Making bitcoin more sustainable through change in fee structure

[larry_vw_1955]

I know that people may not like the idea but in order for bitcoin to be more sustainable, transaction fees must be based on not only the amount of data in the transaction but more importantly the value being transferred.

Do we make it a set percentage of the total number of satoshis being spent? Like 1 percent or is that too simplistic and it needs to be some type of thing that is adjusted by bitcoin miners through a consensus mechanism?

it's important for the bitcoin community to be open minded about things like this. because if we can't do that then bitcoin can't succeed.

Anyone that tries to argue that a setup like this would hurt people who send small transactions because it prioritizes people with larger transactions (in terms of value sent), I'm not sure I am going too sympathetic to that point of view.

CURRENT PROPOSAL

2-stage mining procedure.

Transactions must include an output for a 1% "convenience fee".
The difference between the total inputs and outputs will still be the standard fee which we will call "storage fee".

Stage 1:

Similar to how mining currently works. But in order for a block to be fully confirmed and added to the blockchain, it has to undergo a second mining stage where miners will compete for the "convenience fees".

Stage 2:

Miners will mine on the block from stage 1 and the winning miner will collect all the "convenience fees".

Once stage 2 is complete, the block will be part of the blockchain.

[BlackBoss_]

I know that people may not like the idea but in order for bitcoin to be more sustainable, transaction fees must be based on not only the amount of data in the transaction but more importantly the value being transferred.

Do we make it a set percentage of the total number of satoshis being spent? Like 1 percent or is that too simplistic and it needs to be some type of thing that is adjusted by bitcoin miners through a consensus mechanism?

Bitcoin is decentralized and it should be continued with Satoshi Nakamoto's vision, for pure decentralization.

If there is centralized solution to limit transaction fee, fee rate, is it good?

It will cause another split, fork in Bitcoin community and after Bitcoin Cash, Bitcoin Satoshi Vision, we will have another Bitcoin "Fee Limit" perhaps. Miners will choose the chain that benefits them most, not the chain people with aim to get cheaper transaction fees like. You can see Bitcoin Cash, Bitcoin Satoshi Vision, with bigger blocks, cheaper transaction fees, but demand on these blockchains is actually very lower than Bitcoin blockchain.

Less miners, less hashrate, their networks are less secured, one more reason to don't choose them for fund transfer.

https://howmanyconfs.com/

[larry_vw_1955]

If there is centralized solution to limit transaction fee, fee rate, is it good?

i'm not even sure you understand the proposal. the goal is not to limit transaction fees! it's to set a minimum percentage that doesn't prevent people from paying more it just prevents them from paying less. so if anything the goal is to increase transaction fees for miners so bitcoin can be more sustainable.

Miners will choose the chain that benefits them most, not the chain people with aim to get cheaper transaction fees like.

miners would pick the transactions with the largest fees much like they do now. the only difference being that they were getting paid MORE. more than under the current scheme.

[SamReomo]

No, something like that is not going to happen as no miner will agree to do something like that for the community. Miners spend a lot of money to purchase mining equipment only to make money from mining and that's why they aren't going to accept a proposal that may limit their earnings.

Most of the miners avoid transactions where fee is low because they make nothing for such transactions and in order to survive as miners they often give more priority to transactions with high fee not those with low fee.

[pooya87]

I know that people may not like the idea but in order for bitcoin to be more sustainable, transaction fees must be based on not only the amount of data in the transaction but more importantly the value being transferred.

That makes no sense because the fee that is paid is not to transfer coins, the fee is actually the money sender pays to purchase block space which means it has to be based on transaction size not value transferred.

[davis196]

Like 1 percent or is that too simplistic and it needs to be some type of thing that is adjusted by bitcoin miners through a consensus mechanism?

I like your proposal, but you won't find any support from the BTC miners. Do you really believe that the BTC miners are going to voluntarily limit their revenue just to please the average Bitcoin user? BTC mining is a business and it runs for profit, just like any other business.
I don't know what do you mean by "making Bitcoin more sustainable"? Do you really think that the BTC price will become more stable, if the transaction fees are consistently low? The BTC price has almost nothing to do with the transaction fees and the BTC price volatility will remain forever.

[avikz]

I know that people may not like the idea but in order for bitcoin to be more sustainable, transaction fees must be based on not only the amount of data in the transaction but more importantly the value being transferred.

Do we make it a set percentage of the total number of satoshis being spent? Like 1 percent or is that too simplistic and it needs to be some type of thing that is adjusted by bitcoin miners through a consensus mechanism?

it's important for the bitcoin community to be open minded about things like this. because if we can't do that then bitcoin can't succeed.

Anyone that tries to argue that a setup like this would hurt people who send small transactions because it prioritizes people with larger transactions (in terms of value sent), I'm not sure I am going too sympathetic to that point of view.

