Could the fees really support the Bitcoin network?

[Raulo]

I'm very impressed by the current Bitcoin hashrate, overtaking the fastest supercomputer Tianhe-1A and probably also Folding@Home. For safety, even larger network would be necessary. 

However, at current 2700 GH/s, taking most efficient GPUs at roughly 0.5W per 1MH/s, the whole network needs 1.35 MW of electric power (FPGAs or ASICs that are used by some are more energy efficient but are more expensive and carry larger depreciation cost). With 8-9 blocks/hour, one blocks needs about 150 kWh. This is probably about $15 on average. So if there were currently no block rewards and miners were supported only by fees, a block would have to carry at least $15 in fees if you count only electricity costs or the miners will stop mining. With hardware depreciation that the miners would want to recover and some profit the fees would have to be even larger. With about 15-20 transactions per block (which are mostly free so there would be less of them if there were fees required), one transaction would need to carry at least $1 of fees. This is quite expensive. I claim that the current network size could not be supported by fees only.

More efficient miners would not help much (if at all). More efficient miners would be available not only for the Bitcoin network but also for the potential attacker. The Bitcoin network would have to be always ahead of the attacker. Maintaining such a network will be quite costly. Worse yet, there will have to be constant mining performed while the attacker could just rent the compute time for a few hours to do a >50% attack. Can we really afford it?

Unless the number of fee carrying transactions grows a lot before the mining reward is reduced,  we are going to end up with not large enough and prone to attack Bitcoin network. Or with fees that are hardly better than in mainstream banking.

[bullox]

I agree.

The one thing that would solve the issues you present, however, is if the value of BTC gained fairly consistently over time.

And that, my friends, is a matter of faith. 

For BTC to truly rise in value and not be an inflationary speculation bubble (based off of mining/difficulty), it has to be used more frequently as a currency, not just as an intermediary towards other established currencies.  Goods and services need to be sold through it.   Think about how GDP is calculated...  That is the heart of an economy and what BTC needs.

Just my 2¢

[MoonShadow]

The idea is that by the time the block reward cuts in half in Jan of 2013, the network will be large enough, with enough transactions that pay a small fee of about .001 BTC on average, that the transactions will already be making up for the lost 25 BTC to the miners.  We have already come a long way in just over two years, so I'm betting that this assesment is generally correct.  Time will tell.

[CydeWeys]

There are three issues here:

1.  The size of the network takes into account the 50 BTC reward for each block.  If each block was presently only paying out its transaction fees (rather than the transaction fees plus 50 BTC), then the size of the network would be far smaller.

2.  Assuming the deflationary spiral continues, by the time the block reward is halved, each BTC could easily be worth well over twice what it is now.  So while the BTC per block would be decreasing, the total value of each block would not be.

3.  Bitcoin is still in its infancy.  Most of the transactions are directly attributable to pool payouts, the faucet, or currency speculation.  If Bitcoin becomes much more popular and is actually used as a regular currency for buying and selling goods and services, the number of transactions per block will absolutely dwarf what it is today.  So even with no rewards at all, if Bitcoin achieved even some small fraction of the popularity of, say, PayPal, we're talking about many thousands of transactions per block.  Those fees would add up pretty quickly.

[Raulo]

I get your points. I know that the network is supposed to grow and that the number of transactions will grow, too. But I think it does not scale. This system is too expensive to run to be competitive to the mainstream banking which has economies of scale.

Currently for protecting 35 mln USD Bitcoin "economy", roughly 0.75 mln USD is used  a year in electricity costs. A few million USD of equipment is used constantly (or more periodically) for block generations. The equipment which depreciates rapidly. It's a very large percentage of the total Bitcoin money supply. Guarding gold is cheaper and scales much better. If everything grows (Bitcoin value, number of transaction, etc.), it's still going to cost the same percentwise. The whole network happily bears this cost because the Bitcoin money supply grows and the mining reward is much larger than the cost (at the current generation and exchange rate, the money supply grows by 20 mln USD a year). When this inflation is gone, the fees is all the miners would get. And it would be not enough to keep such a large mining network compared to the Bitcoin economy size. It means that either we will have an expensive system (large difficulty and a lot of miners) which is well guarded against an attack or a cheap system with not that many miners that will be attack prone.

