Is it possible that bitcoin will become unaffordable to use for micropayments?

[mc_lovin]

Regarding transaction fees, right now the fee is pretty reasonable at the price of a bitcoin...  But if transaction fees go up (more sites like SatoshiDice flooding the network?) and the price of a bitcoin goes up (eventually, to like $100+ theoretically), then the transaction fees might get really high.  To send a BTC right now, you might pay like 0.0005 BTC I think, doesn't seem like much, but what if you wanted to send someone a really small integer, like 0.0005, you would pay like double in fees.  If a BTC is trading for $1000, that makes 0.0005 tx fee cost $0.50...  That's not much either, but you pay that on tiny transactions.  Sometimes I go to send a BTC, and I guess if there are multiple small bitcoin addresses that it needs to send from, and I pay a 0.01 fee.  If the network gets very congested and the BTC price goes up (like it's destined to do), won't it be unaffordable to send small amounts of money?

[SgtSpike]

The fee can be changed.  It was already changed from 0.01 BTC to 0.0005 BTC in 2011, it can be changed again.

[DeathAndTaxes]

1) The 0.0005 BTC fee is a spam prevention mechanism.  You could use Bitcoin everyday for your entire life and never pay a fee.

2) The spam prevention fee only applies to low priority transaction.  Period.  If your transaction is high priority then there is no fee.  I could send you a single satoshi right now without a fee.  The input not output size/age is what determines priority.

3) The spam prevention fee can be adjusted.  It was adjusted downward from 0.01 BTC when Bitcoin went above $20 USD.  If necessary it could lowered again to sub cent range as BTC continues to gain value.  I would say at >$100 USD:BTC it might be worthwhile to consider lowering the spam prevention fee to 0.0001 BTC but not until then.    Someday the spam prevention fee may be a single satoshi

So ... no.

[mc_lovin]

oh wow.  that's pretty snazzy.. answers my question!  I felt like the fees would get higher and higher as the years go by and eventually I would feel like Paypal with my mining rigs dealing transactions..

thx guys!

[Stephen Gornick]

oh wow.  that's pretty snazzy.. answers my question!  I felt like the fees would get higher and higher as the years go by and eventually I would feel like Paypal with my mining rigs dealing transactions..

thx guys!

Right now, the fees paid by SatoshiDICE are not attractive enough to all the miners as some are now excluding those transactions.  The miners gain greater value by getting smaller blocks to propagate across the network a little quicker than the value the fees from those transactions brings.

So essentially, it is already happening that a fee of a half a cent isn't always enough to cause a miner want to include the transaction.  

When the amount of transactions grows even higher, the upper limit to the per-block data size will start to get hit.  The only prioritization method built into the system is the price paid for the transaction fee.

So bitcoin wasn't architected to be a micropayments system (defining micropayments perhaps as a dollar or less of value).  I wouldn't build on the presumption that fees will always be below some threshold, like maybe a few cents.

[matthewh3]

I thought of maybe shifting the decimal place so we would end up with 210,000,000 bitcoins instead of 21,000,000 bitcoins and keeping the transaction fee at BTC0.0005  So everyone's wallet goes up by *10.  Then we can still easily deal with whole integers called a bitcoin instead of a milliBitcoins once the BTC/EUR/USD value plateaus over $100 a coin.

[CoinCidental]

I thought of maybe shifting the decimal place so we would end up with 210,000,000 bitcoins instead of 21,000,000 bitcoins and keeping the transaction fee at BTC0.0005  So everyone's wallet goes up by *10.  Then we can still easily deal with whole integers called a bitcoin instead of a milliBitcoins once the BTC/EUR/USD value plateaus over $100 a coin.

When the block reward is cut to 6.25 or 3.15 the miners will figure out which transactions get priority......quite quickly id imagine 

[Foxpup]

I could send you a single satoshi right now without a fee.

Really? Don't dust outputs require a certain minimum fee regardless of priority?

[Vandroiy]

Yes, and it's not a problem. The security requirements for micro-transactions are not as high, so using payment processors or p2p micro-banks would be fine.

In fact, it has the advantage of being much faster. Your savings would still be safely in your own hands, and if tx volume at any given time is small compared to the cost to gain peoples' trust, micro-transaction fraud yields no profit.

[DeathAndTaxes]

I could send you a single satoshi right now without a fee.

Really? Don't dust outputs require a certain minimum fee regardless of priority?

DOH.  Don't post while sleeping.  Your right. I should have said "I can send you a bitcent (0.01 BTC)".

Of course that treshold (0.01 BTC) is adjustable and if BTC were to rise to a significant value (i.e. $100 USD:BTC) it could be lowered without risking the network.

[Stephen Gornick]

Yes, and it's not a problem. The security requirements for micro-transactions are not as high, so using payment processors or p2p micro-banks would be fine.

In fact, it has the advantage of being much faster. Your savings would still be safely in your own hands, and if tx volume at any given time is small compared to the cost to gain peoples' trust, micro-transaction fraud yields no profit.

Exactly.  We already have examples of these p2p micro-banks.   Most of us already use them without knowing it.  Mt. Gox is a p2p micro-bank that offers the ability to transact micro-payments with no fee, using their redeemable codes (denominated in BTCs, USDs, EURs, GBPs, etc.).   These redeemable codes / vouchers / coupons etc are today offered by many exchanges (Bitstamp. CryptoXChange, Bitcoin-24, and more) and now some eWallets are introducing them (e.g. EasyWallet.org) so there is already a method for a service to use bitcoin for micropayments where there are either no fees or the frees are ridiculously low (compared to any other alternatives).

Additonally, each service that has its own EWallet is internally able to support bitcoin-denominated micropayments without a fee for its users.  Ogrr.com is a great example of how this is done today.