Well, I strongly agree to your point! Bitcoin's transaction fees has become a bit of nuisance in recent days. With more and more adoption, I foresee that the transaction fees are going to increase based on how busy the network is. Also with each halving, the mining rewards are getting decreased. So people who have invested a shitload of money in setting up their mining operations, will be more and more dependent on the transaction fees, rather than block rewards. So the transaction fees is bound to increase and it might increase to a certain point where it becomes unaffordable to use Bitcoin as a payment processor.

If the Dev can find a way to limit the transaction fees, I think it will only help Bitcoin to remain financially viable to be used as a payment processor. Right now, the bank transfer is way cheaper than bitcoin transaction. Either the transaction fees issue needs to be fixed or we need to find a way to block BRC-20 tokens from the network forever.

[Helena Yu]

I like your proposal, but you won't find any support from the BTC miners. Do you really believe that the BTC miners are going to voluntarily limit their revenue just to please the average Bitcoin user? BTC mining is a business and it runs for profit, just like any other business.
I don't know what do you mean by "making Bitcoin more sustainable"? Do you really think that the BTC price will become more stable, if the transaction fees are consistently low? The BTC price has almost nothing to do with the transaction fees and the BTC price volatility will remain forever.

It seems that he want to make the fee structure from amount of data in transaction to direct proportion. So, the smaller we send, the smaller the fees, the larger we send, the larger the fees. It's just like credit card where it charge based on %, it might work, but the problem is which transaction should be prioritized and which aren't.

This can support people to spend their coins instead of thinking about the fees.

[larry_vw_1955]

I like your proposal,

thanks. but you don't seem like you understand it.

That makes no sense

it makes perfect sense.

because the fee that is paid is not to transfer coins, the fee is actually the money sender pays to purchase block space

that's a backwards way of thinking and we need to move forward from that one dimensional mindset.

which means it has to be based on transaction size not value transferred.

it doesn't HAVE to be anything. it's just how it was setup by satoshi. but we don't have to agree with everything satoshi did do we? we can try and offer ideas for improvement.

[vjudeu]

transaction fees must be based on not only the amount of data in the transaction but more importantly the value being transferred

They were, but it was changed in next versions: https://en.bitcoin.it/wiki/Miner_fees#Priority_transactions

Transaction priority was calculated as a value-weighted sum of input age, divided by transaction size in bytes:

Code:

priority = sum(input_value_in_base_units * input_age)/size_in_bytes

Transactions needed to have a priority above 57,600,000 to avoid the enforced limit (as of client version 0.3.21). This threshold was written in the code as COIN * 144 / 250, suggesting that the threshold represents a one-day old, 1 btc coin (144 is the expected number of blocks per day) and a transaction size of 250 bytes.

So, for example, a transaction that has 2 inputs, one of 5 btc with 10 confirmations, and one of 2 btc with 3 confirmations, and has a size of 500bytes, will have a priority of

Code:

(500000000 * 10 + 200000000 * 3) / 500 = 11,200,000

See? There was "input_value_in_base_units". But that method of calculating transaction priority was discarded.

Do we make it a set percentage of the total number of satoshis being spent?

Warning: coin amounts in satoshis are expressed as a whole numbers. If you set it "1% of the amount", then people will simply send 99 satoshis per transaction, to pay "99/100=0" fees (because integer division works in that way).

because if we can't do that then bitcoin can't succeed

But you can do that. Fees are not covered by consensus rules. If you have a node, you can relay any fees you want (including free transactions, and 100% fee transactions). If you are a mining pool, then you can enforce those rules. No fork is needed to change it. And in test networks, you can actually see, how some CPU miners enforce their own rules, and for example make transactions like that:

https://mempool.space/testnet4/tx/94444d3f15c1ca6905368c2121a0240c098ed62b061c1ac923cc9bff67991b55 (zero fee)
https://mempool.space/testnet4/tx/9a385f0a8b5f730d21510ee6804121ebb77abf270be39911a5314f85a08746e3 (9,950.00 tBTC fee)

And the same can be done on mainnet.

[pooya87]

that's a backwards way of thinking and we need to move forward from that one dimensional mindset.

That's not thinking, that's just describing how Bitcoin protocol works.

it doesn't HAVE to be anything. it's just how it was setup by satoshi. but we don't have to agree with everything satoshi did do we? we can try and offer ideas for improvement.

Well, that's true. And since fee calculation and generally mempool rules are just preference you can start a PR on the reference implementation repository with the new change and see if people accept it or not...

I'm personally against this and won't run a node with this option because of two main reasons. First is what I explained as it goes against how Bitcoin works and second is the fact that we are not at the point where we need to worry about miners' revenue to need to do anything to increase it for them. Miners are earning enough money and they have additional ways of increasing that revenue as well (like merge mining for instance).

