Gavin Andresen: Rising Transaction Fees Could Price Poor Out of Bitcoin

[CryptoCurrencyInc.com]

Gavin Andresen: Rising Transaction Fees Could Price Poor Out of Bitcoin

"Transaction fees could “rise and rise to the point where only rich people can transact” if block sizes aren’t increased, according to Gavin Andresen, Chief Scientist of the Bitcoin Foundation."

http://www.coindesk.com/gavin-andresen-rising-transaction-fees-price-poor-bitcoin/

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[CoinRocka]

Define poor.  Do most poor folks have cell phones?
My take is the poor is already priced out of bitcoin, the middle class is already priced out of bitcoin because people think in whole numbers.  I can't tell you how many of my friends/coworkers have said, "I'll let you create a wallet for me but I want one bitcoin".

[devphp]

Fortunately, there is always Dogecoin to transact micro payments.

[Nagle]

Block chain transaction volume is no higher than it was 2 years ago. This is a non-problem unless Bitcoin use increases, which doesn't seem to be happening.

[waxwing]

Block chain transaction volume is no higher than it was 2 years ago. This is a non-problem unless Bitcoin use increases, which doesn't seem to be happening.

That's transaction volume in Bitcoin. If anything, it has gone down in two years. Do you think it might be, you know, because the value of 1 Bitcoin has increased thousands of percent, maybe?

[shawshankinmate37927]

Define poor.  Do most poor folks have cell phones?
My take is the poor is already priced out of bitcoin, the middle class is already priced out of bitcoin because people think in whole numbers.  I can't tell you how many of my friends/coworkers have said, "I'll let you create a wallet for me but I want one bitcoin".

Perhaps you can help your friends understand the math that's involved.  There are currently about 7 billion people in the world and a little less than 13 million bitcoins have been mined so far.  There just aren't enough whole bitcoins for everyone to have one.  Fortunately, each bitcoin can be divided into 100 million "whole" satoshis and your friends could each buy one million of those "whole" satoshis for about $4.50 at current prices.

[GhanaGamboy]

Low transaction fees is in miners long term interest for Bitcoin having value. If no one will want use Bitcoin because of high fees, Bitcoin will become much less valuable.

And damn sure with limited block size and more transactions required than can be included fees will be much higher. Also those not willing pay those fees have no choice but stop using Bitcoin (hopefully the fees will not become as high as western union fees one day)

[DeathAndTaxes]

Code:

[quote author=curlyginger link=topic=612652.msg6781840#msg6781840 date=1400336909]
One of 2 things will happen long-term, either:
1) The blockchain and miners evolve to more easily support many high volume micro-transactions. The effect will be the cost to miners of managing micro-transaction will be lowered, and this will be passed on in the form of lower fees.
[/quote]

It depends on what you mean by micro transactions.  Transactions of less than 1 US cent (circa 2014)?  Probably not going to happen.  This isn't just a miner issue.   The blockchain is a public record.  The cost of a transaction is borne by all nodes while the cost by be relatively low on a per tx basis it isn't zero.   The other thing to consider is the critical resource is space so tx are always going to be priced on a per tx (well per kb but the tx size for most txs is a relatively small range) not as a % basis.  This means the effective cost of smaller tx as a % of the value transferred is going to be higher.

 That being said Bitcoin doesn't need to have to support txs which are a thousandth of a US penny and have fees of less that are a billionth of a penny.  It just needs to be cheaper, faster, and more secure than the alternatives.   The most successful digital currency in Africa is mPesa which enforces a min tx value of $0.10 and at that level fees are $0.03 per tx (30% of value).  Can Bitcoin beat that?  Yes.

[code]
mPesa fee tariffs (values converted to USD)
Min Transfer:   $0.10  fee $0.03 (30%)
Max Transfer: $700.00  fee $1.10 (1.6%)

Min Agent Withdraw:   $0.50 fee $0.10 (20%)
Max Agent Withdraw: $700.00 fee $3.30 (4.7%)

Min ATM Withdraw:   $2.00   fee $0.33 (17%)
Max ATM Withdraw: $200.00   fee $1.93 (1.0%)

http://www.hapakenya.com/new-mpesa-tariffs-released/

Bitcoin already beats mPesa on tx fees.  However mPesa has a superior on the ground network when it comes to "cashing in and out".  With fees as low as 1% when withdrawing from an ATM exchangers would really need to cut fees to be competitive.

So it really comes down to what you mean by micropayments?  Do poor users really benefit from the ability to transaction in subcent values?  Even in Kenya with median income being about $800 annually a centralized network without the cost of blockchain imposed a min tx amount of $0.10 (and with a staggering 30% fee) and it became the most successful virtual currency outside of Bitcoin.[/code]

[bryant.coleman]

People who collect very small amounts of Bitcoin, mostly from faucets are disproportionately affected by the rise in the transaction fees. I have seen people paying as much as BTC0.05 in transaction fees, for transferring just BTC0.1. Their transaction size (in KB) is quite large, therefore they will have to pay a higher transaction fee. 

[DeathAndTaxes]

People who collect very small amounts of Bitcoin, mostly from faucets are disproportionately affected by the rise in the transaction fees. I have seen people paying as much as BTC0.05 in transaction fees, for transferring just BTC0.1. Their transaction size (in KB) is quite large, therefore they will have to pay a higher transaction fee.  

Imagine how much worse it was if the dust limit hadn't been put in place.  Prior to the dust limit most "free coins" sites were paying out even smaller values sometimes as little as 100 sat.   

