you wil see mining be more profitable for the 5,000 miners due to less competition. and then transaction fee's can be removed to allow higher profit and mainstreaming abilities for entrepreneurs

rant over

[kaiwahine]

Thanks for an excellent perspective on all of this. In the US, credit transactions are routinely around 2%, and if you want to send money instantly, you pay a HUGE markup as an individual (wire services). The banks have a totally different system of course, but it isn't anywhere near instant. The only other option to send money easily is MoneyPak, but that costs $4.95 USD to send anything up to $500 USD.

[The 4ner]

Adding a fee will move your transaction higher up the priority list, so it should confirm more quickly. You can send a transaction without fees if you wish, provided it is under the size limit. It could end up taking a long time to confirm though.

What is the size limit to send without a fee?

[ranlo]

Adding a fee will move your transaction higher up the priority list, so it should confirm more quickly. You can send a transaction without fees if you wish, provided it is under the size limit. It could end up taking a long time to confirm though.

What is the size limit to send without a fee?

10k and all outputs have to be 0.01 BTC or more.

[DannyHamilton]

Adding a fee will move your transaction higher up the priority list, so it should confirm more quickly. You can send a transaction without fees if you wish, provided it is under the size limit. It could end up taking a long time to confirm though.

What is the size limit to send without a fee?

10k and all outputs have to be 0.01 BTC or more.

In case it isn't clear, that's 10 kilobytes.  The "size" refers to the amount of data in the transaction, not the amount of bitcoins.

[The 4ner]

Oh okay. That was confusing. I thought it was amount of bitcoins ha ha!

[ranlo]

Adding a fee will move your transaction higher up the priority list, so it should confirm more quickly. You can send a transaction without fees if you wish, provided it is under the size limit. It could end up taking a long time to confirm though.

What is the size limit to send without a fee?

10k and all outputs have to be 0.01 BTC or more.

In case it isn't clear, that's 10 kilobytes.  The "size" refers to the amount of data in the transaction, not the amount of bitcoins.

Sorry! When I typed that for some reason I thought it was clear. Re-reading it, I can see the confusion people may have had with it. "Size limit" when I was responding automatically meant "bytes" to me. Now I know why they say "always put your unit of measurement!"

[ISAWHIM]

Adding a fee will move your transaction higher up the priority list, so it should confirm more quickly. You can send a transaction without fees if you wish, provided it is under the size limit. It could end up taking a long time to confirm though.

What is the size limit to send without a fee?

10k and all outputs have to be 0.01 BTC or more.

Unless you "turn-on" the "no minimum" switch.

You do NOT "have" to pay a fee. The program you are using is making you pay a fee, which seems vampireistic to the original purpose of the coins.

However, there is a "hidden" command to remove that "leeching" of your funds. The cost is longer wait times for acceptance into a block. (That will fade away once all the ASIC's are here. They will have to take free transactions, just to have enough transactions to fill a block, or they will be sitting around not processing anything.)

The "fee" was added as a courteous gesture, to reduce "abused" micro-transactions, and "stimulate economy"... lol.. just like the real taxes you are trying so hard to avoid, by using bitcoins in the first place. Kind of self-defeating to the cause, and that alone, is stopping people from using bitcoins. Ironic, the wallet programmers are shooting themselves in the foot. Use another program that doesn't leech your funds, or find that hidden command to unlock the leeching. (It is hidden, as in, no GUI option to turn it off. But it IS clearly in the documentation and the HELP in the console.)

There is no "need" for transactions fees, now, or in the future. Pools already take 3-10% (3-10 of every 100BTC made. They make more than they spend, so taking the transactions fees is just a bonus for them, that they "hide" from the people in the pool. Like some do with namecoins, saying they are not mining them, but they actually are. Pools are on the way out, with the new ASICs coming.)

[DannyHamilton]

The program you are using is making you pay a fee, which seems vampireistic to the original purpose of the coins.

No it doesn't.  Bitcoin was designed from the very beginning with an expectation for transaction fees.

However, there is a "hidden" command to remove that "leeching" of your funds.

And what would that "hidden" command be?

The cost is longer wait times for acceptance into a block.

Depending on the wallet you use and the details of your transaction, it is possible that it will never be confirmed.  When you say "longer" wait times, just how long do you mean?

(That will fade away once all the ASIC's are here. They will have to take free transactions, just to have enough transactions to fill a block, or they will be sitting around not processing anything.)

This is not true at all.  ASIC have no long term effect on the average time between confirmations/blocks.

The "fee" was added as a courteous gesture, to reduce "abused" micro-transactions, and "stimulate economy"...

The fee was added as a protection for the entire network to prevent a very specific form of Denial of Service attack.

lol.. just like the real taxes you are trying so hard to avoid, by using bitcoins in the first place.

Many of us who use bitcoin, have no intention of evading taxes.

Kind of self-defeating to the cause, and that alone, is stopping people from using bitcoins. Ironic, the wallet programmers are shooting themselves in the foot. Use another program that doesn't leech your funds, or find that hidden command to unlock the leeching. (It is hidden, as in, no GUI option to turn it off. But it IS clearly in the documentation and the HELP in the console.)

If that's true, why not just tell us what it is.  Sounds to me like you are just making things up.

Pools are on the way out, with the new ASICs coming.

You clearly have no idea what you are talking about.