A Question from a Novice to an Expert

MX450

newbie

Activity: 25

Merit: 0

Quote from: shorena on June 22, 2014, 04:35:33 PM

The idea is that not the fees increase but that the amount of transactions increase over time because bitcoin gets more and more popular.

Banks are the only treath to Bitcoin's development since Bitcoin runs on the P2P network. It is simple and it is revolutionizing.

I wonder what will be of banks in the next 5 years. And for the sake: what will be of Wall Street?

Anarchy is near.

shorena

copper member

Activity: 1498

Merit: 1528

No I dont escrow anymore.

Quote from: MX450 on June 22, 2014, 04:21:25 PM

-snip-
Very good and detailed answer.

thanks

Quote from: MX450 on June 22, 2014, 04:21:25 PM

Furthermore, we can ask if the fee of each transaction will double each year as the block award halves each year.

If that's the case we can by the theory mine forever as nothing happened.

The idea is that not the fees increase but that the amount of transactions increase over time because bitcoin gets more and more popular.
We will have to wait and see how it develops though. The fees are not fixed and can be changed with every update.

Last change was with update to 0.9.0. [1]

Quote

This release drops the default fee required to relay transactions across the
network and for miners to consider the transaction in their blocks to
0.01mBTC per kilobyte.

0.001 BTC fee would be ~.60 USD currently, so it was lowered to 0.0001.

[1] https://bitcoin.org/bin/0.9.0/README.txt

MX450

newbie

Activity: 25

Merit: 0

Quote from: shorena on June 22, 2014, 02:42:41 PM

Quote from: MX450 on June 22, 2014, 01:05:00 PM

-snip-
1. You can mine blocks for an award and

2. then you can mine to keep transactions going

Thats the same thing.

Quote from: MX450 on June 22, 2014, 01:05:00 PM

My question to experts out there is:

Is there any award linked to "mining" transactions?

My thoughts swarm to bitcoin mining in 3 years or so.

As the award of each block will be halved every year the industry of mining will be unprofitable.

Thus, "mining" transactions could be a profitable alternative.
-snip-
Example: If you have 20000 people each sending a payment to a family member (P2P transaction) someone would have to "mine" those transactions. "Hashing" them from point A to point B.

To set in perspective: Banks around the world use servers to calculate their customer's transactions.

Banks vs. Bitcoin = Servers vs. ASIC machines

Let me quote Satoshi here.[1]

Quote

The steps to run the network are as follows:
1) New transactions are broadcast to all nodes.
2) Each node collects new transactions into a block.
3) Each node works on finding a difficult proof-of-work for its block.
4) When a node finds a proof-of-work, it broadcasts the block to all nodes.
5) Nodes accept the block only if all transactions in it are valid and not already spent.
6) Nodes express their acceptance of the block by working on creating the next block in the
chain, using the hash of the accepted block as the previous hash

The transactions are part of the block. So miners actually get both the block reward and the fees. The blockreward was just implemented to give miners an incentive [2] to start mining.

As you can see here
https://blockchain.info/tx/31d25b6afb97f6f8de3cd57e24ffe1a581c175dbbd0e2332475fc25e7ff8bed4

This newly found block gives an reward of 25.08861653 BTC
25 BTC from the "incentive part" and the rest from fees.

It helps to read the original paper again from time to time, because every few months you understand it better

[1] https://bitcoin.org/bitcoin.pdf - section 5 Network
[2] https://bitcoin.org/bitcoin.pdf - section 6 Incentive

Very good and detailed answer.

Furthermore, we can ask if the fee of each transaction will double each year as the block award halves each year.

If that's the case we can by the theory mine forever as nothing happened.

But do you know this?

InwardContour

sr. member

Activity: 644

Merit: 260

The amount that you receive when you (or your pool) find/mine a block is compromised of two parts

1. The block subsidy - this is currently 25 BTC per block and this is what will be reduced by 1/2 every 3 years.

2. The TX fees - when someone sends a TX they will include a small fee for the miner to give them an incentive to include the TX on a block, thus having the TX be confirmed by the network. The theory is that over time the TX fees will increase enough to counter the fact that block subsidies will be reduced over time

shorena

copper member

Activity: 1498

Merit: 1528

No I dont escrow anymore.

Quote from: MX450 on June 22, 2014, 01:05:00 PM

-snip-
1. You can mine blocks for an award and

2. then you can mine to keep transactions going

Thats the same thing.

Quote from: MX450 on June 22, 2014, 01:05:00 PM

My question to experts out there is:

Is there any award linked to "mining" transactions?

