Skyrocketing Bitcoin Fees Hit Carders in Wallet
krebsonsecurity.com
krebsonsecurity.com
Median BTC fee has been $10 to $25 USD over the past couple weeks. Meanwhile, median BCH fee is under 10c.
Regardless of small-block vs big-block ideology, its pretty clear that a 25 dollar transaction fee rules out a lot of business use cases.
From where I sit, we are witnessing the birthing pains, not of the Internet of Things, but of the Internet of Money.
Why do people always think that BTC—only because it has started as a p2p cash system—needs to stay there?
From my point of view BTC evolved to the best value storage system available:
- Limited supply
- Easily available in any country without a bank as an intermediary (try to purchase or sell gold without a bank, good luck and real, physical gold as an value storage is just cumbersome)
- Probably a good value storage when the stock markets crashes (because again no banks are involved which might also go bankrupt, in particular in countries with a weak economy/currency/infrastructure)
- The strongest brand and most popular with mainstream and retail investors, just go to Google Trends and you see that the search volume of Bitcoin is insanely high (~50% of 'iphone' just to stress how much mainstream bitcoin went); just imagine: which crypto people will choose to put a large part of their money first when a crash comes? To the biggest brand I guess
- Biggest ecosystem around (wallets, etc.) + high reliability even if slow (just look at some other coins with a huge market cap where people even struggle to send and receive coins)
- Highest liquidity
This is a very strong use case for me to buy and hold BTC. If there is any other coin better as an value storage please let me know.
Except that nobody has any idea how much value it will have next week, let alone next year. The variance is just too high.
But if you want to get that value, then bitcoin is unreliable in the amount you get. And that is only if it has grown over the period you stored your value for.
I still don't see any other value store better than BTC considering my prior bullets.
Plus, Gold might be highly volatile by some stock standards but it barely moved a percent over the last 24h while Bitcoin does percent movements on the hour mark.
Stores of value require a predictable purchasing power to be useful, bitcoin does not have predictable purchasing power. Or the guarantee that in 20 years I'll still be able to use bitcoin at all.
The major difference here is that gold has been used for about 2000 years plus now and has proven to be somewhat valuable in a functioning society. Bitcoin hasn't been around for a full percent of this time and nobody knows if it'll be around for another percent to begin with.
Ring me up though if Bitcoin will survive the next 100 years for sure.
Think you confuse matters: A currency should have "a predictable purchasing power", not a store of value. Latter should rather grow (which requires a deflationary nature/limited supply) and offer stability in times when stocks and/or currencies nosedive. Gold is not that bad for this use case and BTC is even better.
But instead of so much meta talk I would be happy if you let me know which asset is a better store of value than BTC and why (for all kind of countries, also those with weak economies/currencies/infrastructures).
The two go together, surely? What kind of value is it if it doesn't translate into purchasing power?
Hard to get better than US T-Bills for value preservation. That's the standard financial advice. There is a point in Bitcoin being available in countries where capital controls make USD hard to obtain, but the bitcoin is hardly easy to obtain in that situation either.
It's def. easier than getting US T-Bills. BTC is widely available in most countries and if not, you just go to a meetup and trade it in person (with higher fees but still easier than... US T-Bills). So, you still owe us after all this discussion a better alternative for an internationally available store of value than BTC.
In a deep crisis, cigarettes aren't a bad idea, they usually end up being a black market currency. In other regions of crisis bullets might also be a good idea.
For a proper financial market with money, a good store of value might just be a long term savings account in a bank, that's a very stable value store and usually those keep up with inflation pretty well. If you can have a bit more risk there are index fonds and ETFs but those are more money making than store of value.
In places with weak economies it usually doesn't make sense to establish much of a store of value, bartering is more common and people just live with what they have, the accumulation of wealth beyond the daily necessary can be rare in some african countries.
BTC is also a bad solution since it's rather expensive, weak economies have more people who can't afford the rather extreme transaction fees (which are laughably high compared to EU SEPA transactions even at comparable confirmation times)
Not sure. Look what 2008 happened: States had to rescue banks which would have gone bankrupt otherwise and because of this the entire economy/currency suffered. A FIAT saving account—even in a developed country/financial market—is a terrible store of value.
> weak economies have more people who can't afford the rather extreme transaction fees
When I look at Google Trends https://trends.google.com/trends/explore?q=bitcoin I see many weaker countries or low-income countries (South America, Russia) which have a quite high interest in BTC.
The transaction fees don't hurt if it's just about putting your savings in a safe spot. The people are not going to buy groceries with BTC.
