Topic: Crypto's utility as a payment tool - page 2. (Read 840 times)

That could have been great. But i dont think it should be fix, bitcoin is bitcoin. Perhaps that idea can be done to other coin/s during the earliest stage.

This is why Lightning Network exists. Small transactions will be happening there most of the time, large value transfers will still happen onchain, and in this case network fee won't be a problem, it would be comparable or smaller than what fiat systems are offering.

This is only my opinion and please allow me to share it with here.

In my opinion, it cannot be modified or repaired because bitcoins have their own decentralized order for its transactions. Because of this, every bitcoin transaction has its own transaction fee and it depends on the bitcoin sender, they had different rates, especially when it is used for paying bills and receiving and sending bitcoin to fellow bitcoin users in different kind of wallet addresses.

And immutability is the definition of irrevocable, therefore any price and rate regarding bitcoin transactions cannot change. And while the basis of the minimum fee for transactions made by bitcoin cannot really change because bitcoin has its own time frame in every transaction it makes.  That's all.

There is none:
https://bitinfocharts.com/comparison/bitcoin-transactionfees.html
https://bitinfocharts.com/comparison/bitcoin-price.html

Average fees from May 2017 till November were constantly over 2.5$, with the price being well below 6k$.
In May 2018 till October, with the price constantly above 6k the average fee was below 1$.
In January this year with prices over 10k we were still below 1$, now with prices below that we're at around 3-5$.


Nope, it's not.  

Indeed I used recent sat/byte fees and prices but this is just for the sake of forming an example.
If you are to introduce more variables in the equation, then you have to be able to prove a correlation. Fee value vs BTC price has a direct connection based on bitcoin's technology alone.
To support the claim that through time fees go down as prices rise, you'd need to look through years of data, see what parts of data are comparable, and account for any connection between the two.
Might be true for some periods, might be the opposite for others. And then transaction volumes must also be accounted for etc. etc. That's much more complicated and doesn't take away anything from the key observation here.

---

By way of example, I'm trying to show that bitcoin's mechanisms makes so there's a direct connection between price and fee-value.
Yes, in a real world scenario there are more variables, but what evidence do we have to support that if prices were to go up that much, the value of fees wouldn't follow suit?
For the record, I wasn't trying to imply that there would be perfect correlation. But rather to show what bitcoin's fundamental's can lead to for fees.



And that brings up another problem. Even if the price does go way up and the correlation between price/fee value isn't great, but it's still there.
The problem I show in my extrapolation is still very much present.
Regardless of BTC price, higher fees act as a disincentive to make transactions. So any transaction of value around the range of the fee becomes prohibitive (i.e. if you have to pay 5$ to transact, you won't want to transact anything near 5$).
Arguably, that lowers bitcoin's utility as a payment tool, which is the problem I'm focusing on here.

This is a very poor approach at it...
Let's continue your example but increasing the value a bit more:


So for 90k$ per BTC we will have 43$ on average.
And for 900k$ we will have 430$ on average.

You realize that this extrapolation is pretty lame, even if bitcoin would be worth x amount, people are not going to spend thousands in fees if there is nothing to gain from it.
Excluding a massive FOMO with rising prices when everybody is rushing his coins around there is really no incentive to move your coins at such fees.

Just as demand for transaction space drives the price up, so will a higher price drive demand down.

that is not the whole story. in fact you have forgotten one thing because you are looking at the very recent history. in fact with price rise, fees have gone down in bitcoin terms. for example when price was less than $1 the fees were around 0.1BTC and as the price went up, the fees went down too. or a couple of years ago fees were fixed at 10k satoshi per transaction.

keep in mind that as far validity of a transaction is involved, the minimum valid fee is zero. it is the "fee market" that decides how much it should be. and fee market is affected by the competition (for the scarce block space) and the price.

immutable means "unchangeable", and immutability of bitcoin means its blockchain is not going to change. for example when your transaction is included in a block it won't reverse or be undone.

Given an infinite resources, the value could be fixed such that this doesn't affect Bitcoin's stability. The value can't be fixed to respond to changes in the exchange rate vs fiat but it could only be fixed to a certain Bitcoin amount. It would be hard for the network to reach a consensus about the value of Bitcoin unless there is a central authority (exchange, weighted average of exchanges) to decide this.

Bitcoin's realistic minimum fee is 1 satoshi/byte.

Assuming that you're talking about minimum fees for a transaction to get confirmed within a timeframe, it shouldn't be fixed. Bitcoin's capacity is not infinite and will probably never be. The fees market won't be affected much even if you were to impose such a restriction. The miners can only include that many transactions and not all the transactions above the fee rates would be cleared in the timeframe; the restriction would be pretty useless.

How do we measure the level of utility that can be derived from using a specific payment method?
For this example let's suppose that the level of utility a payment method can offer is measured as the relationship between monetary value transacted vs. fees paid.

If we apply this to bitcoin, we can see how "efficient" it can be under certain scenarios. Minimum fees/transaction are desired.
For this example I'll set the sat/byte fee as a constant of 193 sats per byte. Amount of money (in monetary value) intended to reach the recipient can be any constant.

For a (very) standard transaction of 250 bytes, one would spend 0.0004825 BTC.
At a hypothetical price of $7.000 per BTC, the cost of the transaction would be $3.3775.
At a hypothetical price of $9.000 per BTC, the cost of the transaction would be $4.3425.
And so on...

We see that bitcoin's utility as a payment tool has an inverse correlation with bitcoin's market value.
If the market price of BTC goes up, fees for transferring the same value with bitcoin become more expensive.

---

My question is, can this be fixed, especially in a way that doesn't compromise decentralization and bitcoin's immutability?
And should it be fixed in your opinion?