I don't assume anything. The problem of cost is going to be the same regardless of what will happen.

I think it shows that if Bictoin by any chance grew to VISA size, it would have been either poorly guarded against adversaries or more expensive to use than VISA. Pick your poison.

[realnowhereman]

It is guaranteed that fees will support the network.

If generation were not profitable, the miner would stop mining, making the difficuly lower and hence the profit per block higher.  Job done. The miners will always be exactly the right number.

IMHO, that is one of the most elegant things about the bitcoin design.

[Raulo]

If generation were not profitable, the miner would stop mining, making the difficuly lower and hence the profit per block higher.  Job done. The miners will always be exactly the right number.

Of course I know it. The market will take care of mining profitability. The problem is that the difficulty required for profitable mining will be low enough for cheap >50% network attack.

Bitcoin will either be always vulnerable to attack by competition or expensive. Again, pick your poison.

P.S. After rereading one of the the previous threads I think I make the same argument as here:
http://forum.bitcoin.org/index.php?topic=8126.0
And I think that these points were too easily dismissed by the posters.

[FreeMoney]

If generation were not profitable, the miner would stop mining, making the difficuly lower and hence the profit per block higher.  Job done. The miners will always be exactly the right number.

Of course I know it. The market will take care of mining profitability. The problem is that the difficulty required for profitable mining will be low enough for cheap >50% network attack.

Bitcoin will either be always vulnerable to attack by competition or expensive. Again, pick your poison.

P.S. After rereading one of the the previous threads I think I make the same argument as here:
http://forum.bitcoin.org/index.php?topic=8126.0
And I think that these points were too easily dismissed by the posters.

It might be expensive if you were required to pay the full cost, but you don't have to. If millions of people are using bitcoin it'll be very cheap for you.

[Timo Y]

Bitcoin will either be always vulnerable to attack by competition or expensive. Again, pick your poison.

That is like saying,

You can either secure your house with a $10,000 steel vault door, or a $20 plywood door that anybody can kick in.  Pick your option.

This isn't a binary choice, you know.  There are in-betweens that are reasonably priced and reasonably secure.


I do agree though that Bitcoin transaction fees suffer from a tragedy of the commons situation that hasn't been resolved yet.   However, it will take decades  before this becomes a serious problem, and it won't become a problem overnight, so this will give us plenty of time to think of a solution.

[goatpig]

I get your points. I know that the network is supposed to grow and that the number of transactions will grow, too. But I think it does not scale. This system is too expensive to run to be competitive to the mainstream banking which has economies of scale.

Currently for protecting 35 mln USD Bitcoin "economy", roughly 0.75 mln USD is used  a year in electricity costs. A few million USD of equipment is used constantly (or more periodically) for block generations. The equipment which depreciates rapidly. It's a very large percentage of the total Bitcoin money supply. Guarding gold is cheaper and scales much better. If everything grows (Bitcoin value, number of transaction, etc.), it's still going to cost the same percentwise. The whole network happily bears this cost because the Bitcoin money supply grows and the mining reward is much larger than the cost (at the current generation and exchange rate, the money supply grows by 20 mln USD a year). When this inflation is gone, the fees is all the miners would get. And it would be not enough to keep such a large mining network compared to the Bitcoin economy size. It means that either we will have an expensive system (large difficulty and a lot of miners) which is well guarded against an attack or a cheap system with not that many miners that will be attack prone.

I don't assume anything. The problem of cost is going to be the same regardless of what will happen.

I think it shows that if Bictoin by any chance grew to VISA size, it would have been either poorly guarded against adversaries or more expensive to use than VISA. Pick your poison.

That is disregarding that miners in the future, following the "green" trend, will want to invest in home based power production. This would drastically reduce the energy cost in the long term.

The other part is that mining difficulty is independent of transaction amount and size. I agree, if Bitcoin remains at the store of value level, I don't think the transaction volume will be able to support the network power to price ratio we are witnessing today. But, if it grows into a currency, the transaction volume could increase as much as a million times more than what we are witnessing. At this point, the block size cap would be raised and each block would pay huge amounts of transaction fee.

Of course the mitigating force of escrow to escrow account trading and private key trading have to be taken in account, since they both bypass the block chain.

[realnowhereman]

If generation were not profitable, the miner would stop mining, making the difficuly lower and hence the profit per block higher.  Job done. The miners will always be exactly the right number.