> because again no banks are involved which might also go bankrupt
> Highest liquidity
I'm not sure what you mean by this. Banks certainly are involved, and provide the liquidity you mention by facilitating transactions for exchanges between crypto and traditional currencies. A disruption to this process either with a beneficiary bank or as an intermediary bank[1][2][3] ripples through the ecosystem. While yes, it's possible to interact with Bitcoin without involving a bank if you mine it yourself, the moment you involve an exchange and want to liquidate your bitcoin for more commonly accepted currency (or the other way around), you indirectly involve traditional banks. And if exchanges can't provide liquidity, then the value of bitcoin can and will drop precipitously.
[1] https://news.bitcoin.com/bitcoin-exchanges-victim-banking-pr... [2] https://medium.com/@whalecalls/taiwan-aml-reforms-usd-crypto... [3] The above articles mention the issue was related to new regulations. But insolvency of intermediary banks (or even beneficiary banks) could cause similar issues in the future as well.
Not necessarily, you could liquidate f2f with another person providing you cash. Just think of the worse case, stock crash, bank crash, etc. Then, it's good to have BTC in your wallet. They are accepted and easily transferred, without any bank).
Not sure if we talk about the same: The last worst case scenario was 2008 (stock crash, banks went bankrupt) but the Internet was still fine.
Monero’s tx fees are low due to lack of use, they go up way faster than bitcoin’s even with RuffCT and adaptive blocksizes.
In the case of bitcoin cash in particular; it would probably still be fine at bitcoin scale. This is because its main difference is removing an artificial limit within Bitcoin. As this limit was set without an empirical basis (and bitcoin showed no signs of degradation as it approached the limit), you would probably be able to scale the block size up some without causing problems.
How much you can scale is still at question. Here [0] is a talk about this very question. Using a small testnet (~6 miner nodes and 12 clients) they were able to achieve 500tx/s with a 1GB block with relativly minor optimizations of the standard Bitcoin implementation (the final bottle neck here is propagation delay reaching 10 minutes). This is, in my opinion, an upper bound on what the Bitcoin protocol can handle.
Smaller transaction sizes with adaptive block sizes seems like a good scaling solution. Is there something I'm missing?
The fee in terms of XMR actually reduces when there's more transactions. However if its value in terms of USD rises, then the fee in terms of USD still might go up with more adoption. Perhaps that's something the developers can adjust in their regularly-scheduled hardforks.
That still makes it a little larger than the average Bitcoin transaction, but the mentality there seems to be that privacy has its price. While next-to-free is preferable, I don't disagree.
This isnt future proof but should alleviate some pressures while internet and widespread computational infrastructure improves
Highly scalable because of their centralized nature are Ripple (XRP) and Stellar (XLM), Stellar started as a Ripple fork. I finally went for Stellar because of the founder (he founded and sold MtGox and founded Ripple), more potential to grow because of lower cap, the complete feature set and some recent announcements (such as Kik/Kin moving from ETH to XLM, Singal-founder will use XLM for his MobileCoin).
I might buy Ripple after some correction though. Ripple has a different positioning but a good setup too. The cap is already very high, close to ETH's.
Edit: Why the downvote?
Edit2: changed that Stellar started as a Ripple fork
HN seems to me like the place to discuss the tech behind a coin, not whether or not to speculate on it for monetary gain.
Personally, I wouldn't say Monero "isn't fast or scalable." Perhaps it's not compared to other coins, but compared to Bitcoin it sure seems fast and scaleable. (Again, I didn't downvote your comment for disagreeing with that.)
Every fully decentralized coin hits at an early point the ceiling and won't scale. Vitalik Buterin expressed this recently. So, why should XMR be faster?
Besides, the anonymity is nice but just pipe your <put any coin here> through some random exchanges and you have the same effect, so it's really not that killer feature to create a new huge ecosystem. I like XMR's tech a lot and I think it's not too bad to have XMR in your portfolio, the question is if it has the potential to be one of the next major coins in the long-term (3-5 years). There, I rather see other candidates with a much higher probability, there is just too much good competition which came up the recents months/years.
It doesn't have the same effect. Blockchain analysis would be able to see right through that.
How?
While in Bitcoin you can offload older utxos to a slower memory, because the access pattern is “utxos die young”. Also, utxo set grows much slower or even can be stable (“1 utxo per person”) while tx volume grows forever.
Bitcoin scales way better than Monero or Zcash (that has the same requirement to store all “nullifiers” to prevent double spending).
That term is misleading and implies actual RAM-type memory is needed, which is untrue. Monero scales quite well using a database on SSD up to transaction rates far in excess of anything Bitcoin can or will realistically handle now or any time soon (certainly hundreds and possibly thousands of tx/sec).
