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Bitcoin transactions are cheaper than credit card transactions. Using the card networks exposes merchants to chargeback fraud, but since the internet now has ca

by natrius 12y ago

Bitcoin transactions are cheaper than credit card transactions. Using the card networks exposes merchants to chargeback fraud, but since the internet now has cash, many merchants can transact with wide swaths of the globe that they previously avoided. Remittances. Capital controls. No one's telling you to switch to Bitcoin, but it's clear that lots of people are going to use it.

danbruc 12y ago
Bitcoin transactions are way more expensive than you think, currently between 10 and 20 dollars.
- natrius 12y ago
  Let's say I'm buying an Overstock rug with bitcoins. I do an instant buy with Circle and and send the bitcoins over. Am I paying $10-$20? Is Overstock? Block rewards have no effect on whether people will use Bitcoin, especially since there are other digital currencies that don't have that issue. Inasmuch as it's a problem, it's fixable.
  - danbruc 12y ago
    Who do you think pays for the electricity bills needed to keep a 250 PH/s network online?
    - natrius 12y ago
      Bitcoin speculators. The folks who hook up their bank accounts to the Bitcoin network don't hold bitcoins or pay the block rewards.
      - danbruc 12y ago
        250 PH/s, 1 W/GH/s, 0.1 $/kWh and you get 219 million dollars per year to run the Bitcoin network. At 75.000 transactions per day this yields 8 dollars per transaction. And these are real costs somebody has to pay for. Maybe most of that is currently covered by the influx of new money but this is not going to last forever. And once the block reward is gone this has to be covered by the fees. Neither lowering the hash rate nor reducing the the mining costs is an option because it undermines the security of the system. The only option is to process more transactions per block and this is not without problems on its own.
        natrius 12y ago
        So your position is that no one is ever going to figure out how to make cryptocurrencies sustainable? Bitshares is already doing it today, and any strategy that proves itself can easily be added to Bitcoin. It's a bad bet, but good luck with that.
        ThomPete 12y ago
        Of course you have also done the calculation for the current system right? Hundreds of thousands of people involved in making the current system work. Legislation and so on.
        danbruc 12y ago
        Does it matter? My point was that Bitcoin transactions are not cheap, that only looking at the transaction fee is misleading. The electricity costs per transaction are currently 200 times larger than the transaction fees, not accounting for hardware costs or any profit for miners. So the whole thing has to change a lot if you want a sustainable system with transaction costs close to transaction fees.
        ThomPete 12y ago
        Yes it matters as thats also part of the cost.
- waterlesscloud 12y ago
  Huh? The current fee is about 4 cents.
  - danbruc 12y ago
    Not the fee, the costs, block reward divided by transactions in the block. Miners will use that to cover their electricity bills and you are paying for this indirectly when you buy Bitcoins.
    - waterlesscloud 12y ago
      That's irrelevant to the people conducting the transaction. If I send $100 worth of bitcoin to someone, they receive $100 worth of bitcoin and I pay 4 cents worth of bitcoin to send it to them. There is no $10-20 transaction cost on either end of the exchange. The value you're referring to is created by the block reward. It's additional value that did not previously exist, not value taken from someone else.
      - danbruc 12y ago
        Bitcoin mining does not create money out of thin air. Running the Bitcoin network costs a lot of electricity and somebody has to pay for that. Right now it may still be mostly covered by the block rewards together with the influx of new money but the day will come where block rewards will no longer pay the bills and then you will have to pay for it with fees.
        waterlesscloud 12y ago
        "Right now" is when you're quoting a $10-20 transaction cost. There is no such cost for a given transaction, and it's simply incorrect to state that there is. You're talking about something completely different and stating that it's the same. It is not.
        danbruc 12y ago
        I added the math to another comment and the electricity cost per transaction should be on the order of 8 dollars per transaction. Part of it is payed by the spread between buying and selling Bitcoins, part of it is payed by the influx of new money keeping the spread narrow. The point is that Bitcoin transactions are not cheap, you are just kind of lucky that other people will pay some of the costs for you right now. But this is obviously not sustainable. If the influx of money stops, miners selling their block rewards to pay for electricity will just drive the price down and you pay all the costs with the spread.