Of course I know it. The market will take care of mining profitability. The problem is that the difficulty required for profitable mining will be low enough for cheap >50% network attack.

Bitcoin will either be always vulnerable to attack by competition or expensive. Again, pick your poison.

But that will be at the choice of those who make transactions.  Profitability will be determined by the offered fees.  Therefore the market will sort that problem out too; if you want higher security, you should be paying more for your transactions shouldn't you?  The users of bitcoin will purchase exactly the difficulty they desire by virtue of their transaction fees.

[gigabytecoin]

I'm very impressed by the current Bitcoin hashrate, overtaking the fastest supercomputer Tianhe-1A and probably also Folding@Home. For safety, even larger network would be necessary. 

However, at current 2700 GH/s, taking most efficient GPUs at roughly 0.5W per 1MH/s, the whole network needs 1.35 MW of electric power (FPGAs or ASICs that are used by some are more energy efficient but are more expensive and carry larger depreciation cost). With 8-9 blocks/hour, one blocks needs about 150 kWh. This is probably about $15 on average. So if there were currently no block rewards and miners were supported only by fees, a block would have to carry at least $15 in fees if you count only electricity costs or the miners will stop mining. With hardware depreciation that the miners would want to recover and some profit the fees would have to be even larger. With about 15-20 transactions per block (which are mostly free so there would be less of them if there were fees required), one transaction would need to carry at least $1 of fees. This is quite expensive. I claim that the current network size could not be supported by fees only.

More efficient miners would not help much (if at all). More efficient miners would be available not only for the Bitcoin network but also for the potential attacker. The Bitcoin network would have to be always ahead of the attacker. Maintaining such a network will be quite costly. Worse yet, there will have to be constant mining performed while the attacker could just rent the compute time for a few hours to do a >50% attack. Can we really afford it?

Unless the number of fee carrying transactions grows a lot before the mining reward is reduced,  we are going to end up with not large enough and prone to attack Bitcoin network. Or with fees that are hardly better than in mainstream banking.

There have been some blocks solved to date with fees as high as 6 BTC...

I honestly believe that by the next block distribution change (from 50 to 25 BTC per block...) that the average block mined will generate more than 50 BTC for the miner.

[Timo Y]

But that will be at the choice of those who make transactions.  Profitability will be determined by the offered fees.  Therefore the market will sort that problem out too; if you want higher security, you should be paying more for your transactions shouldn't you?  The users of bitcoin will purchase exactly the difficulty they desire by virtue of their transaction fees.

This is inaccurate. Difficulty is the same for everybody. Total difficulty will be determined by the aggregation of all transaction fees.  

When paying transaction fees, you're paying for faster processing.  You are getting a tiny little bit more security as a side effect, but you are paying for the collective security of everybody, not for your own security.

If difficulty/security is lower than what the majority of users desire, no action of an individual user can do anything to increase difficulty significantly.  No individual will thus have an incentive to pay for higher security, only for faster processing.

The free market leads to a solution that maximises individual self-interest, therefore the market will not sort out that problem.  Not in the current implementation of Bitcoin anyhow.

[goatpig]

But that will be at the choice of those who make transactions.  Profitability will be determined by the offered fees.  Therefore the market will sort that problem out too; if you want higher security, you should be paying more for your transactions shouldn't you?  The users of bitcoin will purchase exactly the difficulty they desire by virtue of their transaction fees.

This is incorrect. Difficulty is the same for everybody. Total difficulty will be determined by the aggregation of all transaction fees.  

When paying transaction fees, you're paying for faster processing.  You are getting a tiny little bit more security as a side effect, but you are paying for the collective security of everybody, not for your own security.

If difficulty/security is lower than what the majority of users desire, no action of an individual user can do anything to increase difficulty significantly.  No individual will thus have an incentive to pay for higher security, only for faster processing.

The free market leads to a solution that maximises individual self-interest, therefore the market will not sort out that problem.  Not in the current implementation of Bitcoin anyhow.

Free market doesn't stop people from acting in groups. There is a direct correlation between mining profitability and difficulty. It is not impossible, although admittedly hard, for a a majority of Bitcoin users to come to a consensus on how high a fee they're willing to pay. A group that big could manipulate difficulty. Think of it as consumer union, with their own modded client to adjust fees automatically to whatever they vote it to be. I don't think that's a good thing though.