Likewise the total data that needs to be stored grows slowly at realistic tx rates, roughly 80 GB/year at 10 tx/sec. That's similar to the rate of growth of the bitcoin blockchain (unpruned) and well within the hardware capabilities of both existing cheap SSDs and even more so the visible trajectory for future cheap SSDs.
Are you serious? Sold MtGox? That's how you remember him? He was steering that particular ship when it hit an iceberg.
McCaleb sold the site to French developer Mark Karpelès, who was living in Japan, in March 2011.
On 19 June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker allegedly used credentials from a Mt. Gox auditor's compromised computer to transfer a large number of bitcoins illegally to himself.
So yeah, you bid with your fee against everyone else wanting a transaction in.
There is a hard limit to the number of transactions that can fit in a block (1MB, this is the block size).
Users who want to get in the immediate next block will pay higher transaction fees to get in it. This raises the average transaction fee and causes others to raise their fee, too.
But the block is only 1 MB. So 100 times more transactions want in than there is space, thus you need to pay $10 to secure a place for your transaction.
Fewer transactions or increased block size would decrease the transaction fee.
The good news is that at current volumes, the miners are making progress clearing the lower fee transactions. In the next day or two we should start clearing transactions at < 100 satoshis/B.
That's one way that average / median transaction fees are misleading in Bitcoin: people paying much lower fees are making transactions, but traders and those moving large sums seem to be willing to over-pay to move their money.
In some ways the minimum transaction fee processed is more instructive than the median, because it shows how much did one have to pay to get processed, vs how much dod people in general overpay to ensure their payment was processed.
Until approximately 2040 new Bitcoin are introduced into the system as a reward to the miner who discovers a block. So, even if a miner mines a block with only 0-fee transactions, they are still rewarded with a small amount of Bitcoin "from nowhere".
Bitcoin will be introduced in this manner until there are 21 million BTC in existence, at which point they will stop being introduced "from nowhere". This is expected to take until about 2040 (though I don't know how that projection is made). After that point there won't be much of an incentive to mine 0-fee transactions.
Sure, but as long as there are transactions with fees in the mempool, then mining 0-fee transactions has an opportunity cost. Currently that's about 5 BTC per block, compared to the 12.5 BTC reward (https://www.smartbit.com.au/charts/transaction-fees-per-bloc...). It's possible that forgoing the transaction fees will make mining for you unprofitable if margins are thin.
Also, larger blocks are more likely to be orphaned, so including 0-transaction fees increases that risk (very slightly) with no additional reward (though currently the orphan rate appears to be basically zero, even with full blocks)
Also you could short a currency, attack it, then profit.
There are 100,000 transactions with fees greater than $1. Where are these 0-fees?
(15 sat/Byte, ~443 B/tx)
Do note that this was the maximum allowed size. Many blocks are under that, or even empty. It's completely up to the miner that mines the block. This is probably not something that can easily be changed.
The 1 MB maximum size was also true only up to August. New style transactions are allowed to go above that, and inputs and outputs are counted differently towards the limit in order to incentivize transaction defragmentation.
It's not relevant to speak of a fixed size cap anymore. If everyone changed transaction type overnight we'd see somewhere around 2 MB blocks, but it is expected that the rules would lead to a change in what transactions are made which would make blocks larger. Especially if things like Lightning transactions are more popular in the future.
> thus you need to pay $10 to secure a place for your transaction.
That's probably something like the average fee for the past few blocks, but the minimum fee you need to pay is much lower. The exact number is not very relevant however since Bitcoin fluctuates in value, and so does the transaction volume.
Note that fees are denominated in Bitcoin. Fees have actually been pretty stable over the long term, but the skyrocketing price of Bitcoin has lead to it not being practical for low-value USD transactions. This was always true, but the minimum value for which it is viable increases as Bitcoin is more valuable.
Fees today are about 100 sat/b, a multiple of that in times of congestion and lower in the weekends. You never have to pay 1000 sat/b, but you are of course free to subsidize miners however you want. This is roughly the same the fees were in 2013, only that those satoshis of yours are worth so much more USD now.
That isn't the whole truth, and those spikes in fees come more often now and spike higher, but the minimum fee to get into a block averaged over a year isn't that much worse now than in 2013.
That probably isn't very helpful if you need to transact in times of congestion, or make low value transactions, but it's important to know that netiher 1 nor 1000 sat/b has been reality for some time now, and that you should never talk about fees in USD because that doesn't describe how it works.
Another common mistake is to include the value of the transaction when describing fees which misleads people into thinking fees are a percentage of the value transacted which is not the case.
