How to give btc users no transaction fees.

[larry_vw_1955]

Introduction

Casual bitcoin users should have a way to get a free transaction every now and then. In fact, every user should have that privilege. That would help them to understand how to create transactions and they could experiment with very small amounts first so that they didn't make a big mistake and give all their funds to someone mistakenly.

Now there are problems with doing something like that. One of them is that people would try and abuse the privilege. So it's not so trivial to come up with something that would stop that. Also, miners rely on fees to some extent so they need to be incentivized to mine no-fee transactions as well. Otherwise, the whole thing wouldn't work.

Miner incentive

Pay miners a block reward which is competitive with what they would get if they mined a normal block that contained transactions that paid fees. But only if the entire block is filled with no-fee transactions. I would tend to favor a constant block reward that doesn't decrease with time for this purpose, thus ensuring that miners might even put a premium on mining no-fee transactions.


Also having a list of rules that free transactions must follow in order to be able to pay no transaction fee would be a necessary thing.

Consensus Rules

Rule #1: Reject no-fee transactions that have a high number of vouts.

Regarding rule #1, this number could be something that changes with the state of the network or it might be some fixed hard-coded number like anything greater than "two".

Rule #2: Reject no-fee transactions that have any of their inputs that are too recent.

Someone that recently got sent money shouldn't need to be sending it out immediately. If that's not the case, they can pay a fee to do it.

Rule #3: Reject no-fee transactions if the sender got a no-fee transaction in the recent past.

They don't need to be able to send no-fee transactions all the time, just every now and then.

Rule #4: Reject no-fee transactions that have a high number of vins with one potential exception which is that if they are consolidating their utxos and sending them straight back to the same address with no change address (that might possibly be allowed, not sure).

A high number of vins in general indicates some type of business or power user. But in order to help reduce the size of the utxo set, it might be beneficial to allow people to do a no-fee transaction to consolidate their utxos.

Rule #5: Require some amount of proof of work to submit a no-fee transaction.

That way people won't waste the network's time in submitting transactions that just get rejected without wasting some of their own resources.

Rule #6: Reject no-fee transactions where the output size of any of the last n transaction IDs leading up to it is larger than m for any of the inputs.

That way someone can't send a large batch of transactions to 500 different addresses and then try and get free transactions from each individual address until they use each individual address a certain amount first.

Rule #7: Reject no-fee transactions where any one of the outputs gets send to an address that has recently received a no-fee transaction.

This would indicate someone is a business of some type.


Outlook

The outlook for bitcoin's future as far as transaction fees are concerned is that they are likely to get higher. Since the block rewards are decreasing, miners must get their income from higher transaction fees. This does not benefit bitcoin users though. In fact, it could make bitcoin be unusable for someone that just wants to use bitcoin to transfer small amounts of money. That has already happened to some degree but it's likely to get much worse unless something is done to alleviate the issue.

Ref: 1BEB4859-B30C-489F-96B2-A76EFBF319B8

[pooya87]

This means when BTC price is high in USD value, users tend to pay more than they should have to whereas if BTC price was low, they wouldn't be paying as much as they should.

Users pay fees based on their transaction weight and the "competition" for the block space not based on USD price of bitcoin.

Possible solutions

These aren't solutions. For starters the miners don't rely on the fees, they are getting paid more than enough with the block reward and will continue earning more money as price keeps going up. Also as I said the fees aren't set based on what the block reward is, it is based on the competition for the block space.

But it could be remedied somewhat by requiring users to do some form of proof of work.

That makes bitcoin unusable for everyone.

[joniboini]

2) Have a constant block reward for mining so that miners do not need to supplement their earnings by charging transaction fees to bitcoin users.

So you want an infinite supply of coins then? I think this is part of an ongoing discussion on how to solve the incentive issue when the block rewards are emptied, but I don't think a lot of people would agree with this. Scarcity is one of Bitcoin's selling points so removing it doesn't make sense.

[o_e_l_e_o]

1) Offer a higher block reward for miners who mine transactions that have no transaction fee as long as all the transactions in the block being mined pay zero transaction fees.

