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It will be interesting to see how this will work out in the long-term. Currently the cost of Bitcoin transaction is already at around $50 which makes Bitcoin tr
by gst 12y ago
It will be interesting to see how this will work out in the long-term. Currently the cost of Bitcoin transaction is already at around $50 which makes Bitcoin transactions quite expensive. The only reason why this cost doesn't matter yet is because the inflationary factors (new coins, etc.) are smaller than the deflationary factors (more adoption, etc.).
I see Bitcoin as something like the 2nd-gen P2P file sharing systems (Gnutella, etc.) where a radical decentralization approach was taken to counter weaknesses of the earlier generation (P2P: Napster, Currency: E-Gold). In the P2P world we figured out that a small amount of centralization provides benefits and is acceptable (e.g., Bittorrent). I suspect that in the e-currency world we'll be going a similar route, where successors to Bitcoin will use Ripple-like concensus systems instead of proof-of-work [2]. This should not only allow to significantly reduce the cost per transaction, but might also allow to make the network more secure in practice (as the number of validators in a concensus approach will be much larger than the number of mining pools with signficant hashing power in the Bitcoin world).
[1] that's basically the cost of finding a new block divided by the number of transactions per block - see https://blockchain.info/en/charts/cost-per-transaction https://blockchain.info/en/charts/cost-per-transaction.
[2] Proof-of-stake is a nice theoretical approach but due to the complexity involved it will probably take some time until a solution is found that also works well in practice. Proof-of-stake as implemented in Peercoin is basically outdated, something like Slasher (http://blog.ethereum.org/2014/01/15/slasher-a-punitive-proof-of-stake-algorithm/ http://blog.ethereum.org/2014/01/15/slasher-a-punitive-proof...) looks more like a viable solution.
EDIT: As there has been some confusion about the $50 transactions costs: I'm not talking about direct costs for the person who initiated the transaction, but about externalized costs that are paid by the whole network. See my responses below.
- ok_craig 12y agoThe cost of a bitcoin transaction is not $50, it's about $0.06. Often times, such as for large transactions or moving old coins, you don't need to include a fee at all.
- gst 12y agoThe direct cost per transaction (= the mining fees paid by the person who initiated the transaction) is $0.06. The externalized cost per transaction (= the block reward divided by the number of transactions) is $50.
- ok_craig 12y ago(1) That's not made apparent in the sentence (why leave it for a footnote?), and (2) you haven't explained why that number is actually meaningful. Edit: I don't know much about this stuff so please correct me if I'm wrong but wouldn't the cost of the "externalized price per transaction" be (price_to_mine-block_reward)/number_of_txs. price_to_mine and block_reward would approach each other over time.
- gst 12y agoThe block reward will continue to half in regular intervals during the next decades, while the price of a Bitcoin can't continue to double in regular intervals during the next decades (see: limits of exponential growth, etc.). This leaves us with two options: 1) Instead of being financed by the block reward miners will require higher mining fees in order to include transactions. With a decreasing block reward those mining fees will eventually approach the actual cost of a transaction (currently: $50). 2) There will be less miners so mining a single block will be cheaper. This will lead to a decreased security of the network and make the network more vulnerable to attacks.
- dangero 12y agoWhy don't you factor in the possibility of more transactions per block? The idea is that as the Bitcoin transaction volume climbs, the need for a block reward decreases. Secondly, you're assuming that the mining pool is currently constrained by what is profitable. From what I have read about large mining operations, they are significantly into the green on profit margin right now, so there seems to be room for a decrease in profitability without losing significant portions of the mining network. Every time the mining difficulty changes this is tested already so we know that there is at least some wiggle room in the mining profit margins.
- deleted 12y ago[deleted]
- sickpig 12y ago50$ of transaction fee? At current price that means 0.075 btc per tx. I can assure you that you can mv btc from one address to another for a lot less. Even without paying any fee at all. It all depends on how "old" are the btc you're moving, the amount of btc , the number of addresses involved in the tx and if you're in a hurry or not. For more info see: https://en.bitcoin.it/wiki/Transaction_fees https://en.bitcoin.it/wiki/Transaction_fees A 0 fee tx http://blockexplorer.com/block/000000000002e0d610f875f5aa4fb1a2f00bc0a7d34be41cead9294dee867ca4 http://blockexplorer.com/block/000000000002e0d610f875f5aa4fb...
- gst 12y agoSee my response here: https://news.ycombinator.com/item?id=7846502 https://news.ycombinator.com/item?id=7846502
- moe 12y agoCurrently the cost of Bitcoin transaction is already at around $50 That's a meaningless soundbite. The figure you cite is a function of the current network difficulty/hash-rate, tx-rate and USD/BTC exchange rate. It's devoid of any meaning when looked at in isolation because it is by definition already factored into the exchange rate.
- placeybordeaux 12y agoThat chart is labled as "A chart showing miners revenue divided by the number of transactions." Revenue, not cost. The cost depends on the amount of energy expended multipled by the price of energy.
- gst 12y agoIt's a zero-sum game. Revenue = cost.