[Steve]

The very recognition that there is a potential tragedy of the commons problem is what will prevent it from actually happening.  The essential problem is that the current fee system will steer toward the most power efficient solution without regard to the overall security afforded by that solution.  But, the pool operators will have a large voice in setting future transaction fee policies and they'll educate other miners on the need to abide by them.  They'll ponder the level of security sustained by a given level of difficulty and adjust fee policies such that a level of mining activity can be sustained that effectively protects bitcoin.  There are lots of ideas about alternative minimum fee structures and miners will start to experiment with different formulas for determining minimum fees.  I'm pretty confident that a solution will be found and there is plenty of time to find it.

[MoonShadow]

I do agree though that Bitcoin transaction fees suffer from a tragedy of the commons situation that hasn't been resolved yet.   

Too many forum members post this, but this is due to a misunderstanding of what the fable of "the tragedy of the commons" represents.  The classic fable involves a town of sheephearders with a common set of grassy fields for their sheep to graze upon.  This is a commons of a depleting resource that users are incentivized to maximize their usage of, regardless of the impact on the resource.  The relationship between transaction fees and blockchain security is a commons, but not this kind of commons.  The users are incentivized to include whatever fee they believe will save them time, but no more.  This kind of commons contributes to the shared resource, in this case difficulty.  There is also a case of diminishing returns for the transaction fee payer, but that is part of the balancing mechanism.

[Raulo]

You can either secure your house with a $10,000 steel vault door, or a $20 plywood door that anybody can kick in.  Pick your option.

This isn't a binary choice, you know.  There are in-betweens that are reasonably priced and reasonably secure.

The problem is that first of all it is not the house that the lock protects. The lock protects your TV and maybe sofa from theft. Not the house itself. Even if somebody enters and burns the house down, you still have the land. Moreover, you need only to worry about local thieves. For the Bitcoin network, the danger is the the whole world. In case of the house, it's the law system that gives you most of the protection. I'm not sure if it will work for Bitcoin. In my opinion, given Bitcoin rules, malicious block reorganizations would probably be perfectly legal.

I do agree though that Bitcoin transaction fees suffer from a tragedy of the commons situation that hasn't been resolved yet.   However, it will take decades  before this becomes a serious problem, and it won't become a problem overnight, so this will give us plenty of time to think of a solution.

I'm not sure what you mean by "tragedy of the commons" but I understand that fee problem is such that miners protects the whole Bitcoin value. But fees are paid only by those who make transactions. Hoarders who gain most from this protection do not have to pay a dime. Why hoarders gain? Because BTC value is related to the stability of the payment system. If the system gets unreliable, there are double spends, unconfirmed transactions and all kind of mess due to >50% attacks, the value of BTC will drop and drop hard if it becomes the norm. And there is no easy (or probably any) solution to this problem. Do you really think that hoarders will voluntarily start to pay fees to keep it running? If I were a hoarder I would sit and relax and let others pay my share.

A statement "free market will sort it out" is true but it will sort it out probably simply by driving the Bitcoin value to the ground. And then nobody will care about bringing down the Bitcoin network.  Knowing ahead of this problem will not help if the Bitcoin Nash equilibrium is for Bitcoin to bite the dust.

[rezin777]

In case of the house, it's the law system that gives you most of the protection.

The legal system provides an opportunity for retribution, but it rarely offers protection. At best it is a deterrent.

Hoarders who gain most from this protection do not have to pay a dime. If I were a hoarder I would sit and relax and let others pay my share.

If I were holding Bitcoins, I would invest in processing and securing the transactions to protect my holdings. It has the added benefit that I can earn more by processing transactions for others.

Time will tell if the Bitcoin economy is large enough to make processing and securing the transactions valuable enough to sustain itself. I think that it will answer the question on its own. The more valuable the Bitcoin, the more people who want Bitcoin, the more transactions we see, the more profitable mining becomes, the stronger the network grows, the more secure the network becomes.

[elewton]

I believe that it is likely that, were Bitcoin to become a socially accepted tool, corporations like Google, Microsoft et al. would be delighted to throw some of their processors at mining and publicly donate the profits to charity.

