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Comment by Klathmon | Hacker News Reader

The "$20 transaction fee" was an absolute top, and when that happened it was the single most congested the bitcoin network has ever been.

It's nowhere near that right now. The total cost for your "median" transaction right now (at 226 bytes) is about $4.30 USD (at 150 sat/byte). Even if you double that to 300 sat/byte you are still at ~$9.

Edit: I'm not saying even $4 fees are okay, just pointing out that it's not $20. I agree with steam's decision here, and it's something that Bitcoin needs to solve before it can really be useful as a payment system.

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When did $4.30 transaction fees become even close to acceptable. I thought high TX fees was one of the things Bitcoin was purported to solve.

I'm not saying they are acceptable, i'm saying that $20 fees per average transaction isn't true in all cases except once in the history of bitcoin.

Is there reason to believe that sort of congestion won't reoccur?

Every major blockchain is working on scalability (sharding, offchain transactions, and various other solutions are in the works)

So ideally there will be more traffic but less congestion

I think Bitcoin has maneuvered itself into a corner where the remaining dev team doesn't dare to do any hardforks in the future even if they are important to keep Bitcoin competitive.

There is zero reason to believe that, and I'd even go so far as to say it WILL happen again, and probably soon.

There are solutions being worked on, but they are not ready for primetime yet.

My bank charges nothing for instant transfers of up to £10,000.

That's both cheaper than and faster than bitcoin.

(And this isn't a cost hidden in a perk of a monthly fee, there's no monthly account fee either.)

I'm pretty sure if Satoshi re-appeared "he" would be lamenting those artificially keeping the blocksize small. The 2MB limit was put in as a temporary solution to a problem of too many worthless transactions. Bitcoin has the opposite problem now.

Does that stand for transfers over (nation) state borders as well?

Yes, at least in the SEPA area (EU, plus countries in the EU orbit):

https://en.wikipedia.org/wiki/Single_Euro_Payments_Area#Cove...

As a means of payment in the SEPA region, Bitcoin is far worse on cost (free vs $5-10 in my experience), and sometimes worse on speed (1 - 1.5 business days for SEPA to clear).

So in this geographic area, Bitcoin is literally losing to a combination of the legacy banking system, and a huge, multi country, multi lingual, somewhat unwieldy bureaucracy.

That is still an EU payment system, which has improved a lot since the start of Bitcoin. I just need to transfer money to strange places and banks are pretty often crappy at that stuff, best solution I have is to send my credit card around the world.

> That is still an EU payment system, which has improved a lot since the start of Bitcoin.

Which shows how pathetic the main development team behind Bitcoin is (the core team). The fact that they haven't managed to fix problems that are years old and steadily getting worse is inexcusable. It should be a walk in the park for them to out compete a massive, political entity like the EU and the traditional banking sector.

I hear you on the "strange places", that was where BTC was supposed to shine. It hasn't made any inroads into underserved markets that I'm aware of, e.g. less well-off countries and unbanked people. That is a pipe dream as long as the fees are so high to move funds around.

It will certainly be interesting if bitcoin fails because it is less efficient than humans.

Meanwhile, Visa is about 1.5-2% plus $0.10 flat interchange. To break even with BTC against Visa, we're talking an average transaction of over $200. That's not feasible for the vast majority of merchants.

Not to mention that the currency's extreme volatility means that when you sell it to convert it to greenbacks (the currency your investors actually care about) it probably won't be the same amount you were paid for.

Yes, but at the same time Visa requires you to hand over your payment information to each and every merchant you transact with, and they are able to pull as much money from your card as they want, and they are able to charge you multiple times at any point in the future.

But there are some really cool solutions being worked on right now for this problem in bitcoin that can make it scale to a similar way to Visa. But they aren't here yet (and some might turn out to be nonviable). Lightning network would allow Visa levels of transactions per second, at basically zero or next to zero fees per transaction for the majority of them.

cardholders are not liable for unauthorised transactions by merchants

any merchant that commits that sort of fraud repeatedly will have their account terminated

Thankfully we have nice companies like equifax which help secure our details /s.

