Bitcoin usage and misaligned expectations

[kryptqnick]

I believe there are some people in the community who are in the standpoint that "Bitcoin isn't successful" unless they can use it for "almost-zero fee" coffee transactions. But is it truly a failure?

I don't think it's a failure if Bitcoin is used for big transactions, but while at good times it seems like Bitcoin might be appropriate in everyday life, once the prices are getting up and more people actually use the network, you can see how it gets different very fast. When I sell BTC for fiat to actually use it in real life, I usually pay around 2% fees. Today I sold 0.02 BTC and paid 0.0008+ in transaction fees. Paying more than $7 to send $175 seems to be an overkill. And reminds of the banking fees, if not higher, actually. And this is a problem that will only get worse with time since the more people use blockchain, the more time it takes for transactions to be confirmed and the more it costs.

[1714698087]

1714698087

[NeuroticFish]

I don't think it's a failure if Bitcoin is used for big transactions

The success is not related to the size of the transactions (no matter if it's in $, in coins, or in inputs/outputs/bytes), instead, the number of transactions can be considered quite a good measurement.
Of course, many transactions are done by arbitrage bots. Still by the number of voices crying when the fees go up, I'd consider Bitcoin rather successful 
If the coin is not mature, too many transactions can translate into unreasonably high tx fees. Well, success and maturity are not the same thing. Success could force maturity though.

the standpoint that "Bitcoin isn't successful" unless they can use it for "almost-zero fee" coffee transactions. But is it truly a failure?

There are plenty of coins with near zero fees, just because they are not used and worth nearly nothing. Is that success? No.
So I'd say we should not relate to the standards some trolls try to impose.

[oseikuf44]

Not at all! Bitcoin is the most successful project that has existed without management, advertisement, auditors or cooperate bureaucracy yet it is standing in par with Big firms like paypal, skrill or amazon in terms of capitalization. What success again do we need to see from bitcoin usage. Sending and receiving money in a brink of an eye without financial intermediaries is more than success.

[kingpin4321]

Any one with such thoughts on bitcoin future is paying less attention to the bigger picture of bitcoin. Bitcoin is uses for transaction process and also to purchase goods and services yes that's very correct. But bitcoin is also an investment opportunity, bitcoin is also a medium to save funds with out facing the daily challenges of banking service. I think the future of bitcoin begins when government starts accepting bitcoin globally

[squatter]

Maybe we could afford for it to be a selling point years ago when transaction demand was very low and the block subsidy was very high. Cheap transactions didn't hurt miner incentives when block rewards were 50+ BTC. That's changing. In 5 years, the block subsidy will only be ~ 3 BTC. Shouldn't fee revenue be rising to compensate miners? How long can miners be expected to subsidize users with cheap fees?

I think Satoshi was naive with some of his economic assumptions.

I probably don't know enough about the subject, so please be patient with me.

I'm not defending Satoshi, but maybe he thought that BTC's rising value (it is deflationary by design after all) would offset the loss in mining revenue of the decreasing block rewards? I mean, I'd bet that 3 BTC 5 years from now would still be a lot more valuable than 50 BTC from a few years ago. I understand that mining costs are also increasing, but isn't that what the difficulty adjustment is for? It ensures that there will always be financial incentive for miners, regardless of transaction fee revenue.

Fee revenue is essential if there is a hard cap on supply. That was the whole design -- subsidize mining early on to bootstrap the network, then eventually fees will replace the subsidy. Otherwise, network security is utterly dependent on an ever-increasing price, since speculation would be required to incentivize miners. We can't simply assume that price will keep rising forever and that that is a sustainable incentive for miners. We have to consider a future where the design is more self-sufficient.

Consider a context where price is crashing for years and years rather than rising. Difficulty will adjust downwards but if block rewards are also steadily dropping (due to lack of fee revenue), we could see downspiraling hash rates to the point where the network becomes insecure and loses its Byzantine fault tolerance.

I concede that transaction fees will have to rise, and that micro transactions won't be plausible at some point anymore (nor would it indicate failure). My concern is that it still has to be cheap enough as to not be detrimental to adoption. My views may be a little too naive though (like how Satoshi's may be lol), so I would appreciate any insight.

This is all a big experiment. The whole idea of "cryptoeconomics" is brand new, and the whole field of economics isn't scientific. We all have different opinions about how things might work out in the future.

My primary emphasis is on the mining incentive, because it's the supreme building block of the entire system. From my perspective, we can't plan on never-ending price increases nor exponentially increasing adoption. But we can ensure that strong mining incentives remain -- at least relative to the system's native currency, if not fiat currency value -- by ensuring that increased transaction demand nets higher block rewards.

If we let mining incentives bleed away to nothing by increasing block sizes -- while still retaining a hard cap on supply -- I don't see a bright future for Bitcoin.