So then you run in to a scenario where there are a handful of fee paying transactions, but the combined total fee of all these transactions is less than the difference in block reward for mining a no-fee block. Miners are now incentivized to ignore the fee paying transactions and mine zero fee transactions instead, no one who wants a confirmation will pay a fee, and the fee paying transactions get stuck until they are dropped or someone RBFs an astronomical fee to overcome the deficit.

2) Have a constant block reward for mining so that miners do not need to supplement their earnings by charging transaction fees to bitcoin users.

Users would still pay fees to prioritize themselves over other transactions. The only thing that would change would be when the mempool is empty, people would pay 0 instead of 1 sat/vbyte, which would only change the total fees paid by a few mBTC at most.

[ranochigo]

PoW works on the concept that it expends some resources while making it trivial for the rest of the network to validate. Adding additional strain to process like this isn't really ideal; we aren't looking to make it more expensive resource wise for validation than required.

I don't see fees as necessarily something that is required by the miner, in the context of coin distribution. You could very well get away with a tail emission and ensuring that block rewards are never really zero. That won't be implemented in Bitcoin. I don't think we need to necessarily make Bitcoin more complicated as it is, having users pay transaction fees is not a bad idea at all. If you were to enforce PoW, then people are going to eventually spend the equivalent as paying a fee and it would probably just be better to pay the fees, for the network and for the users themselves.

[BlackHatCoiner]

Users pay fees based on their transaction weight and the "competition" for the block space not based on USD price of bitcoin.

I guess that the OP understands it like that:

Assuming that the user wants to transfer the equivalent of $10,000 in Bitcoin.

Case where 1 BTC = $10,000.

• User creates a transaction that moves 1 BTC and pays 1000 sats in fees.
• The user has paid the equivalent of $0.01 in fees.

Case where 1 BTC = $20,000.

• User creates a transaction that moves 0.5 BTC and pays 1000 sats in fees.
• The user has paid the equivalent of $0.02 in fees.

It doesn't matter if the mempool is empty or not; if both transactions weight the same and pay the same amount of BTC to the miner, then the user seems to pay more in the equivalent of dollars in fees if the price rises.

[o_e_l_e_o]

-snip-

When you are transacting in bitcoin, there is absolutely no point considering fees in USD or any other currency. If I am paying by credit card, would I consider any additional fees in terms of yen? If I am buying a money order, would I consider the fee I pay in terms of rubles? Of course not; nobody would. So why would it be any different for bitcoin?

Further, even if you do consider fees in terms of USD, then even if the USD value is static then your fee can vary greatly, as you have pointed out. The fees that I pay are affected far more by the type of transaction I am making and when I am making it than by the price of bitcoin in USD. If I use segwit instead of legacy and smartly choose the time to consolidate my inputs, then I can save >99% on fees. Even if the bitcoin price swings by several thousand dollars, then my fee in terms of USD will only change by a few percent.

[dkbit98]

I see a possible solution that can work with sending temporary private keys to other user that can use and activate that private key.
Something similar is used by Chipmixer and there is one wallet called Mercury that is using this idea for improving privacy on Bitcoin using layer-2 scaling technology based on statechains.
For sending a private key you don't need to pay any fees, but there needs to be some trustless solution to avoid scamming and abuse.
Another way is paying (almost) no fee using Lightning Network for sending Bitcoin.

[bitmover]

2) Have a constant block reward for mining so that miners do not need to supplement their earnings by charging transaction fees to bitcoin users.

I think you are missing the point.

It is possible to pay higher/lower fees based on the user hurry.

If I really need to get a confirmation in the next block, it is important for me to pay for a high priority transaction.
On the other hand, if I can wait for a week, it is also important to have an option to send for lower fees.

You are paying for what you get. And as pooya87 pointed out, miners do not need transactions fees to make money ( at least not for now). Block subsidy (6.25) is more than enough to pay for their expenses.

