Topic: Will transaction fees alone be enough incentive to keep miners mining? (Read 2519 times)

Couldn't there be a way to measure the contribution quantitatively of miners (and pools) by their block signatures, and by the height of the blocks created? There would have to be a scheme that checked that only transactions with fees are counted. I would also like to see (as suggested by someone I cannot recall) to have an additional (or percentage of a) fee destroyed to go back to the unmined bitcoin count.

These and probably a few other schemes might give us a proof-of-merit model that rewards honest mining pools. Possibly with extra Bitcoin from the destroyed fees or maybe decreased difficulty. I'm trying to salvage any ideas from the prook-of-stake model that might serve to add a level of trust to a pool that it will include transactions and be amply rewarded for doing so. It would be a nice bonus if it could mitigate the risk of an unknown 51% attack.

It's also likely that the following will become a more frequent occurrence (but for different reasons). i.e. separate agreements between merchants/service providers and miners.


That will allow, say, a big merchant to provide a separate payment path than fees to the miner when it is for payments from their customers.  It's a bit like the idea of free postage.  We all know that postage isn't free...

Yes. Here's why.

Mining will first go down. That means the reward goes up from having more time for transaction fees to go up. Mining goes up to get it. Reward goes down. Mining goes down. Lather. Rinse. Repeat.

Well, I plan to be reincarnated as an indestructible cyborg when the singularity hits, and I need to plan my trading strategy accordingly. Specifically, I need to know whether bitcoins will go up or down in value over the next several centuries.

A functioning competitive market for a public good will never work, so I fixed that for you.

You missed one possibility, however. You could end up with the emergence of BitPal™. I'm sure BitPal™ would be super-vigilant to prevent fees from ever getting low. You could trust BitPal™ with your network security 100%!

I was wondering about this also. The only way this makes sense as speculation is if one takes a super long term view. Longer than what I usually refer to as long. It's a good point if this is at all relevant here.

Probably because the question is about something that's not going to happen for about a hundred years or so? I think that's about as speculative as you can get!

Why is this in speculation ?

Yes, and the easiest way to convince people to pay higher fees is for a group of miners to only process high-fee transactions.

Hmmm... It would be better if "pay a fee for faster processing" was implemented at the protocol level rather than being left up to miners (though such a protocol change would easily be accepted if enough miners felt they couldn't work out any other solution). Perhaps something like a minimum transaction fee equal to the block number's largest prime factor. That way, transactions with a fee of only 1 satoshi will have to wait for a prime numbered block, while higher-fee transactions are allowed more frequently. Clients can recommend a specific fee by working out the factors of upcoming blocks and asking the user how long they are willing to wait. Just a random idea, I don't know how well it would work in practice.

This is one of those issues that has been discussed at length in other sections of the forum. The conclusion is that this is a non-issue for at least this decade. During the decade we either come up with a functioning tx fee market (which is the most likely scenario) or we don't which means that we either incorporate some type of proof of stake into Bitcoin or a Bitcoin competitor kills Bitcoin.

Either way, realnowhereman is on point saying that this will most likely be solved way before it is actually an issue. The fact that there has been so much talk about this is a very good sign in itself. In fact it's very likely that a new system will begin forming during the 25 BTC reward block era, which is when tx fees quit being negligible amounts of the total reward. They will still be a small percentage (even after the 25 -> 12,5 drop, which is why I said this is really only a problem next decade).

This is speculation based on current tx amounts though, if Bitcoin usage significantly increases tx fees will be a bigger part of the picture sooner than we think. It won't accelerate the problem though because that is solely related to the amount of fixed reward. The reason for this is that increasing usage will also raise the price of BTC thus leading to more mining investments and thus a stronger network.

In 30 years the block reward will be near zero.  The reward will instead come from fees, and the protocol has no control over how often and how large a fee-paying transaction will be offered to the network.  Therefore the actual block period won't matter in the slightest.

I suppose it should be long enough to allow previous blocks to propagate through the network; but that's probably significantly less than 10 minutes.

The market will sort the problem out, as always.  If it becomes unprofitable (by whatever measure, monetary or security) miners will reduce until it does become profitable.  Miners will independently decide on their own "profit-requirements" and might, say, not include any transaction that doesn't offer a greater-than-zero fee; or a 0.01% fee, or whatever.  That requirement will multiply by the size of the pool implementing that requirement and will be competed against between the big pools.

Some small miner with his CPU might say "I'll mine for free"; but then your transaction won't get included for a long time.  Perhaps you're okay with that.

The only thing missing, I think, is the ability to broadcast a new transaction that supersedes one that has been stuck in limbo with a larger fee-paying one.  I think thoughts from developers are already moving in those directions.  In which case, this problem will be a non-problem well before 30 years.  I would expect, by the end of this year in fact.

You don't have to mine to donate hashing power. The easiest way is to just make transactions with high fees.

In short, not much. Although miners would get the block reward more frequently, the block reward halving would happen more frequently as well, causing it to balance out exactly. To put it another way, there are only 21 million BTC to be distributed, the only difference is how fast you distribute them. Furthermore, each individual block would have fewer transactions, and therefore less transaction fees, but you get more blocks, again balancing it out exactly. 10 minutes was chosen because it's not so long that transactions take forever to be confirmed and not so fast that network propagation delays result in stale blocks.

In 30 years I imagine that internet connectivity and computing power will speed up. When rewards drop significantly, what would happen if you decrease difficulty to decrease block creation time?

You are assuming that all miners are motivated solely by profit and would not turn down a fee of any amount, not even a single satoshi. Maybe I'm being hopelessly optimistic, but I think there will always be at least some miners willing to sacrifice a portion of their profit "for the good of the network", as it were. I also think that if the difficulty drops dangerously low, a large number of these self-sacrificial miners will emerge to try to save the network. It's even possible (or even probable) that if Bitcoin becomes a major global economy, major governments will get behind it, spending taxpayers' dollars (bitcoins?) on unprofitable mining operations to ensure the security of the network.

Yes, but that requires selfless sacrifice from the refusing miners so the equilibrium price still approaches zero (given that there is no cost for the users to lower their fees).

No, your services are not identical to competitors' services. You are not just selling spaces in blocks which you might find in the future, you are selling spaces in blocks which you might find in the near future. People don't just want their transaction included a block eventually, they want their transaction included in a block immediately, and they will probably be willing to pay extra to make it happen. As long as there are some miners who refuse to accept small fees, there will be an incentive for people to pay higher fees, since this is the only to guarantee that their transactions will be included in a block as quickly as possible.

What would motivate everyone to download that particular program?

Someone would make a binary with a default fee setting of 1 satoshi for everyone to download. Not everyone has to program the nuts and bolts.

Why? What will motivate a large majority of users to actively lower whatever "negligible" default fee setting they have?