[bitcoindusts]

I believe there are some people in the community who are in the standpoint that "Bitcoin isn't successful" unless they can use it for "almost-zero fee" coffee transactions. But is it truly a failure?

No, it isn’t. Which transaction has zero fee then and now by the way? You take money from ATM, is it free? You pay something with visa card, it is free of service? You wire money from one end to another, is it free? It isn’t a failure, people who know the real advantages of bitcoin will not be convinced it is a failure.

[muratsink]

I thought.  that's a small problem.  Coffee does not determine BTC failure.  the reality is BTC can recover from bearish.  and from 2009 until now BTC still survives and has given large profits to many people.  and in my opinion, the development of BTC until today is part of the success of BTC.

[franky1]

<writes alot about how he feels the stifling of bitcoin and the fee war is some altruistic plan to help pools. without realising pools dont need help>

pools DO NOT need to have blocksizes stiffled/cut short to play around with supply and demand. they can simply raise or lower the price of admission to a block. a block does not need to be full or empty to pass any test.


imagine a public transport bus of 30 seats. imagine to pay the driver, diesel, etc was $112.50 for a 10 minute journey whethr the bus was full or empty. without any government grants or separate reward. a full bus would need to charge $3.75 a journey per passenger.

now if there were more people getting onboard. do you think a bus company would rip out 15 seats and charge bus passengers $7.50...
OR just charge more because there was more demand
OR make the busbigger to allow 60 seats and only charge $1.88

now if there were less people getting onboard because they chose to use the LN public train. do you think a bus company would rip out 15 seats and charge bus passengers $7.50...  OR make the busbigger to allow 60 seats and only charge $1.88 to incentivise people back to using the bus at cheaper rate

poos dont need to keep blocks low or decrease blocksizes to force people to pay more. pools can just reject users that dont pay an amount a pool sets as minfee no matter the size or occupancy of a block is.

[Capt00]

I thought.  that's a small problem.  Coffee does not determine BTC failure.  the reality is BTC can recover from bearish.  and from 2009 until now BTC still survives and has given large profits to many people.  and in my opinion, the development of BTC until today is part of the success of BTC.

That's why people would give their huge trust into Bitcoin rather than in altcoins even ETH. We know it potentiality to lead the market and still, it proven so many times. If you are a wise investors, better to give more in bitcoins cause it surely making more pumps especially when there is a huge increase of users and cause high demand in the market.

[squatter]

<writes alot about how he feels the stifling of bitcoin and the fee war is some altruistic plan to help pools. without realising pools dont need help>

pools DO NOT need to have blocksizes stiffled/cut short to play around with supply and demand. they can simply raise or lower the price of admission to a block. a block does not need to be full or empty to pass any test.

Nobody cares about the interests of pools. I surely don't. The reason I care about maintaining adequate miner incentives is not for the benefit of pools. It's so that confirmations remain reliable and Bitcoin is able to sustain Byzantine fault tolerance. In other words, it's to ensure "honest mining."

I have no interest in letting miners decide the block size. They can easily sacrifice the long term health of the system for their own short term gains. This is why we have consensus rules -- to ensure they have no ability to do that.

If block size limit is larger than transaction demand, fees will always tend towards zero. That's very simple economics. Since the block subsidy is already heading towards zero, that would mean block rewards will tend towards zero. That's completely unsustainable in a system that is designed to rely on rationally incentivized "honest mining." You can't remove the incentive and expect miners to stay honest.

[uneng]

I believe there are some people in the community who are in the standpoint that "Bitcoin isn't successful" unless they can use it for "almost-zero fee" coffee transactions. But is it truly a failure?

Of course it's not a failure, but I like to keep in mind if the taxes were almost zero for coffee transactions it would be much more successful.
It's a mistake to fake everything is perfect just to avoid critics. It's necessary to listen what are people concerns about bitcoin to try to fix and improve these points, always aiming the excellence.

[jseverson]

-snip-

I see. I was always under the impression that block rewards were supposed to be the compensation, and transaction fees were cherry on top. I also read somewhere some time ago that the sheer number of transactions at mass adoption would continue to make mining viable even at low fees and no block rewards, but I guess prices trending down does complicate that. It's looking like a lot of the early ideas have been short-sighted.

I guess everything does make sense though, considering the fact that we're looking into off-chain solutions for scaling. I just thought that the game plan was always to keep on-chain transactions relatively cheap (i.e. still very viable for people who prefer on-chain transactions), though that does defeat the purpose of trying to move bulk of the transactions off-chain.

[Slow death]

I believe there are some people in the community who are in the standpoint that "Bitcoin isn't successful" unless they can use it for "almost-zero fee" coffee transactions. But is it truly a failure?

