Comment by mechanical_berk | Hacker News Reader

Comment by mechanical_berk | Hacker News Reader

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mechanical_berk

I got it from https://bitcoinfees.21.com "The fastest and cheapest transaction fee is currently 330 satoshis/byte, shown in green at the top. For the median transaction size of 226 bytes, this results in a fee of 74,580 satoshis." 74,580 satoshis is currently ~$1.50.

As you and b1daly point out the majority of the cost of running Bitcoin is currently paid for by mining rewards, but even so the fees are still crazy!

I don't know what will happen when the mining reward disappears. There will surely be far fewer miners, which will decrease the real-world cost of mining a block (and also decrease the security of the system!)

If proof-of-stake or something like it is ever adopted then presumably the cost of running the system will plummet but I'm not familiar enough with that stuff to say much more.

> There will surely be far fewer miners, which will decrease the real-world cost of mining a block (and also decrease the security of the system!)

Maybe it'll end up with bigger amount of smaller miners. Now the cost of entering mining is high but when the incentives will be smaller Bitcoin mining may end up where it begun - on small hardware. If fees sky rocket nobody would be using it. One way or another that'll be interesting times...

So I've thought about this a bit.

Assume there are a fixed number of transactions per block (N), but a greater number of potential transactions that people would like to do. Also assume that there is a maximum percentage (of transaction amount) that people will be willing to pay as a fee (F).

Then I think the transaction fee should tend to F * average amount of Nth largest potential transaction in a block window.

The cost of mining a block ought to tend to just less than the average block payout (reward + fees). When the reward disappears, this will happen as miners shut down due to not being able to make a profit and the mining difficulty decreases.

Only the most efficient miners will survive. I think this means a few big miners, rather than many small miners, as big miners are almost certainly more efficient.

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