An act that benefits everyone and appears altruistically motivated is excellent PR, and these companies can do it cheaper than anyone.

[AntiVigilante]

Letting the market it handle is a contradiction. We are the market so let's handle it.

We didn't wait until Deepbit actually had problems from double spending. Soon as it hit near 50% people moved their work load elsewhere.

Why is it people still think the market is some White Knight who slaps you around a few times? It's just the collective entropy that we fail to adjust for. The more ignorant we are or the more irresponsible we are the harder we all get hit.

The market is the collective paranoia of all of us. It can either see the dead canary and run before the gas hits, or it can wait for the first dead body at which point you have a stampede of miners market forcing each other to death. Hurray for balance! Who cares about the funerals?

WE.ARE.THE.FUCKING.MARKET.

[rezin777]

Letting the market it handle is a contradiction. We are the market so let's handle it.

Well, we have to agree on a problem first. I think it's too early to know if there is a problem or not?

With deepbit, we know that someone with >50% of the network can harm the network. (And I don't think this problem has been solved yet.)

Here, some think there won't be enough profit from transfer fees to provide motivation to mine. This is just speculation and I don't see how we can fix it.

[Raulo]

If I were holding Bitcoins, I would invest in processing and securing the transactions to protect my holdings. It has the added benefit that I can earn more by processing transactions for others.

Even at a loss? Really? I personally would not lift my finger. And all rational members would not. This is the Nash equilibrium I'm talking about.

Time will tell if the Bitcoin economy is large enough to make processing and securing the transactions valuable enough to sustain itself. I think that it will answer the question on its own. The more valuable the Bitcoin, the more people who want Bitcoin, the more transactions we see, the more profitable mining becomes, the stronger the network grows, the more secure the network becomes.

But this is all tautology.

The problem I'm suggesting at my original post is that transaction fees would have to be very large to adequately protect the network. And large fees are opposite to popularity of Bitcoin as a payment system.

I think Satoshi was brilliant in all technical Bitcoin details. But I'm not sure he thought about of all economic ramification of Bitcoin.  

Please, prove me wrong because I would like Bitcoin to succeed but I'm afraid the Nash equilibrium is very bad for the network as a whole.

[RustyShackleford]

Letting the market it handle is a contradiction. We are the market so let's handle it.

We didn't wait until Deepbit actually had problems from double spending. Soon as it hit near 50% people moved their work load elsewhere.

Why is it people still think the market is some White Knight who slaps you around a few times? It's just the collective entropy that we fail to adjust for. The more ignorant we are or the more irresponsible we are the harder we all get hit.

The market is the collective paranoia of all of us. It can either see the dead canary and run before the gas hits, or it can wait for the first dead body at which point you have a stampede of miners market forcing each other to death. Hurray for balance! Who cares about the funerals?

WE.ARE.THE.FUCKING.MARKET.

+1

The market as "someone else, over there" approach is hands-off and void of any responsibility/control.  It's the position of the observer and exactly the reason we have our current economic woes (to varying degrees based upon location). Of course, we got into that situation before the internet was around.

[rezin777]

Even at a loss? Really? I personally would not lift my finger. And all rational members would not. This is the Nash equilibrium I'm talking about.

Well, do you secure / protect your other valuables at a loss to yourself? I do.

Do you fix a hole in your roof when it leaks? Do you change the oil in your car when it become ineffective at lubrication? Do you change a fan on your computer when it stops spinning?

Perhaps mining insurance companies will open up and people can pay them to secure the network?

Rational people will protect their valuables.

[AntiVigilante]

+1

The market as "someone else, over there" approach is hands-off and void of any responsibility/control.  It's the position of the observer and exactly the reason we have our current economic woes (to varying degrees based upon location). Of course, we got into that situation before the internet was around.

Amen, brother.

Do-ocracy.

[Raulo]

Even at a loss? Really? I personally would not lift my finger. And all rational members would not. This is the Nash equilibrium I'm talking about.

Well, do you secure / protect your other valuables at a loss to yourself? I do.

Do you fix a hole in your roof when it leaks? Do you change the oil in your car when it become ineffective at lubrication? Do you change a fan on your computer when it stops spinning?

Oh, come on. I would gladly pay for protecting my coins. But mining at a loss or paying fees pays for protection of mostly somebody's else coins. Only number_of_your_coins/number_of_ALL_coins fraction goes for protecting your coins. Everything else goes for protecting other coins. I don't care about protecting your coins, sorry.