Further, even if you do consider fees in terms of USD, then even if the USD value is static then your fee can vary greatly, as you have pointed out. The fees that I pay are affected far more by the type of transaction I am making and when I am making it than by the price of bitcoin in USD. If I use segwit instead of legacy and smartly choose the time to consolidate my inputs, then I can save >99% on fees. Even if the bitcoin price swings by several thousand dollars, then my fee in terms of USD will only change by a few percent.

I agree with this. I have pointed out many times that fiat currencies also have a high volatility. USD and EUR are not so volatile as other currencies. For example, BRL is very volatile.

Take a look at USD BRL charts over the last 5 years: 63% variation


Since the pandemia started (march 2020) BRL lost 21% value against USD.

This is a very high volatility, and people live here with this volatility. Just as bitcoin users live and make transactions with BTC volatility.

I think that in long term, there might be a possibility to create sub  satoshi/vbyte transactions, as bitcoin prices gets higher...

[o_e_l_e_o]

I think that in long term, there might be a possibility to create sub  satoshi/vbyte transactions, as bitcoin prices gets higher...

Easy enough to do. Fees are generally defined in the code as "per kilobyte" rather than "per byte", so the minimum relay fee is currently set at 1000 sats/kilobyte, which obviously works out to the 1 sat/byte which we are all familiar with. Easy enough, then, to simply change that to 500 or 100 or whatever sats/kilobyte which converts to 0.5 or 0.1 sats/byte.

In Bitcoin Core version 0.11.1, the minimum fee was temporarily increased to 5000 sats/kilobyte or 5 sats/byte to protect against transaction flooding.

[odolvlobo]

...when BTC price is high in USD value, users tend to pay more than they should ... if BTC price was low, they wouldn't be paying as much as they should. It would make sense then to have some form of regulation of transaction fees rather than just what the market is willing to pay.

What do you mean by users pay more or less than they should? How do you determine what users should pay? Currently, the market determines what users should pay.

Since the block rewards are decreasing, miners must get their income from higher transaction fees.

There is nothing in Bitcoin that requires miners to receive higher fees in order to cover the decreasing subsidy. The effect of a smaller block reward is lower security, so you must show that security is too low before claiming that fees are too low.

In fact, it could make bitcoin be unusable for someone that just wants to use bitcoin to transfer small amounts of money. That has already happened to some degree but it's likely to get much worse unless something is done to alleviate the issue.

It has become apparent to most people now that Bitcoin cannot be used for everything that everyone wants to use it for. If it cannot be used for transferring small amounts (and this is debatable), then that is just the way it is.

[larry_vw_1955]

So then you run in to a scenario where there are a handful of fee paying transactions, but the combined total fee of all these transactions is less than the difference in block reward for mining a no-fee block. Miners are now incentivized to ignore the fee paying transactions and mine zero fee transactions instead, no one who wants a confirmation will pay a fee, and the fee paying transactions get stuck until they are dropped or someone RBFs an astronomical fee to overcome the deficit.

 I see your point but someone that has a "stuck transaction" could always submit a new one with no fee I suppose. And get it picked up quick.

I don't see fees as necessarily something that is required by the miner, in the context of coin distribution. You could very well get away with a tail emission and ensuring that block rewards are never really zero. That won't be implemented in Bitcoin. I don't think we need to necessarily make Bitcoin more complicated as it is, having users pay transaction fees is not a bad idea at all. If you were to enforce PoW, then people are going to eventually spend the equivalent as paying a fee and it would probably just be better to pay the fees, for the network and for the users themselves.

No one would be enforcing pow on the users or mandating that. It would just be an option. I'd love to have the option to let my cpu do some number crunching in exchange for a free btc transfer. As long as it didn't take too long.

So you want an infinite supply of coins then? I think this is part of an ongoing discussion on how to solve the incentive issue when the block rewards are emptied, but I don't think a lot of people would agree with this. Scarcity is one of Bitcoin's selling points so removing it doesn't make sense.

Well I think there's a delicate balance that has to be achieved. You see, the thing to keep in mind is that as people lose their private keys through whatever events that happen in their lives, the bitcoin supply actually goes down. Thus, having a tail emission does make sense from the perspective of renewing those lost bitcoins. But I don't really think a large tail emission would be ideal.