[larry_vw_1955]

See? There was "input_value_in_base_units". But that method of calculating transaction priority was discarded.

yes the priority score was a thing. i have heard of it. but it was never used as a way to assess fees. it was opt-in for miners and only allowed people to pay no fee. it didn't decide what non-zero fee they had to pay. we're talking about non-opt-in part of the consensus rules type of thing.

but it was a nice example of how you can use the input values into a transaction to help compile some overall score. same idea here. except its not optional. it's mandatory to pay the fee that is calculated. miners can of course accept larger fees but not smaller...

Do we make it a set percentage of the total number of satoshis being spent?

Warning: coin amounts in satoshis are expressed as a whole numbers. If you set it "1% of the amount", then people will simply send 99 satoshis per transaction, to pay "99/100=0" fees (because integer division works in that way).

there's a simple fix for that. if you can detect it you can fix it. int(total_value/100)+1

but thanks for bringing up the priority score.

That's not thinking, that's just describing how Bitcoin protocol works.

ok well there's no arguing against that. we both know that's how it works. 

Well, that's true. And since fee calculation and generally mempool rules are just preference you can start a PR on the reference implementation repository with the new change and see if people accept it or not...

unless people can explain to me why this is a bad idea, maybe i'll have to try and get it put into bitcoin somehow. but not until i have heard from everyone about why they don't think it would work. that's important not to jump the gun. 

I'm personally against this and won't run a node with this option because of two main reasons. First is what I explained as it goes against how Bitcoin works and second is the fact that we are not at the point where we need to worry about miners' revenue to need to do anything to increase it for them. Miners are earning enough money and they have additional ways of increasing that revenue as well (like merge mining for instance).

i certainly respect those 2 reasons. and i somewhat agree with the second one completely RIGHT NOW. the future things could change i guess.

i could be wrong but i think a fee based system like the one i described would help eliminate things like ordinals spam. and i know you're against that.

appreciate your input.

[Fiatless]

Anyone that tries to argue that a setup like this would hurt people who send small transactions because it prioritizes people with larger transactions (in terms of value sent), I'm not sure I am going too sympathetic to that point of view.

Your idea sounds okay but it might not be applicable based on the setup of the Bitcoin network. I think the focus should be on how to tackle NFTs made with the Ordinals protocol and others. If these attacks on the Bitcoin network are halted, transaction fees will remain low.

It seems that he want to make the fee structure from amount of data in transaction to direct proportion. So, the smaller we send, the smaller the fees, the larger we send, the larger the fees. It's just like credit card where it charge based on %, it might work, but the problem is which transaction should be prioritized and which aren't.

This can support people to spend their coins instead of thinking about the fees.

Bitcoin transactions are recorded in the Blockchain, so it will be logical and fair to charge transactions based on how many bytes of space it will occupy rather than the value of the transactions. Sending transactions with many inputs or outputs should attract more fees since it will take more space. One can seek ways of reducing transaction fees which include monitoring the mempool for low transaction fees, coin control, lighting network, and transaction consolidation.

[larry_vw_1955]

Your idea sounds okay but it might not be applicable based on the setup of the Bitcoin network.

i'll take that as a positive comment about my idea. thanks.

I think the focus should be on how to tackle NFTs made with the Ordinals protocol and others. If these attacks on the Bitcoin network are halted, transaction fees will remain low.

no one has brought up the issue of how larger transaction amounts would be prioritized by miners in such a fee-based system where the fee was a certain percentage of the total input value. they would be inclined to stuff blocks full of the largest value transactions and ignore the smaller value ones. that's just a side affect of how it would work i guess. for normal bitcoin users with small transactions they might be affected to some degree. but their solution would be to "pay more". ordinals users might not want to.

[vjudeu]

but it was never used as a way to assess fees

If you know the transaction priority, then you sort your transactions by this priority. Which means, that transaction with priority 1,000,000 is put lower in the queue than transaction with priority 2,000,000. Also, as an experiment, you can just grab the current mempool, apply those rules, and see, which transactions are selected, and which are skipped. You could be surprised.

it didn't decide what non-zero fee they had to pay

Only because we didn't reach the maximum size of the block yet, when this rule was active. But in general, that kind of rule can be used, for example as a starting point, to see, how well or bad it is selecting transactions.

it's mandatory to pay the fee that is calculated

No fee rules can enforce it. Even if you change consensus rules to enforce fees (which I think is a bad idea, because why miners shouldn't be able to pay zero fees, if they are going to collect those fees in the coinbase transaction anyway?), then still: it is possible to make an artificial traffic, only to meet your rules, and this is probably not what you want. Say, a transaction X would be forced to pay 0.01 BTC. Then, transaction X could pay that, but the miner could send 0.01 BTC back to the user, just to override some stupid fee policy. And it is possible to join those payments, then both will be accepted, or none, so it will be trustless.