Would you voluntarily pay for fixing holes in the roofs of all houses in your town? If you know that only a small fraction would go for fixing your roof? Or would you rather let somebody else pay for it?

You are not suggesting introducing taxation for protecting the network, do you?

[rezin777]

Oh, come on. I would gladly pay for protecting my coins. But mining at a loss or paying fees pays for protection of mostly somebody's else coins. Only number_of_your_coins/number_of_ALL_coins fraction goes for protecting your coins. Everything else goes for protecting other coins. I don't care about protecting your coins, sorry.

Would you voluntarily pay for fixing holes in the roofs of all houses in your town? If you know that only a small fraction would go for fixing your roof? Or would you rather let somebody else pay for it?

You are not suggesting introducing taxation for protecting the network, do you?

I'm not trying to argue, I'm trying to find examples that fit! I, like you, don't know if this will be a problem or not. I, like you, hope that it isn't.

I think the idea is that the more Bitcoins you hold (the more value you have) the more you would be willing to pay for securing your holdings. A side effect is that it helps secure the entire network. Being greedy is altruistic!

A new muffler on a Ferrari is more expensive than a new muffler on a Volkswagen. But everyone benefits from the reduction in noise.

I am not suggesting a tax for protecting the network, it is already built in as transaction fees.  (Obviously we are back to square one, will the transfer fee be enough! I don't know.)

[AntiVigilante]

The market is like play dough. You mix colors in and after the twirling the colors become part of the whole.

Whether fees are enough, depends on whether fees come as a shock to the system when they are needed and no one has made decisions with them calculated in.

If we apply fees early people will calculate fees into the market and they will grow and shrink with the rise. Otherwise one day a sudden increase in fees everywhere will cause chat rage and randomness.

Better now than later.

[Raulo]

I'm not trying to argue, I'm trying to find examples that fit! I, like you, don't know if this will be a problem or not. I, like you, hope that it isn't.

I think the idea is that the more Bitcoins you hold (the more value you have) the more you would be willing to pay for securing your holdings. A side effect is that it helps secure the entire network. Being greedy is altruistic!

A new muffler on a Ferrari is more expensive than a new muffler on a Volkswagen. But everyone benefits from the reduction in noise.

No, it's a problem of externalities and market forces are very poor in dealing with externalities. Nobody would install mufflers if it was not mandated.

Actually, I found a solution to this tragedy of commons. But I'm afraid it requires some (although enforced by consensus) force but I'm afraid solving all externalities requires some force.

The fees has to be proportional to the coin age. This way a hoarder who does not spend coins will have to pay for their protection when he wants to spend them. Therefore, a hoarder would pay for their protection in the same way as a frequent spender who spends a lot and pays a lot of fees (hoarder can be forced to pay a bit less because transactions carries some extra overhead). However, such a solution is rather opposite to the current Bitcoin philosophy where fees are left to the miners only. If we wanted to introduce such a solution, the Bitcoin network would have to enforce the fees and would not accept the transactions where the fees for old coins are lower than a threshold. Since there will be very strong opposition to introduce such a rule when the fees are substantial, such rule would have to introduced early. Maybe even now. But I'm pretty sure there still will be a strong opposition to it. Because it acts like coin devaluation. But without it, the Bitcoin will probably fail.

[rezin777]

No, it's a problem of externalities and market forces are very poor in dealing with externalities. Nobody would install mufflers if it was not mandated.

Actually, I found a solution to this tragedy of commons. But I'm afraid it requires some (although enforced by consensus) force but I'm afraid solving all externalities requires some force.

The fees has to be proportional to the coin age. This way a hoarder who does not spend coins will have to pay for their protection when he wants to spend them. Therefore, a hoarder would pay for their protection in the same way as a frequent spender who spends a lot and pays a lot of fees (hoarder can be forced to pay a bit less because transactions carries some extra overhead). However, such a solution is rather opposite to the current Bitcoin philosophy where fees are left to the miners only. If we wanted to introduce such a solution, the Bitcoin network would have to enforce the fees and would not accept the transactions where the fees for old coins are lower than a threshold. Since there will be very strong opposition to introduce such a rule when the fees are substantial, such rule would have to introduced early. Maybe even now. But I'm pretty sure there still will be a strong opposition to it. Because it acts like coin devaluation. But without it, the Bitcoin will probably fail.

