Low transaction fees is one of the strengths of bitcoin. If adoption increases, near zero fees can sum up to a good amount in every mined block. There is no real concern.
It depends how near to zero near to zero is.
Topic: Title: Near Zero Bitcoin Transaction Fees Cannot Last Forever - page 2. (Read 4818 times)
It depends how near to zero near to zero is.
My guess is that the solution will come about in the form of the majority of larger miners/pools agreeing to and publishing a set of rules for fees - basically a fee cartel (Actually I recall reading somewhere that GHash has proposed a meeting of "top" miners at which fees will be one of the subjects under debate.)
This approach has the huge advantage that it doesn't require any protocol changes and would also be flexible, because it would basically just be a set of terms of service used by the major pools and could easily be changed by agreement.
(It might raise some nice anti-trust issues though ....)
This approach has the huge advantage that it doesn't require any protocol changes and would also be flexible, because it would basically just be a set of terms of service used by the major pools and could easily be changed by agreement.
(It might raise some nice anti-trust issues though ....)
It is interesting, I don't really know how the cartel solution would work out though. I can only say that I believe that a comparison of the cartel solution you mention vs. a centralized solution of setting a tx fee by core developers should be further investigated.
Conventional cartels are unstable because members always have an incentive to secretly cheat. But that would not be an issue with a pool/mining fee cartel because of the public nature of the blockchain. Ultimately I could see a situation where fee cartel rules are incorporated into wallet software so that the wallet will give the option to automatically calculate the applicable fee (and will auto-update as the fee rules change).
It might be said that this would only work if mining is dominated by a small number of pools/industrial miners and that this is something we want to avoid.
But perhaps it might work even with a distributed mining network. Suppose an industry body were to produce a set of recommended fee rules which miners are free to adopt or not as they choose. Game theory might suggest that nobody would adopt them because it is not in the interests of any miner to restrict the number of fee-paying transactions he incorporates, irrespective of the level of fee.
But game theory is poor at incorporating social conventions. For example, drivers almost invariably thank other drivers for acts of courtesy even though they will never see that other driver again. People are odd creatures. Perhaps a set of mining fee rules would be adopted as a social convention, even if they are not strictly rational on an individual basis.
Just thinking aloud ....
Low transaction fees is one of the strengths of bitcoin. If adoption increases, near zero fees can sum up to a good amount in every mined block. There is no real concern.
Am reading the paper now. But I noticed this:
"the more transactions a miner include, the more his reward increases but also his probability to earn any reward decreases because the time needed for his block to reach consensus depends on its size due to network propagation"
I don't follow. Miners only work on a hash of the block. So the size of a block cannot not affect the probability of earning the block reward.
When you say "the time needed for his block to reach consensus", do you mean the time taken to propagate a valid (solved) block? I can see this might be fractionally more for a 1Mb block than say a 100k block so that with the bigger block the change of being orphaned is slightly higher, but the diference must be miniscule.
Otherwise rational miners would always work on empty blocks and no transactions would ever get confirmed !
"the more transactions a miner include, the more his reward increases but also his probability to earn any reward decreases because the time needed for his block to reach consensus depends on its size due to network propagation"
I don't follow. Miners only work on a hash of the block. So the size of a block cannot not affect the probability of earning the block reward.
When you say "the time needed for his block to reach consensus", do you mean the time taken to propagate a valid (solved) block? I can see this might be fractionally more for a 1Mb block than say a 100k block so that with the bigger block the change of being orphaned is slightly higher, but the diference must be miniscule.
Otherwise rational miners would always work on empty blocks and no transactions would ever get confirmed !
hi, well, I am not an expert on propagation delay and this issue is referred to as only one sentence that you already quoted. However, we should maybe check the IEEE paper Information Propagation in the Bitcoin Network sec III, part C, named "size matters". Quoting from there:
"There is a strong correlation between the size of a message and the propagation delay in the network." and in the abstract of the same paper: "propagation delay in the network is the primary cause for blockchain forks". So it seems to be one of the issues.
