Miner's fee a barrier to mass adoption

[histman]

I understand that the miner's fee is just a few cents, but am I the only one that sees it as a potential problem?

Situation 1: I buy something and refuse to pay the fee.  I know that blockchain.info will put it back in my account after 24 hours if it isn't confirmed.  Thus, merchants may refuse to take BTC fearing these types of "charge backs."

"so merchants just insist on a miner's fee!" is the simple answer, but imagine a busy restaurant or store ringing up lots of transactions an hour, usually by the typical teenage or marginally trained employees.  A lot of no fee transactions may slip through the cracks.

Situation 2: People making small purchases (under $10) for fast food or coffee are not going to want to tack on a few cents every time.

 "People shouldn't be so cheap!" is the easy answer to that, but they definitely are. Go ask people if they are willing to pay a few pennies every time they use their debit cards and see what the reactions are. Consumers hate that.

Ideas? Solutions?

[Littleshop]

I understand that the miner's fee is just a few cents, but am I the only one that sees it as a potential problem?

Situation 1: I buy something and refuse to pay the fee.  I know that blockchain.info will put it back in my account after 24 hours if it isn't confirmed.  Thus, merchants may refuse to take BTC fearing these types of "charge backs."

"so merchants just insist on a miner's fee!" is the simple answer, but imagine a busy restaurant or store ringing up lots of transactions an hour, usually by the typical teenage or marginally trained employees.  A lot of no fee transactions may slip through the cracks.

Situation 2: People making small purchases (under $10) for fast food or coffee are not going to want to tack on a few cents every time.

 "People shouldn't be so cheap!" is the easy answer to that, but they definitely are. Go ask people if they are willing to pay a few pennies every time they use their debit cards and see what the reactions are. Consumers hate that.

Ideas? Solutions?

You need to go out of your way to remove the fees, basically going against recommendations.  For almost every site and every client the fees are automatic so the vast majority of users will not have those problems.  But if you do go out of your way to zero the fee, you will have poor results. 

[odolvlobo]

Finding a solution for those two problems may not be necessary for mass adoption. Bitcoin is not well suited for face-to-face transactions because you have to wait for a confirmation. It is not also suited for small transactions where a few cents matters. That's just the reality. It doesn't mean that bitcoin is not useful to anyone.

[Shallow]

But the miners fee is essential to keep the network going, especially when all the coins are mined.

[Dabs]

The current fee of 0.0001 is about less than 2 US cents.

Merchants don't need to insist on a fee. But merchants will insist on a confirmation.

[C. Bergmann]

As I know, the fee-issue split europeans and americans.

In europe fees for transactions are rare. I had an account on a little and non-innovative bank where I had to pay fees (a little bit higher than 0.0001 btc) when I made more than 10 transactions. After some research I changed my bank and have now to pay no fees. I told a friend of me that I payed fees for over a year, and he couldn't believe it. In his eyes paying fees for transaction was absurd.

So yes, fees could become a problem.

I don't know if there exists any solution to this issue. When I look at mining-difficulty I fear fees will rise a lot when the next reward era begins.

[e4xit]

You already pay a fee to use your current banking system, it is just hidden (and for this reason can be much larger in without you noticing).

If you have ever: paid for a product from your bank (insurance, 'premium' account etc) then this is subsidising your fees. Not to mention, if you have ever had any kind of penalty fee (late repayment of credit, 'charge' for using abroad etc etc) then again these kind of things cover your transaction fees.

Do you really think that banks just operate to provide you with a free service? Get real.

Only the most concientious of consumers can operate a high street bank without incurring any fees, by never going overdrawn or using any other services other than current accounts/deposits never incur any additional fees, but this is still OK for the bank, as this usually means that you have enough money deposited there that they are able to gamble with it and make money off you that way.

In reality, bitcoin payments should have the ability to be much more transparent (you can see your fee) and at the same time be much cheaper for most people:

For example, my UK bank charges £6 per day if you go overdrawn. I once went overdrawn (they had decreased my overdraft limit without telling me) and was overdrawn until I saw my next statement; 16 days that was, thats a £96 fine right there.

For comparison, that would have paid for over 8000 bitcoin transactions, and that is a single (albeit admittidly large) 'fee'.

A 'normal' £25 fee would still 'pay for' about 2000 BTC transactions.

Oh yeah, try sending >10,000£ from one country to another using the fiat system and take a look at the charges; that would still cost the flat block inclusion fee in bitcoin (amount does not matter)

[C. Bergmann]

I know, I know, you're completely right, what Banks take for insurances, for overdrawing etc. is obscene and a lot more than bitcoin fees. Also the bitcoin-network is a lot more effective than the banking-network ... but don't underestimate the fact, that (european) banks did find a way to get their consumer the feeling they don't pay fees for everyday-using money.