To reduce the fees, we need to remove that artificial 1mb limit. Here's the main approach to that right now: https://www.bitcoin.com/info/what-is-bitcoin-cash
Removed the BCH spam link. No, this is NOT the main approach to that. The main approach to that is the Lightning Network, which is not yet in production.
Your "main approach" is a hardfork that increases the block size, run by someone who owns the bitcoin.com domain, regularly misrepresents what Bitcoin Cash (bcash) actually is, and goes on live shows yelling obscenities and flashing the middle finger very professionally when these things are pointed out.
So, no, Bcash is not the main approach to "fixing" Bitcoin. It is a wholly separate coin with trading volume less than one-third of Bitcoin.
It's a dead-simple idea. You increase the supply side of the fee market and users don't have to compete for transaction finality anymore. It has been implemented and we know it works.
Of course, that is only kicking the can down the road and has many caveats. It still has proven effective to complete its goal (minimize tx fees).
Lightning networks is a WIP that is months, perhaps years, away from hitting production. As such, I wouldn't call them the "main approach" to scaling except in the mind of core engineers. It might drive tx costs down, it might not, at this stage it is too early to tell for sure.
As such, I think OP is right. It is completely fair to say that block size increase is the "main" approach, as in the "the one that we know for sure works right now", to making Bitcoin usable as a payment system.
Now on a side note: I don't think you needed to be that aggressive with OP. I won't address the attacks on Roger Ver because it is my belief that attempts at turning a technical debate into politics should be met with contempt.
>I won't address the attacks on Roger Ver because it is my belief that attempts at turning a technical debate into politics should be met with contempt.
I mean, you just did, via this comment.
Because it's a 99% pure fork of BTC, sure. Closer than the "original" Bitcoin? That's not possible to say.
>>philosophy
Subjective at best. Unless, you know, Craig Wright actually is Satoshi, since he's involved in BCH and has claimed to be him. In which case, it absolutely is.
>>community
Also subjective.
With that said, this certainly does not imply that p2p cash is what Bitcoin could actually excel at once it reach global scale. Modifying the original vision is not some great sin, it literally happens all the time with startups and no one bats an eye.
I don't think being closer to Satoshi's original vision is any important, Bitcoin is not a religion and Satoshi isn't a prophet.
The split-up was a good thing, I'm excited that different avenues are being explored. Maybe core maintainers are wrong and p2p cash is actually the way to go. Maybe Bitcoin Cash fans are wrong and the solution lies in developing L2 solutions. Maybe both are wrong. Time will tell and we should be happy that different things are being tried.
The engineer in me says that the "real" Bitcoin is the one with the most total difficulty. I think that definition is too narrow. To me, both are the real Bitcoin, just in different timelines. The timeline that wins will overwrite reality such that it was the real Bitcoin all along. Meta!
The BCH camp could have contributed their resources to helping Core come up with a long term solution. Any fork that doesn't offer real groundbreaking advances is just a distraction and should be shunned. Forks that are simple recompilations of the original Bitcoin with simple config changes to the blocksize and/or algo are power/greed plays.
While I think BCH is run by a bunch of nutjobs who are hellbent on doing unethical trash to ruin BTC, this isn't a fair criticism. Ver and others did try to help Bitcoin (I refuse to call it Core, it doesn't need a descriptor, Bcash does) through these methods, but BTC's developer pool is... something of a bunch of Internet arguers.
Roger Ver took his ball and went home. There's nothing wrong with that at all. He thinks he's right, and that's all well and good. What's not right is his ridiculous insistence that BCH is the real Bitcoin and the intentional methods to devalue BTC in conjunction with Jihan, and acting like a kid in public and social media going nuts.
Anyway, doesn’t it amount to the same thing? 2 MB every 10 minutes or 1 MB every 5 minutes, your node still has to do roughly the same amount of work to validate blocks.
I think that argument is even stronger against lower block times because latency (network, validation, etc) rather than bandwidth contributes the most to block propagation delays.
This leaves a hard upper bound of 4MB block size, with a "typical" size of ~2.3MB if everyone uses SegWit.
So it's not meaningful to talk about a fixed block cap anymore. Perhaps it is better to talk about "typical" block sizes the way you do.
What's important is that the 1MB limit is history, unless you have to make legacy transactions for some reason.
https://github.com/linalouise9/peercoin-marketing/blob/maste...
If you want to do any trade with the currency, you have to put it on an exchange, and everytime you put it on (deposit) or take it off (withdraw) the exchange, fees are charged (vary from exchange to exchange, and from currency to currency).
And you only need to deal with an exchange to exchange different types of currencies for each other. If you just want to pay someone with bitcoin, you already have bitcoin, and the recipient just wants bitcoin, then you don't need to involve an exchange.