Also, we had some altcoins, which were advertised, for example as "feeless". Guess what: people still have to pay: not with coins, but with time instead.

Another case was some exchange, which charged too huge fees. Guess what: it was exploited, when miners sent to them some payments, using a lot of small coins, so the exchange was forced to pay those miners back, when moving received coins.

So, to sum up: you can enforce your own fee policy. But you cannot expect, that everyone will be forced by consensus rules to follow it. The best you can do is making a new "de-facto standard", similar to "1 sat/vb", which we have today.

int(total_value/100)+1

Then, it will hurt you in the long-term scenario, where you will send a single satoshi, and pay a single satoshi as your fee. Which means: you will be forced to pay 100% fees in that case.

In general, percentage-based fees is one of the reasons, why I stopped using some LN channels. Above some amount, it was just more profitable to pay size-based fees, than amount-based fees. And then, some of my coins simply left LN, because if you have 0.01 BTC, and your fee is 0.1%, then you pay 1k satoshis. While on-chain, with a minimal fee rate, you can get it confirmed for much less than that (I had some batched on-chain transactions, when I paid 80 satoshis per output, and LN was unable to compete with that, because of percentage-based fees in some channels).

Also, your code may explode, where "total_value" will be zero, because then, you will be forced to pay a single satoshi anyway (created out of thin air?). I hope you won't decrement some zero-filled uint64_t, and you won't repeat Value Overflow Incident in that case.

[ABCbits]

I know that people may not like the idea but in order for bitcoin to be more sustainable, transaction fees must be based on not only the amount of data in the transaction but more importantly the value being transferred.

I also don't like it, due to those reasons.
1. You don't know whether a transaction send BTC to someone else or just to the change address.
2. People who withdraw their money from exchange or custodial wallet would be burdened with additional fees.
3. It give less reason to perform UTXO consolidation, which means total UTXO will grow at faster pace.

[pawanjain]

I know that people may not like the idea but in order for bitcoin to be more sustainable, transaction fees must be based on not only the amount of data in the transaction but more importantly the value being transferred.

Do we make it a set percentage of the total number of satoshis being spent? Like 1 percent or is that too simplistic and it needs to be some type of thing that is adjusted by bitcoin miners through a consensus mechanism?

it's important for the bitcoin community to be open minded about things like this. because if we can't do that then bitcoin can't succeed.

Anyone that tries to argue that a setup like this would hurt people who send small transactions because it prioritizes people with larger transactions (in terms of value sent), I'm not sure I am going too sympathetic to that point of view.

I don't think that's a good idea because the current way of calculating the transaction fees depends on the weight of the transaction.
It doesn't depend on the amount of the transaction. People can send even million dollars for barely few dollars in fees but that would change if your technique is implemented.
I personally think that the current way is the best and should be kept as it is. We shouldn't alter the tech behind bitcoin.

[kotajikikox]

Do we make it a set percentage of the total number of satoshis being spent? Like 1 percent or is that too simplistic and it needs to be some type of thing that is adjusted by bitcoin miners through a consensus mechanism?

I think it is clever and could be effective if the transaction fees depended on the value of bitcoin/satoshi of each transaction instead of the size of it. It proposes a lot of advantages one being it creates a fairer system that the more you can spend on btc the more you can spend on tx fees.

Economically speaking it’s better to have this kind of system however a disadvantage I can think of would lean towards people who are only to do small transactions. Miners might not be so eager to process their transactions knowing how much would they benefit from it.

I guess we can try and incorporate this idea with the existing one without erasing the one we have right now.

[buwaytress]

Not arsed to look up old information but plenty of coins have tried to use a fixed fee structure, eithee in coin units or percentage of units. No need for me to tell you that did nothing for sustainability.

Can imagine it also further disincentivises LN channels. Imagine someone willing to fund a channel seeing it dwindling after many on chain settlements.

Still, nothing's stopping you from putting up a proposal.

[EL MOHA]

I also don't like it, due to those reasons.
1. You don't know whether a transaction send BTC to someone else or just to the change address.
2. People who withdraw their money from exchange or custodial wallet would be burdened with additional fees.
3. It give less reason to perform UTXO consolidation, which means total UTXO will grow at faster pace.

OP might be looking for a way to solve fees issue but I think it would be creating more problems than we already have because the system isn’t designed to actually use the quantity of the coins but rather each is treated as an UTXO which doesn’t matter how high it bitcoin in each UTXO is, so a change will also be needed.

My biggest objection to this is since there is limited block space a fixed fee will mean that larger transactions fee would be prioritized which means someone sending a small amount of bitcoin might have to wait a bit longer than wanted, which will actually discourages the first purpose of bitcoin as P2P currency. Right now one can actually have the ability to pay more when they wish to help speed up their transactions, which is ok.