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In regards to Bitcoin always needing fees: That's true, but there's a fundamental difference between the fee structure when blocks are full vs not full. When
by zhoujianfu 10y ago
In regards to Bitcoin always needing fees:
That's true, but there's a fundamental difference between the fee structure when blocks are full vs not full.
When not full, and I believe the way the system was intended to work, the tendency is for miners to compete for users fees; hence the fees will tend to the actual cost of mining. Just enough for miners to stay in business and secure the network, with all extra value being captured by the users.
When full, users compete for mining space, and as such fees tend to the value of a bitcoin transaction. Which means all extra value is captured by the miners, and the users eventually have no incentive to use bitcoin as their transactions tend to be as expensive as they're worth.
Another troubling side effect of that is because of the zero-sum nature of mining, the extra fees will eventually just cause difficulty to increase to match, slowly pushing bitcoin's cost to match its value, providing very little (really almost no) incremental decentralization/security to the network.
The artificial barrier to the number of transactions essentially causes the world to waste electricity while at the same time slowly killing bitcoin. If the barrier were always kept just slightly above the demand for transactions however, bitcoin would operate completely healthily and the (nice low) fees would always provide just enough incentive for miners to continue to mine... by definition!