I wear ear plugs when I mow the lawn, use a chainsaw, etc. I would certainly install a muffler without mandate. I want to protect my hearing. And I prefer to be able to travel without drawing attention to myself.

Interesting suggestion on the old coins. I just wonder if not using your bitcoins is going to be as detrimental to the network as you suggest. I really think enough people will use them that it won't be an issue. And couldn't you just transfer your balance back and forth occasionally to defeat such a fee?

[AntiVigilante]

No, it's a problem of externalities and market forces are very poor in dealing with externalities. Nobody would install mufflers if it was not mandated.

Actually, I found a solution to this tragedy of commons. But I'm afraid it requires some (although enforced by consensus) force but I'm afraid solving all externalities requires some force.

The fees has to be proportional to the coin age. This way a hoarder who does not spend coins will have to pay for their protection when he wants to spend them.

Interesting suggestion on the old coins. I just wonder if not using your bitcoins is going to be as detrimental to the network as you suggest. I really think enough people will use them that it won't be an issue. And couldn't you just transfer your balance back and forth occasionally to defeat such a fee?

Standard fees EARLY have the same benefit as CREEPY fees later, averaged over time. Creepy fees now is redundant.

Over time fees will be part of market history and behavior.

Creepy fees now is not necessary if we start fees now. Hell I'll donate bitcoins to prevent creepy fees.

[Raulo]

I wear ear plugs when I mow the lawn, use a chainsaw, etc. I would certainly install a muffler without mandate. I want to protect my hearing. And I prefer to be able
to travel without drawing attention to myself.

Your noise is quite localized so much of the damage is indeed pointed at you.

But you would not clean your sewage, pay for the police, you would overfish the ocean and do other things that have externalities. And avoid all the things that cost you a lot and bring only small benefit.

Interesting suggestion on the old coins. I just wonder if not using your bitcoins is going to be as detrimental to the network as you suggest. I really think enough people will use them that it won't be an issue.

Please prove me wrong. I'm pretty sure the transaction volume would be not enough for protecting large Bitcoin market value (say billions of dollars). And fees cannot be arbitrary large because users would not use Bitcoins when alternatives are cheaper.

And couldn't you just transfer your balance back and forth occasionally to defeat such a fee?

Yes, but you would then pay the regular fee and end up the same (or worse) than leaving the coins untouched.

[rezin777]

But you would not clean your sewage, pay for the police, you would overfish the ocean and do other things that have externalities. And avoid all the things that cost you a lot and bring only small benefit.

Hehe, well that depends on your opinion of "commons". Mine are quite different, but that is for a different discussion. 

Please prove me wrong. I'm pretty sure the transaction volume would be not enough for protecting large Bitcoin market value (say billions of dollars). And fees cannot be arbitrary large because users would not use Bitcoins when alternatives are cheaper.

You are correct, I can't prove you wrong, so I will just bow out of this discussion and watch from the sidelines.

Yes, but you would then pay the regular fee and end up the same (or worse) than leaving the coins untouched.

Indeed.

[bitanarchy]

If the transaction fees would not be enough to support the desired security by bitcoin hoarders, then the block reward just has to go up. I suspect that competition between different versions of bitcoin that adopt a different block reward, would discover the right block rewards at a certain time. Saving gold in a protective vault also costs a lot.

[MoonShadow]

You guys worry too much.

[AntiVigilante]

You guys worry too much.

We worry sideways so it looks like the sky is falling to the left. And when that gets too weird we come here.

[MoonShadow]

Well, I have to admit that some of the concerns brought up here an in other similar threads have started to make me wonder if the situation can be improved, even though I don't really agree that it's truely broken.  I started a similar threat related to that in Economcs.

[Stephen Gornick]

I started a similar threat related to that in Economcs.

s/threat/thread/ ? 

I'm assuming this is that thread:
  - http://forum.bitcoin.org/index.php?topic=9295.0

[MoonShadow]

I started a similar threat related to that in Economcs.

s/threat/thread/ ? 

I'm assuming this is that thread:
  - http://forum.bitcoin.org/index.php?topic=9295.0

Yes.