Online wallets and exchanges are similar points of failure. Many users have uploaded their picture IDs, banking and tax information to sites like LocalBitcoins.

But you can choose your online wallet or exchange, you can't choose your "equifax" (you can't even opt out of equifax)

>cardholders are not liable for unauthorised transactions by merchants

Assuming they are really fraud and aren't just a "free trial" expiring, aren't a contractually-agreed upon price increase hidden in fine print, or that the cardholder saw the fraud and reported it within 60 days.

Not to mention now the cardholder is now unable to use the card if fraud is found, and needs to wait for a new one to be sent via mail. It would suck if the credit card thought getting gas out of state was fraud, and they canceled your credit card on the first day of a week long trip (happened to me, I had to borrow thousands from a friend for the length of the trip...).

in most civilised countries small print like that would treated as sharp practice and you'd easily be able to force a refund under consumer protection law

in the UK I can walk into my bank branch and have my card replaced on the spot, so I don't really see that as a problem, unless you're abroad (and if you're abroad with only one card you should probably know better)

We have 2 different definitions of "easily". At the very least I need to identify that the charge happened or happened differently (if small, it could take a while). Then I need to make sure that it wasn't a real transaction (both me and my wife use the same cardnumber, so I need to check with her to make sure that "0239-ONLN-PMT-GR" wasn't from something she bought).

Then I can call the bank, tell them I didn't make that transaction, or I didn't agree to it, and if i'm lucky they will refund it right away, then investigate. I then need to follow up on that investigation because if they find for some reason it's not "fraud", then they will recharge me that at a later date, so I need to keep up on it until resolved.

And no matter how easy it is to get a card replaced, it's work that I shouldn't need to do.

I'm not saying that Visa is "broken", or that Bitcoin is the only way forward. But I am saying that I think Bitcoin's core values are better than the current system. And that one day Bitcoin will be easier, more secure, more private, and just as usable as Visa.

Hopefully one day we will look back on the way current payment processes are run and it will seem as terrifying and stupid as if you were required to leave a copy of your car keys at every single parking lot you parked in.

It’s possible that merchants could charge you whatever they like for however much they want. But it’s unlikely. And if they did, you would get all your money back and the merchant would pay a fine.

The privacy info is valid, but BTC isn’t private either and people are connecting identities to purchases all the time. Not to mention 99% of the time I must give my info to the merchant so they can mail me whatever I purchased.

It's not the privacy info that's the problem, it's that credit card are "pull" by nature. You give your information to a merchant, and they decide how much and when to charge you.

Vs with bitcoin it's push. You decide how much you are sending to the merchant, and if it's not enough, they don't deliver the goods/services.

But this has completely gotten away from the issue I was talking about (i'm in a shitty mood today and let myself get sucked into internet arguments).

Bitcoin has problems, and those problems aren't going to be easy to solve, but it's ability to change over time means they can be solved, and I really believe that it's a better way of sending money online.

The "pull" method that banks have used for years is a mess, and I truly believe that the core of bitcoin is valuable and useful over the traditional system.

with pin + chip cards debit/credit cards are 100% push for physical transactions. for online transactions almost every single provider offers one time use card numbers

the push/pull problem has been solved for a decade, and not by bitcoin

If there is an option for pull transactions, it will be abused.

Even if I push my money to you, you have my address that you can pull from later if you want.

Two problems with this line of argument:

A one-time use CC# by nature can't be abused. And any merchant that attempts to issue fraudulent charges starts to run into legal and regulatory frameworks that issue punishments to anyone who has repeat violations. Punishments that range from being kicked off of a payment processing system all the way up to jail time.