My thoughts swarm to bitcoin mining in 3 years or so.

As the award of each block will be halved every year the industry of mining will be unprofitable.

Thus, "mining" transactions could be a profitable alternative.
-snip-
Example: If you have 20000 people each sending a payment to a family member (P2P transaction) someone would have to "mine" those transactions. "Hashing" them from point A to point B.

To set in perspective: Banks around the world use servers to calculate their customer's transactions.

Banks vs. Bitcoin = Servers vs. ASIC machines

Let me quote Satoshi here.[1]

Quote

The steps to run the network are as follows:
1) New transactions are broadcast to all nodes.
2) Each node collects new transactions into a block.
3) Each node works on finding a difficult proof-of-work for its block.
4) When a node finds a proof-of-work, it broadcasts the block to all nodes.
5) Nodes accept the block only if all transactions in it are valid and not already spent.
6) Nodes express their acceptance of the block by working on creating the next block in the
chain, using the hash of the accepted block as the previous hash

The transactions are part of the block. So miners actually get both the block reward and the fees. The blockreward was just implemented to give miners an incentive [2] to start mining.

As you can see here
https://blockchain.info/tx/31d25b6afb97f6f8de3cd57e24ffe1a581c175dbbd0e2332475fc25e7ff8bed4

This newly found block gives an reward of 25.08861653 BTC
25 BTC from the "incentive part" and the rest from fees.

It helps to read the original paper again from time to time, because every few months you understand it better

[1] https://bitcoin.org/bitcoin.pdf - section 5 Network
[2] https://bitcoin.org/bitcoin.pdf - section 6 Incentive

MX450

newbie

Activity: 25

Merit: 0

Quote from: Wusolini on June 22, 2014, 12:47:09 PM

Quote from: MX450 on June 22, 2014, 11:35:15 AM

I would like to call my self a novice since there are several aspects of Bitcoin which I fully do not understand.

The very one aspect that has drawn my attention lately is mining within a pool.

Mining itself is very understandable and I get the idea.

But then come the "ways" of mining in the Bitcoin industry.

1. You can mine blocks for an award and

2. then you can mine to keep transactions going

My question to experts out there is:

Is there any award linked to "mining" transactions?

My thoughts swarm to bitcoin mining in 3 years or so.

As the award of each block will be halved every year the industry of mining will be unprofitable.

Thus, "mining" transactions could be a profitable alternative.

But the question is of course how.

Could you specify what you mean by "mining transaction" ... Huh

... ??

when you mine block (it contains number of transactions) and you get reward (fees of those transaction).

Hey.

Example: If you have 20000 people each sending a payment to a family member (P2P transaction) someone would have to "mine" those transactions. "Hashing" them from point A to point B.

To set in perspective: Banks around the world use servers to calculate their customer's transactions.

Banks vs. Bitcoin = Servers vs. ASIC machines

Wusolini

legendary

Activity: 1190

Merit: 1000

no need to carry heavy money bags anymore

Quote from: MX450 on June 22, 2014, 11:35:15 AM

I would like to call my self a novice since there are several aspects of Bitcoin which I fully do not understand.

The very one aspect that has drawn my attention lately is mining within a pool.

Mining itself is very understandable and I get the idea.

But then come the "ways" of mining in the Bitcoin industry.

1. You can mine blocks for an award and

2. then you can mine to keep transactions going

My question to experts out there is:

Is there any award linked to "mining" transactions?

My thoughts swarm to bitcoin mining in 3 years or so.

As the award of each block will be halved every year the industry of mining will be unprofitable.

Thus, "mining" transactions could be a profitable alternative.

But the question is of course how.

Could you specify what you mean by "mining transaction" ... Huh

... ??

when you mine block (it contains number of transactions) and you get reward (fees of those transaction).

MX450

newbie

Activity: 25

Merit: 0

I would like to call my self a novice since there are several aspects of Bitcoin which I fully do not understand.

The very one aspect that has drawn my attention lately is mining within a pool.

Mining itself is very understandable and I get the idea.

But then come the "ways" of mining in the Bitcoin industry.

1. You can mine blocks for an award and

2. then you can mine to keep transactions going

My question to experts out there is:

Is there any award linked to "mining" transactions?

My thoughts swarm to bitcoin mining in 3 years or so.

As the award of each block will be halved every year the industry of mining will be unprofitable.

Thus, "mining" transactions could be a profitable alternative.

But the question is of course how.

Topic: A Question from a Novice to an Expert (Read 944 times)