Transaction fees for smaller transactions

Thinking about the potential problems with Bitcoin, I am doing a thought experiment. Suppose that Bitcoin is successful in replacing gold. The market cap of gold is $9.6 trillion (10^12). At that level, each bitcoin would be worth $400,000. In such a world, let's suppose that people were making $40 transactions to buy things. Then the average transaction would be 0.0001 bitcoins. Assuming a reasonable transaction fee of 1%, this would imply that transaction fees should be 1 micro bit-coin in such a world.

Bitcoin-qt would clearly need to adapt to this. Some miners (payment processors) could offer different terms, and users could choose these payment processors with the addnode option in bitcoind.

I just wanted to get some feedback on how transaction fees are going to adapt to a higher marketcap.

Kind Regards,
Harold Naparst

transaction-fees

zkilnbqi

Posted 2013-10-07T09:08:18.457

Reputation: 335

Answers

The default fee is in place to decrease the chance the creation of dust outputs (miniscule amounts of bitcoin). Dust outputs cost more to spend than they are worth themselves and they still need to be stored in the disk space of anyone that stores the complete blockchain - thus are frowned upon.

To read a discussion on that matter with some of the Core Developers you might want to review The minimum transfer fee is not trivial anymore.

Currently, there are some mining pools that accept transactions even without transaction fees. The default transaction fee in bitcoin-qt has been lowered before when the value of bitcoin increased sufficiently to make the recommended transaction fee too high. This happened for example in May 2013, when the default fee was reduced to 0.0001 BTC from 0.0005 BTC.

It is therefore expected that the default transaction fee will be kept at a respectively low level should the value of bitcoin increase dramatically. In any case, anyone can choose to ignore it by changing the settings of their bitcoin-qt.

Murch

Posted 2013-10-07T09:08:18.457

Reputation: 41 609

I guess one of the things worth remembering is that you can place any legal/unspent transaction you want on the Bitcoin network without any fees whatsoever. The issue comes down to whether the next miner would accept your transaction and put it in the next block even if there's nothing to be gained from it.

There are currently recommended fees put into the major clients (bitcoin-qt or its CLI only back end) as you well know. I would imagine that the major clients would be updated to accept various fees if the economy changes that much.

As for different payment processors, I'm not sure I understand your plan. Surely ultimately it's down to whoever mines the next block and connecting to a specific node wouldn't really make a difference?

Bittylicious

Posted 2013-10-07T09:08:18.457

Reputation: 136

Currently VISA and Mastercard are payment processors who charge about 2%, and Amex charges about 5%. If they got into the game and ran miners, they probably wouldn't verify transactions for less than these amounts. I am guessing that the hope of finding new bitcoins will not be the incentive to run mining programs, but rather the transaction fee, as it is not with the card companies. What do you think? – zkilnbqi – 2013-10-07T12:31:58.617

Currently the sum of transaction fees is magnitudes away from the block reward. Block 262232 for example has an estimated transaction volume of 2.7k BTC and a transaction fee of 0.15 BTC. That would mean that the average fee is less than 0.06%. If anyone would be trying to verify only transactions with 2% of fee, they would be creating empty blocks. Verifying empty blocks, however, takes the same computational effort as verifying transactions, so they might as well take any fees.

– Murch – 2013-10-07T12:51:15.070

BTC fees are currently around 10%... that's insane. – Matthew Whited – 2017-08-18T03:08:25.250