>Yes, but at the same time Visa requires you to hand over your payment information to each and every merchant you transact with, and they are able to pull as much money from your card as they want, and they are able to charge you multiple times at any point in the future.

Sure but that is Visa's problem not mine.

With newer payment systems such as EMV, your entire payment information is not handed to the merchant. You're just signing the single transaction.

That said, I can't currently put my EMV card into a card reader on my computer and purchase things online. However, many credit card networks have created tokenized payment systems, where the merchant redirects you to your bank, the bank authorizes you and validates the single transaction, and then redirects you back to the merchant with the signed transaction information. Not many merchants use these systems yet though.

How are these transaction fee amounts even determined? With something like credit cards, PayPal, or EFT the fees are deterministic.

With Bitcoin it seems fees are both ridiculously high, plus I can't even tell what I am going to be charged?

When you make a bitcoin transaction, it gets put into a "mempool". Basically you send your TX to a node, that shares it with other nodes on the network, and they all hold it in memory. Once a block is found, the miner that found the block will pull as many transactions as possible from the mempool and put them into that block and sign it on the blockchain forever.

Since TX fees go to miners, they are incentivized to pick the transactions with the largest "fee per size" to include first to maximize their profit (though they aren't required to do so).

So basically you can envision all transactions as a stack, with the highest fees at the top. Once a block is found, it takes the top ~1MB worth of transactions, and the cycle repeats. [0] is a good visual representation of this.

Unfortunately this means there isn't an easy way to determine what fee will absolutely get you included in a block before it's mined, since if thousands of transactions show up with higher fees than yours after you (but before a block is mined) yours might not make it in the next block (even if your fee was the highest when you made the transaction).

It's a tough problem to solve, but there are some solutions being worked on to help solve this problem for the vast majority of bitcoin transactions.

[0]https://core.jochen-hoenicke.de/queue/#24h

I don’t understand why miners wouldn’t include all pending transactions in their block. Seeing as how pow is a guessing game, there are plenty of permutations of the Merkle tree to generate plenty of roots. I guess to dissencentivize free loaders so miners can continue to make money once Coinbase txns are no longer a thing? It’s certainly not free to mine!

The number of transactions that can be included in a block is limited. A block is generated on average 10 minutes (a bit quicker due to increasing hash rate) so the number of transactions in an hour is also limited. Naturally the transactions that pay most to the miners are getting selected by them and included in these blocks.

As the other commenter said, there is about 1 MB of room in each block, and almost always >1 MB worth of transactions in the "mempool" (actually it's often >12MB for the most part, because people will make tons and tons of transactions at 1sat/byte and not really care if they take forever to go through).

And you are correct that bitcoin's ultimate goal is to have mining income come solely from transaction fees eventually. But by that point the hope is that "second layer" systems will take the brunt of the transactions and the actual core blockchain will only be a settlement layer where a $500 fee is no big deal for 2 banks settling hundreds of millions of dollars directly on the blockchain.

So are fees a percentage (.05bc a transaction) or a Flat fee (.05bc a transaction)?

Fees are set as a "flat rate" per transaction, but normally expressed as a fraction of "price over size"

So if a fee is 150 "sat/byte" or satoshi's per byte. A satoshi is 0.00000001 of a bitcoin.

So if your transaction is 250 bytes (which is average for a single transaction to a single person), then you will pay (250 * 150) satoshis (37500 sat), which is about $5.

If your transaction is larger, you'll pay more, if it's smaller, you'll pay less.

But they are "ranked" in terms of who is picked first by "sat/byte" since the amount of room in the block is only 1MB.

So a 500 byte transaction with 37500 sats in fees is worth less than a 250 byte transaction with 37500 sats in fees, because the 500 byte transaction takes up more room that other higher paying transactions could fit in.

Thanks for the explanation. Why do transactions vary so much in relative size?

A transaction can have many inputs and many outputs. These are all Bitcoin addresses.

