Transaction fee too high?

[Brangdon]

In the white paper on BTC it is admitted that BTC protocol does require fees once their is no BTC available(assuming people still use it and there is large volume), so miners can be sustained and transactions verified. The only problem is that these fees are going to start going up and hitting a lot sooner than most expect.

Well, for mining to continue at current profit levels, the halving of the block reward has to be balanced by increase in total transaction fees. I'm not sure the growth by 2017 will match the loss of 12.5 BTC per block then, unless transaction fees increase a lot. I am wondering if we will have some kind of crisis then.

[DannyHamilton]

Well, for mining to continue at current profit levels, the halving of the block reward has to be balanced by increase in total transaction fees. I'm not sure the growth by 2017 will match the loss of 12.5 BTC per block then, unless transaction fees increase a lot. I am wondering if we will have some kind of crisis then.

I recall hearing the same exact thing around here in 2012 when the block reward was being cut from 50 BTC to 25 BTC.  Yet, oddly, the transaction fee today is one-tenth what it was back then.

[Brangdon]

I recall hearing the same exact thing around here in 2012 when the block reward was being cut from 50 BTC to 25 BTC.  Yet, oddly, the transaction fee today is one-tenth what it was back then.

Well, the value of bitcoin also increased tenfold, so the fiat fee remained about the same. More importantly, the fiat value of the block reward increased the same way. So for the crisis to be averted, we have to hope that Bitcoin continues to grow tenfold every couple of years. I'd rather not have to rely on that.

[DeathAndTaxes]

I recall hearing the same exact thing around here in 2012 when the block reward was being cut from 50 BTC to 25 BTC.  Yet, oddly, the transaction fee today is one-tenth what it was back then.

Well, the value of bitcoin also increased tenfold, so the fiat fee remained about the same. More importantly, the fiat value of the block reward increased the same way. So for the crisis to be averted, we have to hope that Bitcoin continues to grow tenfold every couple of years. I'd rather not have to rely on that.

Not really.  Who says the exact amount of computing power used right now is the absolute minimum required to protect the network.  Say the subsidy cut occurred today and lets assume nothing else changes (miners don't become more efficient, avg fee doesn't go up, fiat price doesn't go up, and average number of tx doesn't go up).  Ok then half the miners quit and the network is secured by 3 PH/s instead of 6 PH/s.  Realistically anyone who could 51% attack a 3 PH/s network could do the same to a 6 PH/s network.   3 PH/s puts the possibility of an attack outside the abilities of all but three letter agencies of major nation states and 6 PH/s doesn't materially change that.   Now 30 PH/s or 300 PH/s might change that but not a mere doubling.

[jonald_fyookball]

I thought it's 60 already not 6 phs

[Lauda]

I thought it's 60 already not 6 phs

55 PH/s now. I think that he used 6 only as an example. Mining should always stay profitable, because as soon as a portion of miners leave the others get their share (and it's profitable again).

[Brangdon]

Who says the exact amount of computing power used right now is the absolute minimum required to protect the network.

Um, no-one? It's below the minimum.

Say the subsidy cut occurred today and lets assume nothing else changes (miners don't become more efficient, avg fee doesn't go up, fiat price doesn't go up, and average number of tx doesn't go up).  Ok then half the miners quit and the network is secured by 3 PH/s instead of 6 PH/s.  Realistically anyone who could 51% attack a 3 PH/s network could do the same to a 6 PH/s network.   3 PH/s puts the possibility of an attack outside the abilities of all but three letter agencies of major nation states and 6 PH/s doesn't materially change that.

A 51% attack today would cost under $100m. That's easily affordable by a lot of entities. For comparison, HSBC recently lost over $4,000m in fines for their illegal activities. $100m would be peanuts for them. And that's just a bank. If Russia wanted to retaliate for economic sanctions over Ukraine (estimated to be worth billions), or North Korea wanted to cause problems, or China decided it was serious about wanting to stop its people using Bitcoin, or... any number of entities could do it.

See YouTube.

[franky1]

Well, for mining to continue at current profit levels, the halving of the block reward has to be balanced by increase in total transaction fees.

no

halving of the supply output of coins SHOULD be balanced by a demand rise causing a price rise. this in turn causes miners to profit as their coins are worth more. there is no need to subsidise/tax mining pools until 2140

what miners dont realise is that right now, this year mining pool OWNERS keep the fee's along with 1% of the mining reward. ill repeat again MINERS DO NOT PROFIT due to fee's. pool OWNERS do. mining pool owners also keep the altcoin rewards from merge mining

the only way for MINERS to profit is to stop throwing all their bitcoins at FIAT sales. but instead keep the coins, this will create demand and a price rise to compensate them. instead of selling at a loss, shooting themselves in the foot. and asking for subsidies in the form of fee's, which also never reach them in reality

these days mining it not to invest into bitcoin, it is to sell off back to FIAT and invest in banks and electric companies, as thats where all their mining hard work ends up.

if you are a miner and your cashing out every 10 minutes, then you are missing the whole point of why you should be mining.

[Littleshop]

If we really want micropayments to work with bitcoin, the transaction fee has to be lower.

If we really want miners to make money with their mining rigs, the transaction fee has to be higher.

I am a miner and I disagree.  Maybe after the next halving in two years but not now.  The block reward is plenty.  Sure I want more for my mining, but if you increase it, it will just bring more miners in the end leveling out to where we are now with just higher fees.   

