15 ms·

Skyrocketing Bitcoin Fees Hit Carders in Wallet

96 points by wglb 9y ago

deleted 9y ago
[deleted]
djsumdog 9y ago
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?
- 21 9y ago
  They go to the miner of the block, which is incentivized to pick the highest paying transactions to put inside the limited block. So yeah, you bid with your fee against everyone else wanting a transaction in.
  - ianai 9y ago
    Does the cost of a transaction increase as more blocks are found? What makes the transaction fee minimal?
    - tuxxy 9y ago
      No, it's essentially a race on the number of users trying to get mined in the block. 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.
    - 21 9y ago
      There are 100 MB of transactions which want to get in the next block: https://blockchain.info/charts/mempool-size?timespan=all https://blockchain.info/charts/mempool-size?timespan=all 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.
      - Empact 9y ago
        More than 100 megs according to this, which also shows the fee strata: https://dedi.jochen-hoenicke.de/queue/more/#24h https://dedi.jochen-hoenicke.de/queue/more/#24h 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.
        icelancer 9y ago
        Furthermore, tons of "exchanges" in Korea were spamming the mempool with 0-fee transactions, as were some other notorious figures, driving these relatively false mempool statistics way up in order drive up the value of other coins.
        oh_sigh 9y ago
        What benefit do they get from spamming the exchanges? Is there ever an reason to mine 0-fee transactions?
        icelancer 9y ago
        To get threads like this created about how the mempool is packed and it costs $20 to move BTC from peer-to-peer and to drive media in that direction. For what second-order reason would someone do this? Well, I can think of a few....
        xocyabencl 9y ago
        How can a bunch of no fee transaction attempts cause a $20 market price? It seems like the block would need to be full of transactions with high fees.
    - toomim 9y ago
      The cost is increasing because more people are trying to use Bitcoin, but it has an artificial limit to the number of people who can use it per second. Thus, with increasing demand, and static supply, the fees rise roughly quadratically over time. 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 https://www.bitcoin.com/info/what-is-bitcoin-cash
      - icelancer 9y ago
        >To reduce the fees, we need to remove that artificial 1mb limit. Here's the main approach to that right now... 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.
        relyio 9y ago
        Increasing block size is the low hanging fruit for reducing tx fees. 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.
    - fixedfees 9y ago
      Peercoin has fixed transactions fees, for comparison https://github.com/linalouise9/peercoin-marketing/blob/master/bitcoinvspeercoin/english.txt https://github.com/linalouise9/peercoin-marketing/blob/maste...
  - fizixer 9y ago
    Not all of it goes to miners, unless it's a send/receive between individuals. 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).
    - AgentME 9y ago
      Yeah but those aren't bitcoin transaction fees, those are just the fees for using a service that the service decides to charge. 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.
nextstep 9y ago
Surprised they don’t switch to monero if they’re switching cryptocurrency. Fast and cheap (like litecoin) but also many added privacy benefits.
- ringaroundthetx 9y ago
  Yeah for real, I cant wait for the day a criminal gets busted because they used an AML/KYC enabled payment channel run by Goldman Sachs on bitcoin’s lightning network
- ringaroundthetx 9y ago
  Monero and associated technologies have no scaling solution on the table. It is a problem. 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.
  - andirk 9y ago
    Would you say that a lot of smaller coins tout their quickness and cheapness as a benefit but it is simply because of their low usage? I have heard similar about bitcoin cash.
    - SilasX 9y ago
      Not the parent but I would say yes, definitely. It’s easy to make a cryptocurrency where there is less demand for transactions than can fit in in a small block. The real challenge is when the demand seriously ramps up, which only bitcoin (core) and ethereum have seen.
    - gizmo686 9y ago
      Its difficult to say. Having low usage would make most reasonable coins cheap and quick; but does not give us any information of how they would behave at scale. 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. [0] https://www.youtube.com/watch?v=LDF8bOEqXt4&t=4079 https://www.youtube.com/watch?v=LDF8bOEqXt4&t=4079
csours 9y ago
Carder in this context refers to people who trade in stolen credit card information.
jgord 9y ago
High BTC Fees are hitting lots of legit businesses who were previously making the move to support Bitcoin. If they are halfway thru the rollout, its not a lot of work to switch to supporting BitcoinCash instead, due to the similarity of the apis & protocol. 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.
- waytogo 9y ago
  > High BTC Fees are hitting lots of legit businesses 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.
  - skydv 9y ago
    my urine is also of limited supply, but no one buys and holds it
    - XR0CSWV3h3kZWg 9y ago

96 points by wglb 9y ago

deleted 9y ago

[deleted]

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?

