Where exactly do the transaction fees go in the blockchain? Are they used to bid-on/confirm the next block? Are those mBTC in the transaction fee gone forever once the transaction is confirmed?
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.