Sally and Bob each have 1 Bitcoin. Sally received her bitcoin to a single address. If Sally wants to send that 1 Bitcoin to Charlie, that transaction would have 1 input (the address she received it on) and one output (the address Charlie wants to receive it to). Bob has 1 Bitcoin total, but his 1 Bitcoin came from 4 x 0.25 transactions. Bob didn't want to reuse addresses, so for him to send 1 Bitcoin to Charlie he has a transaction with 4 inputs (each address which contains 0.25 BTC) and 1 output. Thus, Bob's transaction is much bigger than Alice's, despite the same amount of Bitcoin being sent.

Thanks, that makes a lot of sense now.

If they could, miners probably would put all the pending transactions into a block. That's why the block size limit exists; every other node in the network has to process all those transactions and they're not paid for it in any way, so without the size limit miners would be likely to act in a way that hurts the rest of the network.

> Once a block is found, the miner that found the block will pull as many transactions as possible from the mempool and put them into that block and sign it on the blockchain forever.

Might be a nitpick, but you mean the miner puts as many high value transactions as they can fit into a block and then searches for a valid hash?

Yeah that's more correct.

Technically the miner needs to know what they are going to be including in a block when they begin trying to find a valid hash, but for the sake of explanation I generally switch it around for simplicity.

So how does one make money as a miner via processing these fees? Is this money being taken by pools, individual miners? Who is the middle-man that is actually taking this profit?

It's pretty clever.

Whenever you make a transaction in bitcoin, you point to the previous balance you have from a previous transaction, then you say how much you are sending to what address.

The "fee" is the difference between the amounts.

So if I have 1 Bitcoin, and I send .9 to you, the fee is .1

If you want to make sure you keep some Bitcoin, you just send it to yourself.

So 1 have one, and I send .1 to you, and .8 back to me, the fee is .1

Then when a miner mines a block, any unspent money is now theirs, and they claim it via the address they liked for.

> How are these transaction fee amounts even determined?

The number of transactions that can fit into a block (ie. "clear") is roughly fixed. The rate at which new blocks are added (ie. "clearing rate") is roughly fixed. Traders effectively bid for clearing via the transaction fee, and the highest bidding transactions are accepted.

In order words: supply of transactions is effectively fixed, and demand for transactions determines the fee.

There is work going on to enable external clearinghouses called the lightning network that will fix this problem, but that work isn't ready yet.

You can pick the fee with most Bitcoin wallets - the amount will determine how fast it confirms. This site gives guidance as to amount:

https://bitcoinfees.earn.com

The fee is chosen by the person making by the transaction.

I think it's easiest to think of Bitcoin TX fees as a bribe to the miners to include your transaction in a block sooner then other transactions that have a lower fee attached. You get to choose the fee that you provide to the miner.

The problem is that there are now so many transactions that are attempting to get through (And there is a maximum number of transactions that can be placed in a single block) that miners can be more selective. At this point your transaction is unlikely to get through without a minimum fee/bribe being provided because there are enough transactions with fees already at or above that level.

Looks like we need some form of "block neutrality".

Not really, this is an intended feature of Bitcoin, not a bug.

Every so many blocks, the number of new Bitcoin handed to the miners is halved, and eventually it will drop to zero. When that happens, the only incentive for miners to continue mining (And thus keep Bitcoin going) is the fees collected from the transactions. So required fees are only going to go up.

Stupid question.... What sort of compression is used on the block ? I.e If you use a better compression or re-align the transaction in the block can you not get more transactions per block ?

There is no compression at that level.

There is some compression at a storage level after blocks have been created, but it's not all that important. Pretty much all the data in Bitcoin is very difficult to compress with most of it being signatures, transactions, and addresses all stored in a binary format. The random nature of encryption makes it difficult to compress, and the formats have already been "hand tuned" for minimum size in many cases.

But it still happened, and there's really nothing in place to stop it from happening again. And Valve would have no control over it.

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