It is always better to opt for larger payments if possible.  In pool mining, to reduce fees paid, you should set the payout threshold as high as possible but no higher than an amount you would be willing to lose if the pool fails or defrauds you.   So if you are willing to risk a max loss of 0.05 BTC then payout in 0.05 BTC increments because a single 0.05 BTC output will require less fees to spend than fifty 0.001 BTC outputs.

[jubalix]

Define poor.  Do most poor folks have cell phones?
My take is the poor is already priced out of bitcoin, the middle class is already priced out of bitcoin because people think in whole numbers.  I can't tell you how many of my friends/coworkers have said, "I'll let you create a wallet for me but I want one bitcoin".

Perhaps you can help your friends understand the math that's involved.  There are currently about 7 billion people in the world and a little less than 13 million bitcoins have been mined so far.  There just aren't enough whole bitcoins for everyone to have one.  Fortunately, each bitcoin can be divided into 100 million "whole" satoshis and your friends could each buy one million of those "whole" satoshis for about $4.50 at current prices.

but people don't think like that. They want at least 1 bitcoin and the sell is there are 21 Million.

this seems to be a limiting factor atm.

[IIOII]

I'm not an expert, but increasing blocksize is not without problems, because as a result blockchain size and bandwidth requirements will grow. This will lead to a reduced number of full nodes in the network and therefore more centralization around high bandwidth, high storage capacity nodes.

[Nagle]

Block chain transaction volume is no higher than it was 2 years ago. This is a non-problem unless Bitcoin use increases, which doesn't seem to be happening.

That's transaction volume in Bitcoin. If anything, it has gone down in two years. Do you think it might be, you know, because the value of 1 Bitcoin has increased thousands of percent, maybe?

Sorry, wrong chart. Here's the last year of block chain transaction rate. Up and down a bit, around 60,000 a day now, and around 50,000 a year ago. Peak was around 100,000/day, for one day. Blockchain capacity is around 500,000 transactions per day, so we're still an order of magnitude below capacity.

[DeathAndTaxes]

Block chain transaction volume is no higher than it was 2 years ago. This is a non-problem unless Bitcoin use increases, which doesn't seem to be happening.

That's transaction volume in Bitcoin. If anything, it has gone down in two years. Do you think it might be, you know, because the value of 1 Bitcoin has increased thousands of percent, maybe?

Sorry, wrong chart. Here's the last year of block chain transaction rate. Up and down a bit, around 60,000 a day now, and around 50,000 a year ago. Peak was around 100,000/day, for one day. Blockchain capacity is around 500,000 transactions per day, so we're still an order of magnitude below capacity.

The daily tx volume chart is very volatile so looking at daily amounts can hide the underlying trend.  By my math in the  last 180 days there were 11.7M txs, the six months prior it was 8.8M txs, the six month prior to that was ~8M txs.  On a year over year basis tx volume (trailing twelve months) tx volume has almost doubled (from 40K per day to 57K per day).  Blockchain's chart has moving averages which make the trend a little more clear.  The 7 day can be changed to any value although the they way they compute it means the first x days are not averaged so that is why the chart looks a little weird.

A 180 day moving average of transaction volume:
https://blockchain.info/charts/n-transactions?timespan=2year&showDataPoints=false&daysAverageString=180&show_header=true&scale=0&address=

As for the network supporting 500K tx per day that is not true.  The network is capped by block size not tx volume.  To support 500K tx per day on 1MB blocks would require the average tx to be only 288 bytes.  While many txs are there are tx which are many magnitudes larger and that drags the average tx size is closer to 800 bytes.  In theory if all miners produces exactly 1MB blocks that would be 180,000 tx per day.  Fees may rise long before we reach 180K tx per day because that assumes all blocks are 1MB, however most miners do leave some tx out of the next block either due to arbitrary block sizes (250KB cap still appears to be rather common) or due to low/no fee.

[DeathAndTaxes]

Do most poor folks have cell phones?

Yes.  More people in Africa have cellphones than have indoor plumbing.

[jbrnt]

About a year ago, you can send a transaction with 0.0001 fee and you can nearly almost expect it to confirm within 20 minutes. Now, you send a transaction with 0.0001 fee, there are times you need to wait for 45 minutes. For free transactions, it varied from half an hour a year ago, to over 10 hours these days.

I know, it depends on transaction size and priority, but I am comparing similar transactions I made over the past year. Overall, I do feel that the network is more "crowded" now.

If the current block size do not increase, we may see longer and longer confirmation times at the standard 0.0001 fee in another year's time, and we may be forced to include a higher fee if we need the transaction urgently.

I think increasing the block size will help to solve this, and standard fee may not fall at all due to increased demand for quicker transactions. Bitcoin will need quicker transaction confirmations for it to expand adoption.

[DeathAndTaxes]

Increase the max block size isn't going to do much if most miners aren't already using that max.  A significant portion of the blocks created today are 250KB or less in size.  It is like you have a car which only goes 60 mph, raising the speed limit from 90 mph to 120 mph isn't going to get you there any faster.

[jbrnt]

Increase the max block size isn't going to do much if most miners aren't already using that max.  A significant portion of the blocks created today are 250KB or less in size.  It is like you have a car which only goes 60 mph, raising the speed limit from 90 mph to 120 mph isn't going to get you there any faster.

Yes, I noticed that. Some pools are constantly making smallest blocks possible. Is there a "minimum blocksize" setting which can be raised to force pools to include more transactions into their blocks? It will not be popular, but will do the community some good.

[DeathAndTaxes]

Is there a "minimum blocksize" setting which can be raised to force pools to include more transactions into their blocks?

No.

[Malin Keshar]

there are altcoins with lower transactions fees, for exemple, litecoin


also bitcoin can be change to mBTC or uBTC, and taxes adjusted to follow it