It is not a failure because even if it had the cheapest fee it would still not be possible to use bitcoin to pay for a worldwide coffee because of the lack of cryptos laws. We focus a lot on the issue of low rate, high adoption and high prices. but we ignore the probation of governments (laws for cryptos). We have to have influential politicians who like cryptos and who can pass good laws for cryptos.

[pooya87]

-snip-

I see. I was always under the impression that block rewards were supposed to be the compensation, and transaction fees were cherry on top. I also read somewhere some time ago that the sheer number of transactions at mass adoption would continue to make mining viable even at low fees and no block rewards, but I guess prices trending down does complicate that. It's looking like a lot of the early ideas have been short-sighted.

I guess everything does make sense though, considering the fact that we're looking into off-chain solutions for scaling. I just thought that the game plan was always to keep on-chain transactions relatively cheap (i.e. still very viable for people who prefer on-chain transactions), though that does defeat the purpose of trying to move bulk of the transactions off-chain.

both block rewards and fees are the compensation but now that each block is giving miners $100k+, fees aren't and should not be for compensation.

as for second layer, in order for it to work the underlying layer (meaning the on-chain transactions) need to be cheap otherwise nobody can open up a channel if it costs $50 to do so.

[jseverson]

-snip-

both block rewards and fees are the compensation but now that each block is giving miners $100k+, fees aren't and should not be for compensation.

as for second layer, in order for it to work the underlying layer (meaning the on-chain transactions) need to be cheap otherwise nobody can open up a channel if it costs $50 to do so.

That's exactly what I thought too. I guess it just boils down to compromise of cheap-enough fees and good-enough miner support. It probably won't be cheap enough for a single cup of coffee, but should be viable enough for not-so-smallish transactions.

[Wind_FURY]

I believe there are some people in the community who are in the standpoint that "Bitcoin isn't successful" unless they can use it for $20 per transaction for only vaulting it up. But is it truly a failure?


the silly thing is those that want expensive fee's go to extremes of stifling bitcoin and then blaming bitcoin for it(pretending bitcoin is AI and it stifled itself). they then go to extremes of thinking those that want regular use of bitcoin want it to buy google adsense at 0.001cent a tx

the even stranger thing is that its not even the pools that want excessive fees right now.
the even stranger thing is that when pools do rely on fee's they can set their min fee without care about blocksize

the real reality is if a tx fee is more than an hourly wage in any country. its automatically pushed that country out from viewing bitcoin as viable
entertaining alternative networks as the solution is not a bitcoin solution. its an altcoin solution

Then is Bitcoin truly a failure? Without meandering, and the social drama, tell us directly. Because your reply hints that it's a "failure", but the reality is going against the people, like you, that say it.

Going to the other side, without the social drama, would you say that the Bitcoin forks with bigger blocks, and almost-zero fees are truly "successful"?

[squatter]

I guess everything does make sense though, considering the fact that we're looking into off-chain solutions for scaling. I just thought that the game plan was always to keep on-chain transactions relatively cheap (i.e. still very viable for people who prefer on-chain transactions), though that does defeat the purpose of trying to move bulk of the transactions off-chain.

as for second layer, in order for it to work the underlying layer (meaning the on-chain transactions) need to be cheap otherwise nobody can open up a channel if it costs $50 to do so.

What constitutes "cheap"?

Once we establish that, I guess we can talk about the economic implications and how it affects the design. I strongly believe that the sustainability of the system has to be the top priority, much more important than cheap fees.

All manner of economic and scaling designs should be tested. If cheap fees (with regard to "the masses") are truly important, there's an abundance of Bitcoin copycats with bigger blocks and cheaper fees. I suspect that Bitcoin's value stems from elsewhere than cheap fees though, and that there will be strong demand for Bitcoin's block space even at orders of magnitude higher fees than seen today.

[Ucy]

Bitcoin main chain is not suitable for coffee and micro transactions. Several hundreds of thousands of such transactions perday could lead to serious congestion.
This is why we have Lightening Network , though not very usable at the moment. Hopefully when it becomes usable, it will handle the small transactions mostly while bitcoin Main chain handles mostly the large ones.

[_Django05_]

I believe there are some people in the community who are in the standpoint that "Bitcoin isn't successful"

Bitcoin isn’t without its fair share of problems, no rational person would deny that. But it would be parochial to conclude that bitcoin as a project has failed in its entirety. Bitcoin fails on two accounts, as both a stable store of value, and as a convenient medium of exchange. This is a far cry from the intention of its creator, who had in mind a vision of a convenient peer-to-peer electronic cash system–a stable form of payment.

[Pagri]

If in spite of the great popularity of bitcoin and the great price it has reached these days, it has not yet being used massively in real life, maybe there is some truth in those who claim that the original bitcoin project has failed, especially when we observe that the bitcoin market has fallen into the hands of speculators, who seem to be the only ones who decide the course that the cryptoeconomy will take in the medium term.