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The True Cost of Bitcoin Transactions

moneyandstate.com

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Re: The True Cost of Bitcoin Transactions

#31

Post by checksauce »

pmorici wrote: post #17
ac29 wrote: post #13

This article completely ignores the block reward -- the real cost per transaction is more like $7 [0]. The blocksize really needs to change too, last time I did a bitcoin transaction, every recent block was 95%+ full. Its an arbitrary limit, but its contentious and political to change. It really made me want to avoid Bitcoin in the future. [0] https://blockchain.info/charts/cost-per-transaction

The whole point of the block reward is to subsidize the network until transaction volume can grow to an equilibrium point where the network can be supported on fees alone. The fact that transaction volume is capped by the block size is troubling because it won't be able to grow to that equilibrium point.

As the value of Bitcoin grows, transaction cost grows relative to other currencies. Really transaction costs in strictly btc/byte have decreased. Pretty much everyone agrees the block size will need to grow at some point, including core devs. It is the current proposed method of introducing this change (via hardfork) that is questioned and scrutinized.

Re: The True Cost of Bitcoin Transactions

#32

Post by danbruc »

pmorici wrote: post #20
danbruc wrote: post #15

And if you look at hardware, energy and all the other costs, then you probably still end up in the $5 to $10 range as true costs per transaction. But this will not become fully visible until the block reward becomes negligible or the demand for new coins becomes essentially zero so that the deflation becomes visible.

If what you say is true then that would imply that miners are losing money. I don't think that is the case. Total network hash rate has strong growth. People don't normally invest huge sums to turn a loss.

They are not losing money, they get the block reward to sell. This in turn makes all Bitcoin users pay indirectly due to deflation but that is currently not visible because there is money flowing into the system.

But you can just do the math for yourself - the network hash rate is currently 3,160 petahash per second, 300,000 transactions are processed per day, an AntMiner S9 - the most efficient currently available miner as far as I can tell - consumes 98 joules per terahash and you can buy electricity for 5 cents per kilowatt-hour. With this numbers you end up at 1.24 Dollar per transaction and that is as optimistic as it gets when looking at electricity costs. Then add costs for hardware, rent, cooling, labor, profits, ...

Re: The True Cost of Bitcoin Transactions

#33

Post by pmorici »

cloakandswagger wrote: post #30
pmorici wrote: post #24

Earlier quoted context omitted.

None of the comments I make in that sub seem to show up any more and the only reason I realized it is because I stopped getting any responses and checked from an incognito window. Sure enough nothing there. I know others who have experienced the same. Some people are outright banned as well.

I don't even bother with r/bitcoin anymore. The level of groupthink is insufferable, but hard for me to say whether it formed naturally or via direct influence (considering it's Reddit, both are likely)

I agree. I think it is a natural consequence of the censorship. If you censor comments and ban users that dissent people take the hint pretty quick that diversity of opinion isn't welcome and look elsewhere.

The one hope I have for this whole thing being resolved is that historically there are examples in Bitcoin of groups that were once very influential being superseded. Most notable is probably Ghash.io which had so much hash rate at the height of their power that people were afraid they could perform a 51% attack and that Bitcoin was doomed. Today they don't even register a percentage point.

Re: The True Cost of Bitcoin Transactions

#34

Post by Laforet »

cloakandswagger wrote: post #23
joshontheweb wrote: post #11

Earlier quoted context omitted.

Can you expound on why? I'm interested in hearing both sides of this.

I've been an outside observer of the block size debate for a while now, so here is my naive take on it: The anti-block size increase camp says that increasing the block size is only a temporary fix, and that no blockchain can accommodate Visa levels of throughput. They also posit that any increase in the block size will make running a full node more difficult, meaning Bitcoin will become more and more centralized and…

I've also been keeping tabs on the debate and I agree with you except on one account: Not everyone want the Bitcoin to be the next Visa or Paypal, some are perfectly content with a 10 minute confirmation delay as long as the blockchain remains fully distributed and anonymous, whereas others see a business opportunity that could make themselves rich and influential down the line.

The entire narrative about larger block making the network more centralised is a red herring. The network has been going in that direction for quite some time without a block size increase and in any case, going from 1MB to 2MB or even 16MB isn't going to change the economics of running a full node that much, which is to say there are no incentives for non-miners to host a full node at all, regardless of the alleged computing and network overhead (and worse, it can make you a more likely victim of DDoS attacks[0]). The entire point about keeping the 1MB limit (which was meant to be a temporary cap anyway) is to artificially create scarcity in transaction capacity and coerce people into accepting SegWit and eventually fully functional side chains.