[MtFox]

First and foremost, Bitcoin transactions are irreversible. Unlike purchases with Paypal and credit card, Bitcoin transactions are forever one-way tickets, so merchants are completely able to avoid the hassle by the name 'chargeback'. If you don't pay a fee, the only thing we know is it may take a while for your transaction to get confirmed. We don't know how long your transaction can get confirmed if no fee is paid. The only problem that merchants and retailers may face taking payments in Bitcoin is what Bitcoin creators defined as 'double-spend'. 'Double-spend' in some circumstances may happen but it can easily be avoided too. 

Transaction fee is and will never be an issue for Bitcoin in the sense that merchants may be willing to take that part for their buyers. After all, Paypal and credit card companies all require expensive fees too. Why do people still use Paypal and plastic cards every day? and who pays the fees when you use them?

[seafarer124]

As BTC appreciates in value why would you be concerned about a few cents?

We are very fortunate to be living now to see this BTC event.

[franky1]

As BTC appreciates in value why would you be concerned about a few cents?

We are very fortunate to be living now to see this BTC event.

that is the mindset of the longterm investor. the OP is thinking interms of instant payment merchants that were initially promised "virtually fee free"

i personally i find the fee system a bit of an unrequired feature for atleast a decade or two. the block 'reward' is more then enough... for now

but as long as GavinA keeps decreasing the amount of satoshi's the fee is, when releasing updates for the bitcoin-QT dependant on price, like he has done over the last couple years. and every other third party program follows,  so that fee's remain pennies. i see no massive problem just little irritations at a nearly flawless system

[RoadToHell]

I don't see the fee as a barrier at all.  The payment systems just need to reflect the total to the user so there aren't any surprises.  Either the fee shows up in the running total just like tax or shipping would.  Or the merchant eats the fee by subtracting it from the transaction amount.  My guess is that it will evolve to the merchant eating the fee since that is how other payment systems work now.

[franky1]

I don't see the fee as a barrier at all.  The payment systems just need to reflect the total to the user so there aren't any surprises.  Either the fee shows up in the running total just like tax or shipping would.  Or the merchant eats the fee by subtracting it from the transaction amount.  My guess is that it will evolve to the merchant eating the fee since that is how other payment systems work now.

but the whole idea of bitcoin is to be different.

merchants dont want to fill in paperwork to get merchant accounts with card providors. if the FIAT side of converting bitcoin to fiat requires AMLKYC then thats still paperwork

merchants dont want fee's that eat into profits, so i do see fee's as a problem, but as long as they continue to represent pennies, it wont be a massive problem, just an irritating one

[odolvlobo]

The fee will be a token amount until the block size limit is reached and people start competing for space in a block. Then it will get interesting.

[DannyHamilton]

Then it will get interesting.

Very!  Both because it will be interesting to see what happens to the fees at that time, AND because it will be interesting to see how widespread bitcoin use will have to be to generate enough transactions every day to completely fill 144 blocks.

[RoadToHell]

I don't see the fee as a barrier at all.  The payment systems just need to reflect the total to the user so there aren't any surprises.  Either the fee shows up in the running total just like tax or shipping would.  Or the merchant eats the fee by subtracting it from the transaction amount.  My guess is that it will evolve to the merchant eating the fee since that is how other payment systems work now.

but the whole idea of bitcoin is to be different.

merchants dont want to fill in paperwork to get merchant accounts with card providors. if the FIAT side of converting bitcoin to fiat requires AMLKYC then thats still paperwork

merchants dont want fee's that eat into profits, so i do see fee's as a problem, but as long as they continue to represent pennies, it wont be a massive problem, just an irritating one

Like I said, it's just a guess.  But some of my reasoning is:  Since merchants do not directly charge (i.e. it is not listed as a cost) customers for fees incurred with credit card, paypal, or other systems, then doing so for bitcoin transactions would appear as an additional cost to customers.  Additionally, showing the fee would require updates to user interfaces for any web or POS sales.

[markjamrobin]

I don't see the fee as a barrier at all.  The payment systems just need to reflect the total to the user so there aren't any surprises.  Either the fee shows up in the running total just like tax or shipping would.  Or the merchant eats the fee by subtracting it from the transaction amount.  My guess is that it will evolve to the merchant eating the fee since that is how other payment systems work now.

but the whole idea of bitcoin is to be different.

merchants dont want to fill in paperwork to get merchant accounts with card providors. if the FIAT side of converting bitcoin to fiat requires AMLKYC then thats still paperwork

merchants dont want fee's that eat into profits, so i do see fee's as a problem, but as long as they continue to represent pennies, it wont be a massive problem, just an irritating one

Like I said, it's just a guess.  But some of my reasoning is:  Since merchants do not directly charge (i.e. it is not listed as a cost) customers for fees incurred with credit card, paypal, or other systems, then doing so for bitcoin transactions would appear as an additional cost to customers.  Additionally, showing the fee would require updates to user interfaces for any web or POS sales.