[moderator's note: consecutive posts merged]

[kaggie]

So you want an infinite supply of coins then? I think this is part of an ongoing discussion on how to solve the incentive issue when the block rewards are emptied, but I don't think a lot of people would agree with this. Scarcity is one of Bitcoin's selling points so removing it doesn't make sense.

Well I think there's a delicate balance that has to be achieved. You see, the thing to keep in mind is that as people lose their private keys through whatever events that happen in their lives, the bitcoin supply actually goes down. Thus, having a tail emission does make sense from the perspective of renewing those lost bitcoins. But I don't really think a large tail emission would be ideal.

I've lost bitcoin to a crashed encrypted computer, which I had to overwrite because of a deadline.
So that's probably gone forever.
But there's no guarantee that a large amount of bitcoin is truly lost though.
It's an assumption -- a completely impossible to prove assumption.

A lower supply isn't necessarily a bad thing on a macroscopic level.
On an individual level, it no doubt sucks -- but there is no way to reverse transactions without introducing all sorts of protocol flaws.
There isn't a macroscopic reason to renew those bitcoin, as it brings value to the bitcoin that already exist as bitcoin is lost.

There are reasons to keep miners incentivized to secure the network. An infinite supply is fine, but miner rewards should always decrease over time to match the lost bitcoin, or miners would eventually outstrip node power and limit that security benefit.
Small transactions don't need the same security, which is what alt coins and the lightning network are good at.

[BlackHatCoiner]

If I am paying by credit card, would I consider any additional fees in terms of yen?

This is a very bad analogy. If you pay with your credit card, the payee can repay his bills or any other person of his country (or nation) with the currency you paid him. There's no point to count the fees in yen, because you are completely unconcerned about that currency if you're not living in China where everyone accepts it. This isn't true with Bitcoin, that's why there are no fixed prices in any store that accepts it. Only a fool would do that.

Just like when you translate a price of a product in terms of USD whether you accept Bitcoin or not, you do it for the mining fees too. In the example above, a person who wants to move the equivalent of $10,000 in Bitcoin pays more as the price arises, because the equivalent in BTC decreases but the fee remains the same.

Even if the bitcoin price swings by several thousand dollars, then my fee in terms of USD will only change by a few percent.

I took the example where both transactions weight the same. Then I doubled the price; the equivalent in fees was doubled too.

[ranochigo]

No one would be enforcing pow on the users or mandating that. It would just be an option. I'd love to have the option to let my cpu do some number crunching in exchange for a free btc transfer. As long as it didn't take too long.

You can. Miners don't want to include transactions that don't have a fee because there is no benefits in for them, other than to have a slower block propagation. There is nothing that can make miners include zero-fees transaction, arbitrarily giving miners Bitcoins in lieu of transaction fees involves significant economics repercussions and definitely would need far more research in that.

Since a reasonable timeframe for a CPU to generate a sufficiently expensive PoW would be in the range of hours, then it would make little sense. Too cheap, and you risk having spammers clog up the network.

[o_e_l_e_o]

I see your point but someone that has a "stuck transaction" could always submit a new one with no fee I suppose. And get it picked up quick.

Except it would be rejected by the network since the mempool already contains a transaction spending those inputs, and RBF cannot be used since the fee on the new transaction would be lower, not higher.

I'd love to have the option to let my cpu do some number crunching in exchange for a free btc transfer. As long as it didn't take too long.

You are still paying for it, just in terms of electricity and hardware degradation rather than in bitcoin. Nothing stopping you from mining some useless altcoin, dumping it for a few hundred sats, and using that to pay your bitcoin fees.

This is a very bad analogy.

I disagree. If a merchant is selling something for bitcoin, I am paying them in bitcoin, and we are making a transaction between our bitcoin wallets, then why would we be calculating the fees in USD? It makes no sense.

[BlackHatCoiner]

I disagree. If a merchant is selling something for bitcoin, I am paying them in bitcoin, and we are making a transaction between our bitcoin wallets, then why would we be calculating the fees in USD? It makes no sense.