Agreed. But the effect is marginal. A second or two as compared to the average block interval of 600 seconds. I don't know whether the big pools even take this into account. They seem fairly indifferent to the size of the blocks they solve.
My guess is that the solution will come about in the form of the majority of larger miners/pools agreeing to and publishing a set of rules for fees - basically a fee cartel (Actually I recall reading somewhere that GHash has proposed a meeting of "top" miners at which fees will be one of the subjects under debate.)
This approach has the huge advantage that it doesn't require any protocol changes and would also be flexible, because it would basically just be a set of terms of service used by the major pools and could easily be changed by agreement.
(It might raise some nice anti-trust issues though ....)
This approach has the huge advantage that it doesn't require any protocol changes and would also be flexible, because it would basically just be a set of terms of service used by the major pools and could easily be changed by agreement.
(It might raise some nice anti-trust issues though ....)
It is interesting, I don't really know how the cartel solution would work out though. I can only say that I believe that a comparison of the cartel solution you mention vs. a centralized solution of setting a tx fee by core developers should be further investigated.
Am reading the paper now. But I noticed this:
"the more transactions a miner include, the more his reward increases but also his probability to earn any reward decreases because the time needed for his block to reach consensus depends on its size due to network propagation"
I don't follow. Miners only work on a hash of the block. So the size of a block cannot not affect the probability of earning the block reward.
When you say "the time needed for his block to reach consensus", do you mean the time taken to propagate a valid (solved) block? I can see this might be fractionally more for a 1Mb block than say a 100k block so that with the bigger block the change of being orphaned is slightly higher, but the diference must be miniscule.
Otherwise rational miners would always work on empty blocks and no transactions would ever get confirmed !
"the more transactions a miner include, the more his reward increases but also his probability to earn any reward decreases because the time needed for his block to reach consensus depends on its size due to network propagation"
I don't follow. Miners only work on a hash of the block. So the size of a block cannot not affect the probability of earning the block reward.
When you say "the time needed for his block to reach consensus", do you mean the time taken to propagate a valid (solved) block? I can see this might be fractionally more for a 1Mb block than say a 100k block so that with the bigger block the change of being orphaned is slightly higher, but the diference must be miniscule.
Otherwise rational miners would always work on empty blocks and no transactions would ever get confirmed !
hi, well, I am not an expert on propagation delay and this issue is referred to as only one sentence that you already quoted. However, we should maybe check the IEEE paper Information Propagation in the Bitcoin Network sec III, part C, named "size matters". Quoting from there:
"There is a strong correlation between the size of a message and the propagation delay in the network." and in the abstract of the same paper: "propagation delay in the network is the primary cause for blockchain forks". So it seems to be one of the issues.
Isn't the problem with relying on fees to support the network, that miners have an incentive to include any fee-paying transaction irrespective of the level of fee. So there is no incentive on the part of users to pay more than a miniscule fee. But if everybody pays a miniscule fee then fees won't support a sufficiently robust network.
My guess is that the solution will come about in the form of the majority of larger miners/pools agreeing to and publishing a set of rules for fees - basically a fee cartel (Actually I recall reading somewhere that GHash has proposed a meeting of "top" miners at which fees will be one of the subjects under debate.)
This approach has the huge advantage that it doesn't require any protocol changes and would also be flexible, because it would basically just be a set of terms of service used by the major pools and could easily be changed by agreement.
(It might raise some nice anti-trust issues though ....)
My guess is that the solution will come about in the form of the majority of larger miners/pools agreeing to and publishing a set of rules for fees - basically a fee cartel (Actually I recall reading somewhere that GHash has proposed a meeting of "top" miners at which fees will be one of the subjects under debate.)
This approach has the huge advantage that it doesn't require any protocol changes and would also be flexible, because it would basically just be a set of terms of service used by the major pools and could easily be changed by agreement.
(It might raise some nice anti-trust issues though ....)
