Topic: What will keep transaction fees up? - page 5. (Read 15432 times)
Very nice explanation, Theymos. Can you comment on "max block size" in the future? Is it likely to stay the same for all time? If not how will it be increased?
There is a small cost to adding a new transaction. You have to store the transaction until it is spent, validate the transaction, and recompute part of the Merkle tree for the block. There will also be big network, disk, and electricity costs for generating blocks.
Block size limitations indicate that the network is unanimously willing and able to download, upload, and store blocks of that size every 10 minutes. It will probably stay at the current 1MB until Bitcoin has a solid backbone of generators. Then it can increase rapidly.
Some generators will set fees to the minimum, and some will set fees to the highest profitable level in the hope of raising it further. Most will be set somewhere in the middle. The generators will be saying, "We want to be paid on average this much," and the users will be saying, "We will pay only this much on average." This creates a really nice effect: your transaction will almost always clear eventually, but more fee = more speed.
The "minimum fee" for a generator will usually be the fee that causes the most fee-transactions to be included in the block. Volunteers or people who feel that the generation reward is enough might have a minimum fee of 0. This will happen less and less in the future, though, because costs will rise, inherent rewards will be reduced, and you'll therefore want to create blocks with at least some non-free transactions.
If the network overcharges, competitors will come in that claim the leftover transactions. If the network undercharges (a high-fee transaction exists, but it is not included in a block in favor of a cheaper one), competitors will come in with proper fee-based prioritization.
When the coins generated per block is low, users may not be willing to pay enough for generators to ever be profitable. Transactions will be really slow in this case, and the users will hopefully change their minds. If they don't, the least efficient generators will leave, the difficulty will be reduced, and generation will be profitable again. The users will be saying, "I'm not paying for that much CPU power! Reduce it."
Block size limitations indicate that the network is unanimously willing and able to download, upload, and store blocks of that size every 10 minutes. It will probably stay at the current 1MB until Bitcoin has a solid backbone of generators. Then it can increase rapidly.
Some generators will set fees to the minimum, and some will set fees to the highest profitable level in the hope of raising it further. Most will be set somewhere in the middle. The generators will be saying, "We want to be paid on average this much," and the users will be saying, "We will pay only this much on average." This creates a really nice effect: your transaction will almost always clear eventually, but more fee = more speed.
The "minimum fee" for a generator will usually be the fee that causes the most fee-transactions to be included in the block. Volunteers or people who feel that the generation reward is enough might have a minimum fee of 0. This will happen less and less in the future, though, because costs will rise, inherent rewards will be reduced, and you'll therefore want to create blocks with at least some non-free transactions.
If the network overcharges, competitors will come in that claim the leftover transactions. If the network undercharges (a high-fee transaction exists, but it is not included in a block in favor of a cheaper one), competitors will come in with proper fee-based prioritization.
When the coins generated per block is low, users may not be willing to pay enough for generators to ever be profitable. Transactions will be really slow in this case, and the users will hopefully change their minds. If they don't, the least efficient generators will leave, the difficulty will be reduced, and generation will be profitable again. The users will be saying, "I'm not paying for that much CPU power! Reduce it."
I'mnot sure, but wouldn't it be the same way we agree on the reward for a generate? By refusing to accept blocks that are too big?
Sure, but the reward sizes are set in stone in the protocol and follow a predetermined path. The maximum block size will have to adjust to balance security and transaction demand.I think the max block size is set so that the chain file will never be larger than [max block size]*[time since first block]/[10 minutes]
If a generator could just increase it they could force a huge block on everyone. To avoid that, we all reject oversize blocks. I believe it would be a breaking change, but there are ways to get it done anyway. If file storage becomes absurdly cheap and many blocks are full we will organize the change by issuing all new versions for a while to trigger the rule change at some future block.
This is my understanding, anyone please correct.
I'mnot sure, but wouldn't it be the same way we agree on the reward for a generate? By refusing to accept blocks that are too big?
Sure, but the reward sizes are set in stone in the protocol and follow a predetermined path. The maximum block size will have to adjust to balance security and transaction demand.When coin creation diminishes transaction fees are supposed to encourage people to keep generating blocks. But how does the transaction pricing work?
The cost of hashing does not increase from including another transaction in a block. A generator will always benefit from including a transaction no matter how small the fee. So the fees will approach zero (as, indeed, they are now) making block creation very unrewarding which will reduce the computing power providing Bitcoin its security to almost nothing.
The wiki only talks about how limited block sizes keeps transactions scarce and prices up. Is that it? I see no market mechanism connecting the demand for transactions to the block size limits. How will everyone agree on maximum block sizes?
Am I missing something?
The cost of hashing does not increase from including another transaction in a block. A generator will always benefit from including a transaction no matter how small the fee. So the fees will approach zero (as, indeed, they are now) making block creation very unrewarding which will reduce the computing power providing Bitcoin its security to almost nothing.
The wiki only talks about how limited block sizes keeps transactions scarce and prices up. Is that it? I see no market mechanism connecting the demand for transactions to the block size limits. How will everyone agree on maximum block sizes?
Am I missing something?
I'm not sure, but wouldn't it be the same way we agree on the reward for a generate? By refusing to accept blocks that are too big?
When coin creation diminishes transaction fees are supposed to encourage people to keep generating blocks. But how does the transaction pricing work?
The cost of hashing does not increase from including another transaction in a block. A generator will always benefit from including a transaction no matter how small the fee. So the fees will approach zero (as, indeed, they are now) making block creation very unrewarding which will reduce the computing power providing Bitcoin its security to almost nothing.
The wiki only talks about how limited block sizes keeps transactions scarce and prices up. Is that it? I see no market mechanism connecting the demand for transactions to the block size limits. How will everyone agree on maximum block sizes?
Am I missing something?
The cost of hashing does not increase from including another transaction in a block. A generator will always benefit from including a transaction no matter how small the fee. So the fees will approach zero (as, indeed, they are now) making block creation very unrewarding which will reduce the computing power providing Bitcoin its security to almost nothing.
The wiki only talks about how limited block sizes keeps transactions scarce and prices up. Is that it? I see no market mechanism connecting the demand for transactions to the block size limits. How will everyone agree on maximum block sizes?
Am I missing something?
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