Bitcoin Forum
December 05, 2019, 02:50:26 PM *
News: Latest Bitcoin Core release: [Torrent]
   Home   Help Search Login Register More  
Pages: « 1 [2]  All
Author Topic: "Spiraling Transaction Fees Destruction" of bitcoin  (Read 8336 times)
This is a self-moderated topic. If you do not want to be moderated by the person who started this topic, create a new topic.
Hero Member
Offline Offline

Activity: 518
Merit: 500

View Profile
November 23, 2013, 01:31:34 AM
Last edit: November 28, 2013, 01:53:28 AM by AnonyMint

I finally had a spare moment to contemplate the variables.

A key factor is the block size. If the block size is unlimited (and bandwidth is an insignificant cost), then unless miners have a monopoly they will accept transactions with fees as low as don't constitute a DoS attack, in order to maximize revenue.

In other words, they would have no pricing power at all (a Tragedy of the Commons) and the system would devolve into a partial-monopoly in order to gain pricing power.

A partial-monopoly in this case is enough % of the network hashrate to delay transactions (by that % of blocks) which do not include a sufficient fee.

If we limit block size, then the system doesn't scale.

If we let the Bitcoin foundation decide when to increase block size, then they control the economic market function, i.e. we've centralized Bitcoin.

Let us assume unlimited block size and partial-monopolies. Thus the transaction fee can always be forced higher in order to generate more revenue for the miners. Thus Bitcoin devolves (as coin rewards diminish) to a system that presents spenders with a choice between include a very high transaction fee or accept an ever increasing delay for confirmation. This will exacerbate as coin rewards diminish and volume of transactions increase.

If we instead assume limited block size, then the Bitcoin foundation will set the transaction fees, not the market.

Bitcoin is a broken design. - Prodigiously Elucidating the Profoundly ObtuseTHIS FORUM ACCOUNT IS NO LONGER ACTIVE
Pages: « 1 [2]  All
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!