The new minimum fee seems like it is quite fair for both miners and micropayments. 

[Lauda]

If we really want micropayments to work with bitcoin, the transaction fee has to be lower.

If we really want miners to make money with their mining rigs, the transaction fee has to be higher.

I am a miner and I disagree.  Maybe after the next halving in two years but not now.  The block reward is plenty.  Sure I want more for my mining, but if you increase it, it will just bring more miners in the end leveling out to where we are now with just higher fees.   

The new minimum fee seems like it is quite fair for both miners and micropayments. 

That's the thing. If you increase the fee, more miners will end leveling it out. If you decrease it (and if mining becomes unprofitable), some will leave and level it out again.

[Foxpup]

If we really want micropayments to work with bitcoin,

But who does really want micropayments with Bitcoin? Not full nodes, who have to deal with increased bandwidth and storage requirements. Not miners, who have to deal with a higher orphan rate when mining large blocks. The only people who want microtransactions are the ones who want to consume other people's resources without paying for them, ie, freeloading scum. Bitcoin ain't a charity. You want to make transactions, you got to pay the fee. If your transaction is very small in comparison to the fee, that's too damn bad, you got to pay it anyway. Bitcoin is not suitable for microtransactions, never was, never will be.

[bryant.coleman]

If we really want miners to make money with their mining rigs, the transaction fee has to be higher.

BS. Even if we make the transaction fee to 100%, the miners will not make profits. If someone increases the transaction fee, then more mining rigs will be bought up, increasing the hash rate. The mining will never be profitable, as long as there are people who are willing to mine at -50% returns (BTW... I have to concede that a lot of mining is done by companies such as BFL and Avalon, using their customers' rigs).

[eleuthria]

what miners dont realise is that right now, this year mining pool OWNERS keep the fee's along with 1% of the mining reward. ill repeat again MINERS DO NOT PROFIT due to fee's. pool OWNERS do. mining pool owners also keep the altcoin rewards from merge mining

You do realize that all the major pools pay out transaction fees *and* merge mined coins...right?  GHash, BTC Guild, Eligius, and Slush all pay TX Fees.  GHash, BTC Guild, and Eligius pay merge mined coins (Slush does not merged mine, provable by looking at the coinbase for his blocks lacking the mm tags).  Other smaller pools do as well (but I can't speak for certain about which ones, I just track the major ones).

I don't think Discus Fish does, but they're Pay per Share last I checked.  Wouldn't trust Google Translate on a Chinese mining pool's fee system.

[activebiz]

Its not too high, It can be reduced  or removed if u want to wait a few hours for a confirmation

[Light]

Its not too high, It can be reduced  or removed if u want to wait a few hours for a confirmation

It can't really be 'reduced' without the consensus of the nodes and the miners. If you're talking about setting a lower fee than you should according to the reference implementation then that's not really true as it is quite likely to hobble your confirmation times. Trust me sending 0 fee transactions is not the smartest thing to do - if you can't afford 5c (0.5c once reference is adopted) than you really shouldn't be wasting the effort of the network with your tx.

[bitgeek]

IMO the fees aren't that big. My bank charges ~20 times more every month just for allowing me to have a debit card. I had money sent through paypal and the fee was so big that I'll need few years of paying bitcoin fees to catch up.

[Kazimir]

I typically use a 0.00001 BTC fee (one hundredth of a milliBit) for transactions, always works fine. That's about half a ¢ent. And even lower works fine as well. This is not an issue anymore since Bitcoin Core 0.9 (in which the default fee policy was adjusted).

High-priority transactions in BTC-E charge a transaction fee of BTC0.0005 (Equivalent to $0.25). That is a bit high, I think. Especially when we have to withdraw small amounts like BTC0.01.

It's pretty high, yes. Then again, do you really need high-priority transactions? (especially for 0.01 BTC payments?) And more importantly, high priority wire transfers (especially internationally, where "high priority" still means "several days at least") easily cost over $10. I say Bitcoin still wins hands down.

[blatchcorn]

If we really want micropayments to work with bitcoin,

But who does really want micropayments with Bitcoin? Not full nodes, who have to deal with increased bandwidth and storage requirements. Not miners, who have to deal with a higher orphan rate when mining large blocks. The only people who want microtransactions are the ones who want to consume other people's resources without paying for them, ie, freeloading scum. Bitcoin ain't a charity. You want to make transactions, you got to pay the fee. If your transaction is very small in comparison to the fee, that's too damn bad, you got to pay it anyway. Bitcoin is not suitable for microtransactions, never was, never will be.

Yeah it's companies that want to charge for microtransactions, not freeloaders.

[Lauda]

It's pretty high, yes. Then again, do you really need high-priority transactions? (especially for 0.01 BTC payments?) And more importantly, high priority wire transfers (especially internationally, where "high priority" still means "several days at least") easily cost over $10. I say Bitcoin still wins hands down.

In terms of fees and speed Bitcoin will always win. If you use WU, you will have a fun time.

[DannyHamilton]

High-priority transactions in BTC-E charge a transaction fee of BTC0.0005 (Equivalent to $0.25). That is a bit high, I think. Especially when we have to withdraw small amounts like BTC0.01.

Sounds like a really good reason not to use BTC-E.

Sounds like there's room in the market for someone to create a similar competing service with lower fees.