Am reading the paper now. But I noticed this:
"the more transactions a miner include, the more his reward increases but also his probability to earn any reward decreases because the time needed for his block to reach consensus depends on its size due to network propagation"
I don't follow. Miners only work on a hash of the block. So the size of a block cannot not affect the probability of earning the block reward.
When you say "the time needed for his block to reach consensus", do you mean the time taken to propagate a valid (solved) block? I can see this might be fractionally more for a 1Mb block than say a 100k block so that with the bigger block the change of being orphaned is slightly higher, but the diference must be miniscule.
Otherwise rational miners would always work on empty blocks and no transactions would ever get confirmed !
"the more transactions a miner include, the more his reward increases but also his probability to earn any reward decreases because the time needed for his block to reach consensus depends on its size due to network propagation"
I don't follow. Miners only work on a hash of the block. So the size of a block cannot not affect the probability of earning the block reward.
When you say "the time needed for his block to reach consensus", do you mean the time taken to propagate a valid (solved) block? I can see this might be fractionally more for a 1Mb block than say a 100k block so that with the bigger block the change of being orphaned is slightly higher, but the diference must be miniscule.
Otherwise rational miners would always work on empty blocks and no transactions would ever get confirmed !
hi all,
Thanks for all the comments. I am actually the author of the paper. Since I did my research on bitcointalk forum, I knew most of the info therein is already known by you, tech-savvy bitcoiners. My nevertheless intention in writing the manuscript was to inform the issue to the unfamiliar readers (or noobs in your terminology), raise some questions, help alerting more academicians about working on Bitcoin and related scalability issues, and propose what might be called as a minor contribution perhaps.
In more detail, depending on core developers' approach to trade-off of supporting small or large transactions in the future, whichever in priority, they should not only set a strict transaction fee (rather than a donation) such as [a percentage of the transacted amount] or [a fixed minimal fee + a percentage of the transacted amount], but also do this in a manner such that it fills the gap created by the future slow down of price increase together with the block rewards decrease. That is, to fix the total rewards, I propose the developers that they increase the transaction fees gradually over time, to keep up with a fixed hypothetical sum expressing total block earnings (sum of block rewards + tx fees) per block as follows,
https://i.imgur.com/MCWO0tH.png
note: The block rewards decrease once in every 4 years at once, as we all know it. Hence we should see cuts in the above graph but assuming it is approximated, we can ignore the cuts for the sake of simplicity.
However, as stated in paper, we all know that it is early for this kind of a modification. So I basically propose this kind of a "transaction fee such as a dynamic (gradually increasing) percentage", not now but in the future, when the time comes. I think it is ok to replace "when the time comes" with "when price of a bitcoin or lets say volatility reaches to the stability level of gold or a well-known fiat currency". Well, that's all about it. Although being arguably straightforward, to the best of my knowledge, I have not seen such a proposal before. As a future research, I believe it is crucial to determine/approximate, what a fixed transaction fee/percentage can/might/should be in a userwise/marketwise pacified/stabilized setting, in order to be able to compare tx savings with competitors such as visa/paypal etc.
Thanks for all the comments. I am actually the author of the paper. Since I did my research on bitcointalk forum, I knew most of the info therein is already known by you, tech-savvy bitcoiners. My nevertheless intention in writing the manuscript was to inform the issue to the unfamiliar readers (or noobs in your terminology), raise some questions, help alerting more academicians about working on Bitcoin and related scalability issues, and propose what might be called as a minor contribution perhaps.
In more detail, depending on core developers' approach to trade-off of supporting small or large transactions in the future, whichever in priority, they should not only set a strict transaction fee (rather than a donation) such as [a percentage of the transacted amount] or [a fixed minimal fee + a percentage of the transacted amount], but also do this in a manner such that it fills the gap created by the future slow down of price increase together with the block rewards decrease. That is, to fix the total rewards, I propose the developers that they increase the transaction fees gradually over time, to keep up with a fixed hypothetical sum expressing total block earnings (sum of block rewards + tx fees) per block as follows,
https://i.imgur.com/MCWO0tH.png
note: The block rewards decrease once in every 4 years at once, as we all know it. Hence we should see cuts in the above graph but assuming it is approximated, we can ignore the cuts for the sake of simplicity.
