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Comment by givemeethekeys | Hacker News Reader

Does that means that the cost of transferring bitcoin will only go up with time?

"We leave the conclusions to the reader. However, we notice that by spending only 0.005% of the total Bitcoin supply on transaction fees, a single entity can significantly impact the entire Blockchain regime. This illustrates that if a whale or a governmental actor, possessing hundreds of thousands of Bitcoins, decides to spam the blockchain, they could impede its usability for normal payments."

There are essentially no "normal payments" being done with Bitcoin.

Well, what is "normal" anyways... For me, the next question is: Who owns that BTC address? Once we know this, we can fairly quickly piece together the link between BTC manipulation and adjacent monetary paths, e.g., US stock market fluctuations and the recent bank failures.

I've paid for things with Bitcoin before. Unless by "essentially" you mean to say that those types of transactions don't make up a significant network volume.

The cost will rise and fall based on demand for block space. If that demand only goes up, then yes.

Yes, Bitcoin is designed to migrate from the current inflation subsidy to fees paid by the users of the system.

https://rusty-lightning.medium.com/the-three-economic-eras-o... for more detail that you probably want...

Indeed, and then the cost of a single transaction (around USD 50 currently) will be borne by the sender/recipient, rather than by all Bitcoin holders via increase of the money supply (as is the case now).

(Note that the actual cost is probably higher due to externalities in the waste of electricity and equipment, and borne by all of us.)

if you think about it in the long-term, the rewards eventually go to zero and there's no incentive for any of the miners to mine and the whole thing collapses

I was under the impression that long term, the fees will increase and the fees will be the miners reward

Unlike the block reward (mining subsidy) which is set according to a fixed schedule, fees are set by the market. They will go up if demand for L1 transactions go up, but there’s nothing in the protocol to push them up over time.

Satoshi’s vision was for Bitcoin to be used as digital cash[1], so that transaction demand would be enough to sustain the security of the system. Since the “cash” use case has fallen away to the “store of value” use case, it seems a bit dubious.

Transaction costs have recently gone up because of ordinals and NFTs so we’ll see if that sticks.

[1] the Bitcoin paper was called “Bitcoin: a Peer-to-Peer Electronic Cash System”

Did the original "digital cash" thesis ever make sense? It's my understanding that Bitcoin can never hope to scale to meet a fraction of daily real-world transaction volume outside of adopting a so-called L2 solution like Lightning Network, which would seem to defeat the point somewhat.

It certainly couldn’t have covered all of human commerce, but it could cover the sort of transactions where having an uncensorable, irreversible transaction is worth paying a premium for (silk road, etc.)

Well, in practice the mining subsidy is highly variable, as most miners' costs are in local currency, so fees are already set by the market.

But I agree that the NFT thing is really a side-effect of fees being low (thus, cheap distributed storage) which probably at best provides a price floor, rather than a sustainable source of revenue.

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