You pay a fee when you use a credit card, albeit you don't see it, it is usually factored in by the merchant. Cheaper prices for Bitcoin (enough to cover the fee), could easily be used, similarly to cheaper prices when paying with cash.

[RoadToHell]

I don't see the fee as a barrier at all.  The payment systems just need to reflect the total to the user so there aren't any surprises.  Either the fee shows up in the running total just like tax or shipping would.  Or the merchant eats the fee by subtracting it from the transaction amount.  My guess is that it will evolve to the merchant eating the fee since that is how other payment systems work now.

but the whole idea of bitcoin is to be different.

merchants dont want to fill in paperwork to get merchant accounts with card providors. if the FIAT side of converting bitcoin to fiat requires AMLKYC then thats still paperwork

merchants dont want fee's that eat into profits, so i do see fee's as a problem, but as long as they continue to represent pennies, it wont be a massive problem, just an irritating one

Like I said, it's just a guess.  But some of my reasoning is:  Since merchants do not directly charge (i.e. it is not listed as a cost) customers for fees incurred with credit card, paypal, or other systems, then doing so for bitcoin transactions would appear as an additional cost to customers.  Additionally, showing the fee would require updates to user interfaces for any web or POS sales.

You pay a fee when you use a credit card, albeit you don't see it, it is usually factored in by the merchant. Cheaper prices for Bitcoin (enough to cover the fee), could easily be used, similarly to cheaper prices when paying with cash.

Maybe I didn't explain what I meant very well.  By "eat" the fee, I just meant "hide" the fee.  Just like merchants currently do with credit cards and paypal.  And the main reason it would be appealing to do this is because customers are not used to the idea that they are paying a fee when they use credit cards now.  Many people probably realize (i.e. a lot of people don't realize) that part of what they pay goes to the credit card companies, but still fail to consciously associate it with the transaction right when they are making a purchase.  So showing an added fee for using bitcoin and not showing an added fee for a credit card would be perceived as a reason to not use bitcoin.

However, you imply a great point: Show a discount to the customer if they pay with bitcoin vs a credit card.  This could be something as simple as "Pay with bitcoin and save another 2%."

[histman]

The problem, as I understand it, is that the purchaser can choose to pay or not pay the fee.  It is done on the "senders" end.  Thus, there is no way that I can see for a seller to "add the fee" automatically to the purchase.  True, he can add the fee to the total cost, but the person receiving the BTC cannot "force" the fee to be paid via the technology. Thus, the sender could simply not pay it.  

Verification that the fee was paid seems difficult in busy environments with lots of sales ringing up.  Remember, the transaction gets returned to the wallet if confirmation doesn't take place in 24 hours.  

Any type of instant gratification purchase (grocery store, coffee shop, fast food) would be very vulnerable under these circumstances.  

I don't really see Bitcoin transactions as "instant" and impossible to "charge back" as described.  Confirmation is necessary, and sometimes it won't happen.  You don't have your BTC until the transaction is confirmed.  You can forget most businesses taking BTC under these circumstances.

Is there a way for the merchant to "force" the fee to be paid?  

As for the psychology of "paying the fee," it doesn't matter that we already pay fees to use credit and debit cards.  They are currently hidden.  It is all in the mind, I admit, but Americans wholeheartedly hate the idea of adding a few cents.  Debit/Credit "feels free" and that is what matters.

[DannyHamilton]

there is no way . . . for a seller to "add the fee" automatically to the purchase.

This is not true.

True, he can add the fee to the total cost, but the person receiving the BTC cannot "force" the fee to be paid via the technology.

This depends on how the eventual implementation in the POS is handled.

Thus, the sender could simply not pay it.  

This depends also on how the eventual implementation in the POS is handled.

Remember, the transaction gets returned to the wallet if confirmation doesn't take place in 24 hours.  

This is not true.

I don't really see Bitcoin transactions as "instant" and impossible to "charge back" as described.

0 confirmation transactions are "instant".

Transactions with confirmations are "impossible to charge back".

The merchant will have to decide what their fraud risk is and how much risk they will accept.  Solutions beyond the protocol are possible to increase usability (just like there are additional layers beyond TCP/IP for your internet usage).

Confirmation is necessary, and sometimes it won't happen.  You don't have your BTC until the transaction is confirmed.  You can forget most businesses taking BTC under these circumstances.

And yet they accept credit cards and PayPal under these circumstances.  I think you have a very flawed understanding of what businesses are willing to accept in the interest of increasing profits.

Is there a way for the merchant to "force" the fee to be paid?  

Yes.

As for the psychology of "paying the fee," it doesn't matter that we already pay fees to use credit and debit cards.  They are currently hidden.  It is all in the mind, I admit, but Americans wholeheartedly hate the idea of adding a few cents.  Debit/Credit "feels free" and that is what matters.

And bitcoin transactions can be handled that way as well.