Why are micro-transaction such a problem?

[fgmnp]

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[CIYAM]

I wonder if it's really that bad. In a way, won't they actually help this market discover the true price of a transaction?

I don't think that micro txs are the real issue (the pricing of tx's using tx size and coin age stops spamming without fees) but instead the handling of a large # of txs (small or large).

In some ways we can thank SD for giving the system a bit of stress as it is now obvious that further development (much of which is already underway) is needed in order for the system to scale up (which will be necessary if it is to ever compete with the likes of a payment processors such as the current credit card ones).

[imsaguy]

I wonder if it's really that bad. In a way, won't they actually help this market discover the true price of a transaction?

I don't think that micro txs are the real issue (the pricing of tx's using tx size and coin age stops spamming without fees) but instead the handling of a large # of txs and in some ways we can thank SD for giving the system a bit of stress as it is now obvious that further development (much of which is already underway) is needed in order for the system to scale up (which will be necessary if it is to ever compete with the likes of a payment processors such as the current credit card ones).

Well, sendmany was a good first step. 

[iamtheone]

I believe what they did to me was a bit too unfair. What happened to the open source spirit. How can I move forward and support my system if the close down my thread. And what if people will suddenly surge using bitcoin after all the publicity? I'm a programmer too and that's not how you handle technical problems. And they didn't answer my questions. It's really not fair.

[Stephen Gornick]

How can I move forward and support my system if the close down my thread.

Just to followup, he closed it accidentally himself apparently.

[Stephen Gornick]

Time for my embarrassing question of the day. Micro-transactions are frowned upon, for example satoshidice, and this one:

Buying a GPU today is another thing being frowned upon (as there is the upcoming block reward adjustment).  That reason this "frowning" on that is occurring, in that instance, is because come the end of November there will be wailing and gnashing of teeth as GPU miners realize the gig is over.  By frowning now (90 days before many GPUs will be getting powered off and liquidated) those who proceeded regardless can't say nobody warned them.

So with microtransactions there is the same thing.  If you want to do microtransactions today?  Go nuts, blocks are filling with just 20% or so of capacity so there's room.  But if you want to build a service that relies on microtransactions?   Bad idea -- unless you only want to run it for the short term, like a matter of months before higher fees become mandatory ....

And then what you end up is this:
 - http://bitcointalk.org/index.php?topic=101146.msg1109201#msg1109201
where because fees for micropayments are rising (as the BTC/USD rises, a fixed minimum fee of 0.0005 BTC costs more now in terms of fiat than it did a few months ago)  so then you get complaints that the fees are making BTC too costly (and "unfair") to be used for microtransations.   And the correct response to that is no ....  don't use bitcoins for microtransactions and you won't be stuck with this dilemma where the fees have become too costly for microtransactions to continue.

[Mike Hearn]

Don't feel too bad about it. Most users are still on Satoshis code which does not implement SPV, so Bitcoin is struggling to scale as the number of transactions ramps up. This means that every so often when somebody creates a service that happens to spike transaction load they get accused of doing "dos attacks". I don't really share that view.

There are some changes coming in 0.7 and especially 0.8 (assuming everything gets merged) that should help scalability a lot, and which will buy some time to move people onto SPV mode clients. Once these changes come through the pressure on the system will lift somewhat and micro-transactions will cause less of an issue.

[nevafuse]

Most users are still on Satoshis code which does not implement SPV

SPV?

Edit: nvm, https://en.bitcoin.it/wiki/Thin_Client_Security#Simplified_Payment_Verification_.28SPV.29

[DeathAndTaxes]

It isn't a "problem" but it is an issue.  Part of the issue is that the infrastructure isn't all in place yet.  Remember bitcoin is in BETA.  

To have a working fee economy you need:
a) miners making optimal decisions on tx inclusion.
b) smart clients able to make recomendations to users on apropriate fees (by looking at the memory pool & prior block fees)
c) robust enough processing nodes to handle the increased volume.
d) a low enough subsidy that it doesn't distort the true cost of tx.

Those don't exist (yet) although some are being worked on.  The last point will really only be "fixed" over time as the subsidy declines.

That being said I think SD is great.  It is a free (for non players) stress testing of the network.  I do think on a long enough timeline it will not be viable.  Space in the blockchain is simply too valuable for the processing model to remain viable.

[AbsoluteZero]

Who decides when Bitcoin is not In Beta?

[matthewh3]

You could try litecoin that has a much lower value transaction fee.

[nevafuse]

Who decides when Bitcoin is not In Beta?

I think D&T meant "beta" in the sense that bitcoin is still really new.  No one really decides when bitcoin is or isn't in beta.  Bitcoin-qt is technically considered in "beta," but someone could develop their own bitcoin-qt and say that it is not in beta.

[DeathAndTaxes]

Exactly.  Nobody controls Bitcoin so there is unlikely to be unanimous decision.  Still given significant portions of the protocol and infrastructure have been yet to be developed I think it would be hard for anyone to objectively say Bitcoin isn't still a beta.