This is probably fine for those who believe that A. Bitcoin will become mainstream and B. the ends justify the means, but I find this to be a very unethical position to take.

Disclaimer: I don't own a single cent in BTC, nor do I have association with anyone involved in the Bitcoin scene.

[0]:http://www.financemagnates.com/cryptocurrency/news/the-lates...

Re: The True Cost of Bitcoin Transactions

#35

Post by pmorici »

danbruc wrote: post #32
pmorici wrote: post #20

Earlier quoted context omitted.

If what you say is true then that would imply that miners are losing money. I don't think that is the case. Total network hash rate has strong growth. People don't normally invest huge sums to turn a loss.

They are not losing money, they get the block reward to sell. This in turn makes all Bitcoin users pay indirectly due to deflation but that is currently not visible because there is money flowing into the system. But you can just do the math for yourself - the network hash rate is currently 3,160 petahash per second, 300,000 transactions are processed per day, an AntMiner S9 - the most efficient currently available m…

Ah, you mean if you divide the block reward by transactions per block. Yeah in that case it's about $7 per transaction right now. That is why we need to increase on-chain transactions so that those fixed per block costs are amortized over a larger number of transactions.

Re: The True Cost of Bitcoin Transactions

#36

Post by pmorici »

hnolable wrote: post #28
pmorici wrote: post #22

Earlier quoted context omitted.

That's my point exactly people calling segwit a block size increase are playing semantic games. Miners and devs met a year ago and agreed on a path forward of segwit+hardfork blocksize increase to 2MB. Now they are trying to get people to activate segwit w/o a 2mb increase. It's not a mystery why this is happening and it isn't just Chinese miners that oppose it.

You admitted that "The whole reason people want bigger blocks is for higher transaction throughput on-chain." And said that "Segwit doesn't deliver that". Segwit delivers that.

The link I provided in my first response to you clearly shows that segwit can result in much lower transaction throughput.

Re: The True Cost of Bitcoin Transactions

#37

Post by crocodileJS »

The "average" cost of a Bitcoin transaction is just that, the average. It's not (part of) the true cost. The "true" cost is specific to the transaction. The last time I sent around some Bitcoin, it was around 20$ worth and the fee was whatever the client recommended me. It didn't amount to anything near the average. Why would I care about the average?

Re: The True Cost of Bitcoin Transactions

#38

Post by pmorici »

checksauce wrote: post #31
pmorici wrote: post #17

Earlier quoted context omitted.

The whole point of the block reward is to subsidize the network until transaction volume can grow to an equilibrium point where the network can be supported on fees alone. The fact that transaction volume is capped by the block size is troubling because it won't be able to grow to that equilibrium point.

As the value of Bitcoin grows, transaction cost grows relative to other currencies. Really transaction costs in strictly btc/byte have decreased. Pretty much everyone agrees the block size will need to grow at some point, including core devs. It is the current proposed method of introducing this change (via hardfork) that is questioned and scrutinized.

There is at least one prominent core dev that recently seriously proposed _decreasing_ the block size to 1/3rd of what it is currently. The problem is that the block size needed to be increased last year. Agreeing that it needs to be increased at some unspecified point in the future minus any specifics is just a stalling tactic.

Re: The True Cost of Bitcoin Transactions

#39

Post by notyourwork »

cloakandswagger wrote: post #23
joshontheweb wrote: post #11

Earlier quoted context omitted.

Can you expound on why? I'm interested in hearing both sides of this.

I've been an outside observer of the block size debate for a while now, so here is my naive take on it: The anti-block size increase camp says that increasing the block size is only a temporary fix, and that no blockchain can accommodate Visa levels of throughput. They also posit that any increase in the block size will make running a full node more difficult, meaning Bitcoin will become more and more centralized and…

>They also posit that any increase in the block size will make running a full node more difficult, meaning Bitcoin will become more and more centralized and consolidated around the big mining pools that have the hardware to handle bigger block sizes.

With a bigger block size what hardware constraints begin to appear?

> This is a big problem for miners who have poured lots of money into their rigs, because now the blockchain would be little more than a settlement network. There would be far more transactions occurring off the network, meaning less money for miners.

So the motivation is strictly monetary?

Re: The True Cost of Bitcoin Transactions

#40

Post by decker »

pmorici wrote: post #2

There is a small faction of the Bitcoin community working exceptionally hard to prevent any block size increase. I find their motives really baffling. They had some legitimate arguments a few years ago when discussion of this issue first started but those have all since been superseded by improvements in the protocol like xthin. They now resort to distasteful tactics by running anyone out of town that even so much as…

Follow the money, it's not baffling at all.
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