by natrius 12y ago

danbruc 12y ago

Bitcoin transactions are way more expensive than you think, currently between 10 and 20 dollars.

natrius 12y ago
Let's say I'm buying an Overstock rug with bitcoins. I do an instant buy with Circle and and send the bitcoins over. Am I paying $10-$20? Is Overstock? Block rewards have no effect on whether people will use Bitcoin, especially since there are other digital currencies that don't have that issue. Inasmuch as it's a problem, it's fixable.
- danbruc 12y ago
  Who do you think pays for the electricity bills needed to keep a 250 PH/s network online?
  - natrius 12y ago
    Bitcoin speculators. The folks who hook up their bank accounts to the Bitcoin network don't hold bitcoins or pay the block rewards.
    - danbruc 12y ago
      250 PH/s, 1 W/GH/s, 0.1 $/kWh and you get 219 million dollars per year to run the Bitcoin network. At 75.000 transactions per day this yields 8 dollars per transaction. And these are real costs somebody has to pay for. Maybe most of that is currently covered by the influx of new money but this is not going to last forever. And once the block reward is gone this has to be covered by the fees. Neither lowering the hash rate nor reducing the the mining costs is an option because it undermines the security of the system. The only option is to process more transactions per block and this is not without problems on its own.
      - natrius 12y ago
        So your position is that no one is ever going to figure out how to make cryptocurrencies sustainable? Bitshares is already doing it today, and any strategy that proves itself can easily be added to Bitcoin. It's a bad bet, but good luck with that.
      - ThomPete 12y ago
        Of course you have also done the calculation for the current system right? Hundreds of thousands of people involved in making the current system work. Legislation and so on.
        danbruc 12y ago
        Does it matter? My point was that Bitcoin transactions are not cheap, that only looking at the transaction fee is misleading. The electricity costs per transaction are currently 200 times larger than the transaction fees, not accounting for hardware costs or any profit for miners. So the whole thing has to change a lot if you want a sustainable system with transaction costs close to transaction fees.
        ThomPete 12y ago
        Yes it matters as thats also part of the cost.
waterlesscloud 12y ago
Huh? The current fee is about 4 cents.
- danbruc 12y ago
  Not the fee, the costs, block reward divided by transactions in the block. Miners will use that to cover their electricity bills and you are paying for this indirectly when you buy Bitcoins.
  - waterlesscloud 12y ago
    That's irrelevant to the people conducting the transaction. If I send $100 worth of bitcoin to someone, they receive $100 worth of bitcoin and I pay 4 cents worth of bitcoin to send it to them. There is no $10-20 transaction cost on either end of the exchange. The value you're referring to is created by the block reward. It's additional value that did not previously exist, not value taken from someone else.
    - danbruc 12y ago
      Bitcoin mining does not create money out of thin air. Running the Bitcoin network costs a lot of electricity and somebody has to pay for that. Right now it may still be mostly covered by the block rewards together with the influx of new money but the day will come where block rewards will no longer pay the bills and then you will have to pay for it with fees.
      - waterlesscloud 12y ago
        "Right now" is when you're quoting a $10-20 transaction cost. There is no such cost for a given transaction, and it's simply incorrect to state that there is. You're talking about something completely different and stating that it's the same. It is not.
        danbruc 12y ago
        I added the math to another comment and the electricity cost per transaction should be on the order of 8 dollars per transaction. Part of it is payed by the spread between buying and selling Bitcoins, part of it is payed by the influx of new money keeping the spread narrow. The point is that Bitcoin transactions are not cheap, you are just kind of lucky that other people will pay some of the costs for you right now. But this is obviously not sustainable. If the influx of money stops, miners selling their block rewards to pay for electricity will just drive the price down and you pay all the costs with the spread.