Optimizing fee payment for speed or zero fees/privacy? (Clients vs. e-wallets)

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As far as I understand the more fees you pay, the faster the delivery. What I don't understand is fees are given to kilobytes of data, not amount of money.

Maybe here would come handy a little deeper basic understanding how bitcoin works behind the scenes, maybe I should read this book?

I don't know, but the bigger the money the bigger the block size? Or the newer the money the bigger the block size? Or a little bit of both? As the miner solve more and more complex calculation problems(?). And the older the bitcoin block, the cheaper the transfer, regardless how big the amount is?

Consider 2 cases:

1st, you want to optimize for lowest or zero fees: time is not an issue. In this case as I understand bitcoins are transferred in chunks to save on fees. Does it also increase you privacy as well? How much time it takes to transfer a quadrillion dollars (or a little less), and what is the absolute minimum fee for such a large transfer?

2nd, you need instant delivery. I'm not sure about the fee structure (does it depend on the client or wallet you use?) but is it a fixed or variable % or a fixed amount per transaction? In the Qt client you can set an amount for fees but how do you calculate to spend the absolute minimum fees for an instant delivery? That would be just optimal, right?

As e-wallets use a share address, transferring funds in between bitcoin addresses of the same e-wallet should be free, and instantaneous, right? Instawallet?

Do I have the choice if I want to optimize for speed or costs (and maybe privacy?) with the various e-wallet providers? Let's say I want to spend instantaneously from an e-Wallet BTC 1 but I want to know beforehand how much I should transfer to that wallet in advance (slow transfer, zero fees) to include the appropriate (fast) fees.

superuser

Posted 2013-01-12T21:33:41.177

Reputation: 387

1I would discourage you from buying a book as Bitcoin is a really fast moving ecosystem, which makes any book become out of date quickly. However if you are looking for the fundamental technical details that are not changing that fast and feel more comfortable reading them up in a book it might be worth it. The book you mention however does not tackle those fundamental details, and aims more at the fast moving stuff. Last but not least: there is no quadrillion bitcoins in the system and there never will be. 21 million is the mathematical upper bound on the supply. – cdecker – 2013-01-13T14:27:28.787

What do you mean by fast moving? Examples? I don't know, but the fundamentals didn't change, did they? Yes, you mentioned that. I don't necessarily want to read about in a book, it it's a newbie friendly web page, so be it. I dais a quadrillion dollars, not bitcoins. But it can be a zillion, too. – superuser – 2013-01-13T14:34:01.793

Answers

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The amount of bitcoins transferred is not the scarce resource you are paying for, disk space is. The distributed ledger that keeps track of the balance of each address is replicated on all participating nodes. That means that each KB more in your transaction is replicated thousands of times.

For the speed: all transactions are treated equal (except if they are deemed invalid as they in the case of a double-spend) so they are distributed over the network with the same speed. The fee comes into play once many transactions are available to be included in a block, i.e., they are still unconfirmed. As blocks have a maximum size (currently 1MB) there is a limited number of transactions that will be confirmed by a block. Miners will try to optimize their revenue from transaction fees of transactions that are included in the block, filling up with transactions that do not include fees.

Adding a fee to your transaction will increase the probability of it being included in a block, i.e., being confirmed.

The transaction size is dependent mainly on the number of inputs that are claimed. As the number bitcoins from an output have no influence on its size the number of bitcoins transferred in a transaction does not influence the transaction size.

As for e-Wallet internal transactions: they are likely not handled by the Bitcoin network but internally, thus completely independent from the network rules.

cdecker

Posted 2013-01-12T21:33:41.177

Reputation: 7 878

Somewhere I have to start to be able to comprehend this. – superuser – 2013-01-13T14:35:12.993

Asked: 2013-01-12T21:33:41.177

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Active: 2013-04-13T19:04:22.060