However, as stated in paper, we all know that it is early for this kind of a modification. So I basically propose this kind of a "transaction fee such as a dynamic (gradually increasing) percentage", not now but in the future, when the time comes. I think it is ok to replace "when the time comes" with "when price of a bitcoin or lets say volatility reaches to the stability level of gold or a well-known fiat currency". Well, that's all about it. Although being arguably straightforward, to the best of my knowledge, I have not seen such a proposal before. As a future research, I believe it is crucial to determine/approximate, what a fixed transaction fee/percentage can/might/should be in a userwise/marketwise pacified/stabilized setting, in order to be able to compare tx savings with competitors such as visa/paypal etc.
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Near zero fees don't exist now. They are some of the most expensive transaction fees you'll find, but they are hidden in subsidies that are paid for via inflation.
The block subsidies are designed to give miners an incentive to mine until the time comes that bitcoin is widely enough used so that there will be sufficient volume of BTC transactions with TX fees to make it worth their while.
Near zero fees don't exist now. They are some of the most expensive transaction fees you'll find, but they are hidden in subsidies that are paid for via inflation.
In other words, a miner, who already received bitcoins virtually for free from his mining efforts, needs a fee to coax him into parting with some of those bitcoins, right?
I understand that mining isn't free - equipment purchases, electricity, upkeep, a place to keep and run the equipment. But if the bitcoins that are mined don't pay for it, the whole thing isn't worth doing.
If enough miners quit mining, the difficulty will drop, and then it will be profitable again. And while the mining is down, sort of, some mining pool that is out to take over will rule the Bitcoin world, and Bitcoin will flop. So, are we going to attempt to prop Bitcoin up with fees? Bitcoin is supposed to be serving us, not we serve Bitcoin. Supply and demand.
Now, here I go, picking on supply and demand by commenting thusly. After all, all the fees, and all the discussion are part of the supply and demand. The need for Bitcoin is all about supply and demand. If Bitcoin flops, something will take its place, and it will be about supply and demand. Wars are fought over supply and demand. Dictators and kings attempt to control the markets, and their controls are part of supply and demand.
Thanks for listening.
I understand that mining isn't free - equipment purchases, electricity, upkeep, a place to keep and run the equipment. But if the bitcoins that are mined don't pay for it, the whole thing isn't worth doing.
If enough miners quit mining, the difficulty will drop, and then it will be profitable again. And while the mining is down, sort of, some mining pool that is out to take over will rule the Bitcoin world, and Bitcoin will flop. So, are we going to attempt to prop Bitcoin up with fees? Bitcoin is supposed to be serving us, not we serve Bitcoin. Supply and demand.
Now, here I go, picking on supply and demand by commenting thusly. After all, all the fees, and all the discussion are part of the supply and demand. The need for Bitcoin is all about supply and demand. If Bitcoin flops, something will take its place, and it will be about supply and demand. Wars are fought over supply and demand. Dictators and kings attempt to control the markets, and their controls are part of supply and demand.
Thanks for listening.
your right its about supply and demand.. by selling at a loss because they have been subsidized, means there is less demand because the coins are being pushed out (over supply). thus bitcoin buyers wont raise their prices as they have no need to. but if miners hoarded their coins, buyers would pay more as there is less supply on the exchange.
in short by selling at a loss they cause a price drop, thus again shooting themselves in the right foot a second time. knowing the next reward would be at a lower price shooting their right foot a third time. then the next block would be cheaper, you get it.. more shooting
This has been known from the beginning. People need to read the white paper.
Quote
By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.
The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of the block containing the transaction. Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free
The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of the block containing the transaction. Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free
In other words, a miner, who already received bitcoins virtually for free from his mining efforts, needs a fee to coax him into parting with some of those bitcoins, right?
I understand that mining isn't free - equipment purchases, electricity, upkeep, a place to keep and run the equipment. But if the bitcoins that are mined don't pay for it, the whole thing isn't worth doing.