Also, each micropayment doesn't need to be an individual transaction on the blockchain.  The transaction fee can be shared among multiple transactions, lowering the per-transaction code.  This is how the Bitcoin Faucet works, for instance, when it hands out its pennies-worth of transactions throughout the day.

So eventually it probably won't be feasible for microtransactions themselves to cross the blockchain.  Once that day arrives there are already alternative approaches that work nearly as well.  In the meantime, there are services like SatoshiDICE and others that have the opportunity to take advantage of this period where ultra low cost microtransactions that cross the blockchain are possible, and build a customer base while following a strategy that is compatible once the day that the "nearly free, ultra low cost" feature goes away.

Though there is a wide gap between fees that are "free or nearly free" and those that are "multiples of pennies" per transaction, the difference means little to most every normal commercial and P2P transaction so this issue is isolated solely to the use of microtransactions that themselves are amounts measured in pennies.

[matthewh3]

So bitcoin for micro-transactions in the future is a no go unless you stay within a walled garden.  I thought bitcoin was all about being open and zero transaction fees.  Those are two of its biggest sellers.  Cut them out too early and slow down bitcoin adoption.  The whole bitcoin market capitalisation is still under $100Million yet they sound expensive to buy at nearly $10 each and too expensive to transfer for frequent open micro transactions.  Revalue bitcoin once it's spent twelve months plateaued over $10 to 210,000,000 coins from 21,000,000 and revalue everyone's wallet by *10 keeping the transaction fee at BTC0.0005.  Plus keep doing that until the bitcoin market-cap is worth trillions of dollars and they are mainstream worldwide.  So take this bitcoins are worth $100 each and a transfer costs $0.50 yet the whole market-cap is only $1Billion.  Sounds like bitcoin would be getting too big for its boots when you look at how many dollars are in circulation in bills and coins.  Plus those in circulation as bills and coins are only the tip of the ice-berg.

[DeathAndTaxes]

You keep bring up this moving the zero nonsense.  It would change anything also it will NEVER (I don't mean unlikely I mean NEVER) happen as it is a hard fork on a unnecessary change.

Bitcoin can handle micro transactions just fine.  The scenarios describe above are talking about years (maybe decades) down the line.  Even if more advances services are built on top the platform is still open and that allows cross compatibility and open free markets for those "gardens".  Hardly walled, more like picket fences.

[matthewh3]

Maybe that hard fork won't be implemented until the transaction fee of 1satoshi is too much then.  With bitcoin value set to rise with it being deflationary people are going to be dealing in smaller and smaller amounts of coins so the Tx fee will have to drop and keep dropping as long as bitcoin remains to grow.  Or bitcoin market-cap will stop growing. 

[DeathAndTaxes]

Dropping the fee is trivial.  It has been done once already.  It is simply changing some lines of code in the client as fee are enforced at the node level and nodes don't have to agree.  There is no issue of compatibility or causing a fork.  If you wanted to you could publish a "fork" of the client which has a 0.00001 BTC mandatory fee and it would work just fine on the network (albeit other nodes might drop your txs).


When 1 satoshi is >$0.05 (2012 dollars) then a fork may be needed still I doubt even then the 21M will be expanded to 210M to 2.1B.  Just make 1 satoshi 1E-12 instead of 1E-8 and keep the same number of BTC.  Then again if 1 satoshi = $0.05 then the Bitcoin money supply is on the order of $105 trillion and it is the large economy in the world and likely the reserve currency of the central banks for the few remaining fiat.  Worrying about how to solve that problem seems like putting the cart before the horse.

[SgtSpike]

You keep bring up this moving the zero nonsense.  It would change anything also it will NEVER (I don't mean unlikely I mean NEVER) happen as it is a hard fork on a unnecessary change.

Bitcoin can handle micro transactions just fine.  The scenarios describe above are talking about years (maybe decades) down the line.  Even if more advances services are built on top the platform is still open and that allows cross compatibility and open free markets for those "gardens".  Hardly walled, more like picket fences.

It wouldn't require a hard fork.  Just make the change on the client front-ends.  1 BTC = 10 BTC on the client-side display.  No one would know the difference besides the programmers.

[finkleshnorts]

It bothers me to read bitcoin propaganda that harps strongly on the "no transaction fees" bit.

Hasn't Gavin said that bitcoin is not supposed to be particularly useful for micropayments in the long run?

[DeathAndTaxes]

I would say "low transaction fees" although remember it is very likely free tx will remain viable for a long time.  It won't be realtime but if you are willing to wait hours or days I am sure someone will include it for free.  Still low/free can be very very low.  If Bitcoin scaled to PayPal sized network (~50tps) that would be roughly 1.5 billions transactions per year.  If avg fee was $0.01 USD it would be the cheapest payment platform by far and would still generate ~$15 mil a year to fund miners and protect the network.

[CoinCidental]

I would say "low transaction fees" although remember it is very likely free tx will remain viable for a long time.  It won't be realtime but if you are willing to wait hours or days I am sure someone will include it for free.  Still low/free can be very very low.  If Bitcoin scaled to PayPal sized network (~50tps) that would be roughly 1.5 billions transactions per year.  If avg fee was $0.01 USD it would be the cheapest payment platform by far and would still generate ~$15 mil a year to fund miners and protect the network.

Miners dont have much choice to refuse tranactions yet if they want the population  to use bitcoin ,nobody is going to wait a few days on transaction

(if transactions are not processed ,all the coins will be worth zero )

[Xenland]

I believe miners can chose which trasnactions to mine, so I'm sure some miners wont care and some miners aim for the higher transaction fees. The spam prevention is up to the miners but the official client helps with that spam prevention by hardcoding an annoying message to include a tx fee