If we were all able to pay our bills, our purchases from the local market, our education, our health using Bitcoin, it'd start not having much sense to calculate the exchange rate of 1 BTC in terms of USD, because we'd be enough from our self-controlled and decentralized currency. But, since no state accepts it, then the merchant will have to convert these sats to USD; he's constrained into using Bitcoin.

While this currency is one of the most revolutionary moves of all time, you're still living in a society where you're restricted into following certain rules. I've said this before, but adopting a so “anarchist product” into an orderliness world isn't going to really work.

[o_e_l_e_o]

If we were all able to pay our bills, our purchases from the local market, our education, our health using Bitcoin, it'd start not having much sense to calculate the exchange rate of 1 BTC in terms of USD, because we'd be enough from our self-controlled and decentralized currency. But, since no state accepts it, then the merchant will have to convert these sats to USD; he's constrained into using Bitcoin.

The merchant can price things in a fluctuating amount of BTC, pegged to a certain amount of USD or other fiat, if they choose. Of course. No problems there. But I have no knowledge of what they are doing with the BTC I send them, nor do I care to know. They could immediately convert it to USD, they could hold it forever, they could pay their staff or suppliers with it, they could buy some shitcoin. Their choice, and none of my concern. All I know is there is something I want to buy for x amount of BTC, I will send the merchant x amount of BTC to purchase that item, and I will pay the fees for this transaction in BTC.

Honestly, I do this multiple times a week. Usually the only reason I know that the bitcoin price has swung significantly is because of posts on this forum. I pretty much never check the price in terms of USD before I spend or use BTC, and I never think of the fee I pay in terms of USD.

While this currency is one of the most revolutionary moves of all time, you're still living in a society where you're restricted into following certain rules. I've said this before, but adopting a so “anarchist product” into an orderliness world isn't going to really work.

And the things I cannot buy with bitcoin I buy with USD. And when spending my USD I think in terms of USD, and any credit card fees or other such fees I calculate and consider in USD. Just as when being charged sales tax on an item I'm buying in USD I don't think of the additional charge in BTC, then when buying an item with BTC I'm not going to think of the fee in USD.

[BlackHatCoiner]

All I know is there is something I want to buy for x amount of BTC, I will send the merchant x amount of BTC to purchase that item, and I will pay the fees for this transaction in BTC.

But, why does this amount of BTC changes every single moment? Haven't you wondered that the marketing value of BTC in terms of USD affects your purchase since the merchant will prefer not to keep them in the block chain, but rather convert them to USD?

Just as when being charged sales tax on an item I'm buying in USD I don't think of the additional charge in BTC, then when buying an item with BTC I'm not going to think of the fee in USD.

That may be just you; when I make a purchase I want to make sure the fee that I'll pay won't be high in terms of USD, because I'm generally paying everything in terms of USD. There's no reason to think in terms of USD for the price of the products, but skip the fee.

Ironically, these non-custodial wallets show the equivalent of your fiat you're spending for the mining fee.

[o_e_l_e_o]

But, why does this amount of BTC changes every single moment?

But I don't see it change every single moment. I see a price displayed when I place my order on a website or when I take my goods to the cashier to be rung up. I don't ask for their conversion rate to USD to see if I'm getting a good deal in USD, and very rarely do I look up the going rate on a web browser myself (usually only if I think something seems expensive in terms of BTC, I'll check if there has been a big price swing since the last time I looked at the price, which could have been weeks ago). Why, when everything else about the transaction is measured in BTC, does it make sense to single out the fee for consideration in USD, especially when the fee is almost always a couple of hundred sats, or in the case of a Lightning payment, completely negligible.

Haven't you wondered that the marketing value of BTC in terms of USD affects your purchase since the merchant will prefer not to keep them in the block chain, but rather convert them to USD?

As I said, it is none of my business what the merchant does with the BTC once he has received them.

There's no reason to think in terms of USD for the price of the products, but skip the fee.

That's the point I'm making. I generally don't think of the price of the product in USD.

Ironically, these non-custodial wallets show the equivalent of your fiat you're spending for the mining fee.

Only if you select a fiat option in the preferences. If you don't select a fiat, then no fiat rate shows.