Topic: Demurrage, transaction fees, storage fees & comparison to commodity money. - page 5. (Read 16799 times)

It's only so expensive now because the economy that it represents is so small, and the inflation rate is so high.  That ratio will change with the growth of the economy and the first block reward cut.

How is that an issue?

The block chain secures the network. But it doesn't HAVE to be used to trade, it's merely the main frame. If you enforce rules on the block chain that people regard as unfair, they will naturally stray away from it, using escrows or key swapping to trade instead, and that will reduce the traffic on the block chain, thus reducing miners' fee, and reducing the security overall. As it stands, use of the block chain is voluntary, so you can't go around pushing rules on it.


You miss the point. Right now whether I pay .20 BTC or 20 BTC, I'm paying the same fee. Fee is based on transaction size, not volume. What is charged is the amount of data that needs to be added to the block chain for the transaction to take place. That is of course logic. But if you feel you need to modulate fees based on another criteria than block chain load because the payout is too low, then I say let things settle naturally and watch miners charge fees based on volume too.

My point still stands, flat fees always hurt small trades. Once again that will push people towards escrows, who will offer cheaper transfers while not paying a cent to the miners.


I do not think time of entry is a legitimate cause for higher fees. You people are presenting hoarders as some sort of free loaders on the economy that only take and don't give anything in return... The network has grown to what it is thanks to long time holders. Not thanks to miners, not thanks to speculators, but thanks to long time investors alone, who took a chance and invested into Bitcoins. You are offering to chastise these people for the very action that bears the economy.



Maybe you should take a little more time in reading the people you refer to. Traders are the ones making the block chain heavier, certainly not hoarders.

Nevertheless, the whole idea that hoarders just sit on their money and NEVER participate in the economy is preposterous.

This is not quite what I intended.  Older coins are not more expensive than newer coins.  Several dispersed transactions holding one person's funds is ore expensive than fewer transactions holding that same total.  It just tends to be more likely for older transactions because savers who have more bitcoin in total than is required for regular trade have a security incentive to spend the most recent matured coins before the older coins.  The default client behavior is to spend the oldest transactions first, but this can be changed; and thus it will if the incentive for savers to keep the bulk of their funds in many older transactions as compared to a few consolidated transactions.  I don't want the costs of storage to be very high, because I still want Bitcoin to favor capital accumulation.  It's just that there still needs to be some incentive for those early adopters to consolidate their holdings rather than keeping 400,000+ BTC in 8000+ transactions of 50 BTC apiece.

A max limit doesn't make any sense, however.  The fee needs to be roughly equivalent to the problem in order to encourage the desired behavior; which means that it needs to increase relative to the age of the transaction.

I don't really get why you think it is possible to artificially manipulate the risk-free interest rate without affecting the risk premium.  When a borrower has the option of default, there is no distinction between risk-free interest rate and risk premium -- they are inextricably linked.  And since Bitcoin isn't going to be building debtor's prisons or enforcing wealth redistribution, it would be irresponsible to build such assumptions into the system.

Okay, so you just want to tax savers which would indirectly benefit borrowers.  We get that.  But if the demurrage is close to the actual cost of securing the network, then the effect is nil.  So couching your argument in terms of borrowing and lending just seems out of place.


The lending hole was caused by inflation and fractional reserves subsidizing investors.  Bitcoin eliminates that.

It's going to be a problem much sooner than that. Would you buy gold now if you knew that it would likely turn into lead in 40 years?

Even if we somehow collectively solve this problem, there is another one. Contrary to what Satoshi wrote at the beginning, Bitcoin is a quite expensive system to maintain. At the current difficulty and BTC price, miners are paid 25-30 million USD a year (by block inflation) to protect 40-45 million USD Bitcoin market value. The current BTC price/difficulty may be abnormally high but the electricity alone costs a cool 1-1.5 million USD a year and equipment depreciation is 2-3 times of that and it will rise when BTC price/difficulty drops. And Bitcoin is barely safe to an attack because Bictoin need to maintain this capacity constantly and attackers can just use short bursts. I'm not sure that the mainstream banking costs for transaction system and money supply are so high percentwise for the same amount of money supply and trading that Bitcoin offers. The bailouts (which were indeed expensive) went for fixing the lending hole which Bitcoin is not doing.

Bitcoin will either be expensive or attack prone. Both outcomes are not good for the BTC value.

The Demurrage rate would be substracted from the interest rates, thus leading to cheaper loans for borrowers.
That's an effect that most people in this forum consider undesirable. On the other hand, I consider that effect (provided that the demurrage rate is lower than the "liquidity premium" and therefore does not affect the risk premium) desirable.

Then I'm a little confused as to what this discussion has to do with lending/borrowing.  Can you explain that?

No, English is not my native language, so I appreciate any correction in my use of it.
But, but as far as I know...
savers = hoarders + people who store goods for future consumption + investors who don't borrow money + lenders
You don't need to borrow money to be a trader.

No it won't. You'll simply sit on a coin with capped fee and swap the private keys around, enjoying lower fees on your everyday spending wallet. Overall this will reduce network security long term, because it forces people to design ways to altogether avoid the block chain.