If enough miners quit mining, the difficulty will drop, and then it will be profitable again. And while the mining is down, sort of, some mining pool that is out to take over will rule the Bitcoin world, and Bitcoin will flop. So, are we going to attempt to prop Bitcoin up with fees? Bitcoin is supposed to be serving us, not we serve Bitcoin. Supply and demand.
Now, here I go, picking on supply and demand by commenting thusly. After all, all the fees, and all the discussion are part of the supply and demand. The need for Bitcoin is all about supply and demand. If Bitcoin flops, something will take its place, and it will be about supply and demand. Wars are fought over supply and demand. Dictators and kings attempt to control the markets, and their controls are part of supply and demand.
Thanks for listening.
I understand that mining isn't free - equipment purchases, electricity, upkeep, a place to keep and run the equipment. But if the bitcoins that are mined don't pay for it, the whole thing isn't worth doing.
If enough miners quit mining, the difficulty will drop, and then it will be profitable again. And while the mining is down, sort of, some mining pool that is out to take over will rule the Bitcoin world, and Bitcoin will flop. So, are we going to attempt to prop Bitcoin up with fees? Bitcoin is supposed to be serving us, not we serve Bitcoin. Supply and demand.
Now, here I go, picking on supply and demand by commenting thusly. After all, all the fees, and all the discussion are part of the supply and demand. The need for Bitcoin is all about supply and demand. If Bitcoin flops, something will take its place, and it will be about supply and demand. Wars are fought over supply and demand. Dictators and kings attempt to control the markets, and their controls are part of supply and demand.
Thanks for listening.
Title: Near Zero Bitcoin Transaction Fees Cannot Last Forever
http://sdiwc.net/digital-library/near-zero-bitcoin-transaction-fees-cannot-last-forever.html
http://sdiwc.net/digital-library/near-zero-bitcoin-transaction-fees-cannot-last-forever.html
Thank you for posting this, exactly the information I was looking for, has saved me some work.
this article is printed atleast a decade too soon... i think luke JR/ghash probably sponsored the article writer 
for the next 10 years (2017 halving 2021 halving and 2025 halving) we should not worry or even concentrate on fee's but instead make miner not be soo ambishious to instantly sell coins at a cost loss, thus make them not need the extra fee as a subsidy.
after all, selling at a loss is not making them a bitcoin investor.. but an electricity supply investor.
by adding hashpower in a failed attempt to get a larger slice of th reward pie. is shooting themselves in the left foot
by selling the rewarded bitcoin as soon as they receive it at a potential loss. is shooting themselves in the right foot
we should not be subsidising their self mutilation suicide attempts, but instead getting them to see the beauty of holding on to life, and their bitcoins to then have a better future
for the next 10 years (2017 halving 2021 halving and 2025 halving) we should not worry or even concentrate on fee's but instead make miner not be soo ambishious to instantly sell coins at a cost loss, thus make them not need the extra fee as a subsidy.
after all, selling at a loss is not making them a bitcoin investor.. but an electricity supply investor.
by adding hashpower in a failed attempt to get a larger slice of th reward pie. is shooting themselves in the left foot
by selling the rewarded bitcoin as soon as they receive it at a potential loss. is shooting themselves in the right foot
we should not be subsidising their self mutilation suicide attempts, but instead getting them to see the beauty of holding on to life, and their bitcoins to then have a better future
The fees will be worth more as value rises so I don't expect any major changes any time soon. People seem to love to manufacture things to worry about with bitcoin.
and PDF is the most hackable format virus intégrated system ... in the world.
don't open a "free" and non-identified file !
use HTML5 instead of PDF.
don't open a "free" and non-identified file !
use HTML5 instead of PDF.
The TX fees will likely decrease in terms of BTC overtime as the price of BTC increases. Over time as more people start to use bitcoin the TX fees per block will increase, making the block subsidies less important to miners.
Ok, so what? Everything I read is already known. Fees were designed to replace the reward system. Do you have a comment about it or is this new information for you?
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