21 9y ago
They go to the miner of the block, which is incentivized to pick the highest paying transactions to put inside the limited block. So yeah, you bid with your fee against everyone else wanting a transaction in.
- ianai 9y ago
  Does the cost of a transaction increase as more blocks are found? What makes the transaction fee minimal?
  - tuxxy 9y ago
    No, it's essentially a race on the number of users trying to get mined in the block. 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.
  - 21 9y ago
    There are 100 MB of transactions which want to get in the next block: https://blockchain.info/charts/mempool-size?timespan=all https://blockchain.info/charts/mempool-size?timespan=all 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.
    - Empact 9y ago
      More than 100 megs according to this, which also shows the fee strata: https://dedi.jochen-hoenicke.de/queue/more/#24h https://dedi.jochen-hoenicke.de/queue/more/#24h 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.
      - icelancer 9y ago
        Furthermore, tons of "exchanges" in Korea were spamming the mempool with 0-fee transactions, as were some other notorious figures, driving these relatively false mempool statistics way up in order drive up the value of other coins.
        oh_sigh 9y ago
        What benefit do they get from spamming the exchanges? Is there ever an reason to mine 0-fee transactions?
        icelancer 9y ago
        To get threads like this created about how the mempool is packed and it costs $20 to move BTC from peer-to-peer and to drive media in that direction. For what second-order reason would someone do this? Well, I can think of a few....
        xocyabencl 9y ago
        How can a bunch of no fee transaction attempts cause a $20 market price? It seems like the block would need to be full of transactions with high fees.
  - toomim 9y ago
    The cost is increasing because more people are trying to use Bitcoin, but it has an artificial limit to the number of people who can use it per second. Thus, with increasing demand, and static supply, the fees rise roughly quadratically over time. 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 https://www.bitcoin.com/info/what-is-bitcoin-cash
    - icelancer 9y ago
      >To reduce the fees, we need to remove that artificial 1mb limit. Here's the main approach to that right now... 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.
      - relyio 9y ago
        Increasing block size is the low hanging fruit for reducing tx fees. 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.
  - fixedfees 9y ago
    Peercoin has fixed transactions fees, for comparison https://github.com/linalouise9/peercoin-marketing/blob/master/bitcoinvspeercoin/english.txt https://github.com/linalouise9/peercoin-marketing/blob/maste...
- fizixer 9y ago
  Not all of it goes to miners, unless it's a send/receive between individuals. 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).
  - AgentME 9y ago
    Yeah but those aren't bitcoin transaction fees, those are just the fees for using a service that the service decides to charge. 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.

nextstep 9y ago

Surprised they don’t switch to monero if they’re switching cryptocurrency. Fast and cheap (like litecoin) but also many added privacy benefits.

ringaroundthetx 9y ago
Yeah for real, I cant wait for the day a criminal gets busted because they used an AML/KYC enabled payment channel run by Goldman Sachs on bitcoin’s lightning network
ringaroundthetx 9y ago
Monero and associated technologies have no scaling solution on the table. It is a problem. 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.
- andirk 9y ago
  Would you say that a lot of smaller coins tout their quickness and cheapness as a benefit but it is simply because of their low usage? I have heard similar about bitcoin cash.
  - SilasX 9y ago
    Not the parent but I would say yes, definitely. It’s easy to make a cryptocurrency where there is less demand for transactions than can fit in in a small block. The real challenge is when the demand seriously ramps up, which only bitcoin (core) and ethereum have seen.
  - gizmo686 9y ago
    Its difficult to say. Having low usage would make most reasonable coins cheap and quick; but does not give us any information of how they would behave at scale. 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. [0] https://www.youtube.com/watch?v=LDF8bOEqXt4&t=4079 https://www.youtube.com/watch?v=LDF8bOEqXt4&t=4079

csours 9y ago

Carder in this context refers to people who trade in stolen credit card information.

jgord 9y ago

High BTC Fees are hitting lots of legit businesses who were previously making the move to support Bitcoin. If they are halfway thru the rollout, its not a lot of work to switch to supporting BitcoinCash instead, due to the similarity of the apis & protocol. 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.

waytogo 9y ago
> High BTC Fees are hitting lots of legit businesses 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.
- skydv 9y ago
  my urine is also of limited supply, but no one buys and holds it
  - XR0CSWV3h3kZWg 9y ago