The True Cost of Bitcoin Transactions

http://moneyandstate.com/the-true-cost-of-bitcoin-transactions/

by lisper • 9 years ago

108 115 9 years ago

pmorici26• 9 years ago

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had some legitimate arguments a few years ago when discussion of this issue first started but those have all since been superseded by improvements in the protocol like xthin.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 suggests a block size increase. They are also working overtime to censor any comments that challenge their world view on the /r/bitcoin sub reddit which is why you see such hostile comments mentioned by the OP in response to users asking about slow transactions. /r/bitcoin is now just an echo chamber where yes men regurgitate the agenda of a select few. Eeveyone else is shadow banned.

edit: anyone that doubts this go make a comment in /r/bitcoin that contains the word "censorship" then view the page in incognito mode. The comment is immediately hidden by the automoderator. It really is nuts.

Article about the history of censorship in /r/bitcoin https://medium.com/@johnblocke/a-brief-and-incomplete-histor...

knocte• 9 years ago

That's really baffling, I perceived quite the opposite.

pmorici26• 9 years ago

Based on what? Can you name a single dev that expresses support for bigger blocks that hasn't been systematically ridiculed and excluded from Bitcoin Core development by the small block crowd? It isn't even possible to get an accurate perception of Bitcoin Unlimited support from reading the traditional Bitcoin discussion forums like /r/bitcoin because there is ZERO tolerance for discussion of bigger blocks unless it in a negative context.

joshontheweb2• 9 years ago

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

steveklabnik• 9 years ago

Eeveyone else is shadow banned.

On reddit, only admins can shadow ban, and they claimed that they stopped doing it over a year ago, in my understanding.

slaveofallah93• 9 years ago

Subs can do a pseudo-shadowban by setting up automoderator to delete any comment you make automatically without explicitly banning you.

pmorici26• 9 years ago

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.

decker• 9 years ago

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

brokenmachine• 9 years ago

Can you explain better? How does changing the blocksize affect the amount of money?

nadaviv24• 9 years ago

I was sure you're talking about the chinese miners as I started reading your comment...

The ones who oppose a block-size increase today are the miners and the anti-Core crowd. The rest of the bitcoin community, including its technical and business community, are pushing for an increase to 2MB blocks in the form of SegWit.

And I think the "hostile comments" referred to by the OP are the non-stop personal attacks and toxicity that is happening on r/btc.

pmorici26• 9 years ago

Your comment is a good example of the double speak and gas lighting I often see in /r/bitcoin

nadaviv24• 9 years ago

You're painting a very unbalanced picture.

There is a small faction of the Bitcoin community working exceptionally hard to prevent any block size increase.

This small faction is composed of nearly ~all the technical experts we have in the Bitcoin space, over 100 businesses and projects that support SegWit, the majority of bitcoin users that I'm personally familiar with, the majority of full-nodes on the network (~85%), and the vast majority by pretty much every metric you choose.

https://bitcoincore.org/en/segwit_adoption/

https://bitcoincore.org/en/supporters/

https://coin.dance/nodes/share

https://bitcoin.org/en/bitcoin-core/capacity-increases

/r/bitcoin is now just an echo chamber where yes men regurgitate the agenda of a select few.

r/bitcoin is the largest and most active bitcoin community by far. It had to start engaging in more heavy-handed moderation when the voting bots, sockpuppet accounts and other manipulation made it impossible to conduct productive discussions. Its sad, but I don't really see an alternative.

https://www.reddit.com/r/Bitcoin/comments/4biob5/research_in...

https://bitcoinmagazine.com/articles/a-closer-look-at-reddit...

https://www.reddit.com/r/Bitcoin/comments/3hf5z7/determining...

https://news.bitcoin.com/the-block-size-debate-and-sock-pupp...

https://www.reddit.com/r/btc/comments/5n3wsw/birds_by_bitcoi...

pmorici26• 9 years ago

You don't deny that censorship is taking place you are just rationalizing it by calling it "moderation". Lets be clear what is going on there goes way beyond what is commonly understood as moderation. They are systematically silencing a large segment of the Bitcoin community.

If your side really had the support you claim the censorship wouldn't be needed.

simulx5• 9 years ago

Segwit is a block size increase. After activation blocks on the block chain will be up to a max of 4MB, with an average of 2.1MB There is no meaningful definition of a block size increase that does not include segwit, which increases the size of blocks on the chain.

Most of those devs and businesses are vocally advocating for segwit - a block size increase.

hnolable7• 9 years ago

If Eric was serious about this he would have targeted this post at chinese miners who are stalling on activating segwit (which is a 2x blocksize increase and the foundation for instant & nearly free txs via the Lightning Network).

mhluongo7• 9 years ago

Erm, targeted at? You mean he would have, what, written it in Chinese?

Note he said most businesses are looking for Segwit activation + a hard fork blocksize increase (ours included). The "Chinese miners" have expressed that desire as well. Segwit is stalling because it's not what the market is asking for.

hnolable7• 9 years ago

Segwit requires 95% of miners to activate. Currently about 75% of hash power is controlled by a group of chinese miners/pools. This is about the % of hashing power that is missing for Segwit to activate.

nadaviv24• 9 years ago

SegWit is supported by over 100 businesses and projects, and pretty much by ~everyone in the technical bitcoin community. It definitely is what the market is asking for.

https://bitcoincore.org/en/segwit_adoption/

pmorici26• 9 years ago

Segwit is not a 2x block size increase. That is marketing spin that Blockstream started spreading to try and fool people into supporting their agenda w/o having to compromise and raise the block size. Segwit does _not_ increase the block size in the sense that people are discussing and in some cases it might even make the transaction throughput much worse than the current system.

The whole reason people want bigger blocks is for higher transaction throughput on-chain. Segwit doesn't deliver that.

https://np.reddit.com/r/Bitcoin/comments/5f507l/core_is_the_...

hnolable7• 9 years ago

You can play semantical games but segwit gives about 2x onchain capacity. And the only thing holding it up is a group of chinese miners/pools. Anyone truly wanting more onchain capacity should be engaging those miners/pools.

Of course that's not really what people bitching about tx fees want.

nadaviv24• 9 years ago

SegWit allows twice as many transactions as soon as miners and users update their software. How is that not a capacity increase?

https://segwit.org/is-segwit-a-block-size-increase-705df6a87...

colordrops2• 9 years ago

The Lightning Network is not bitcoin. The people who are fighting against block size increase are the same people pushing segwit. While there is nothing inherently wrong with segwit and the Lightning Network, they are ignoring the most important improvement to Bitcoin itself, which would be a pure block size increase.

hnolable7• 9 years ago

https://bitcoincore.org/en/2016/01/26/segwit-benefits/#block...

nadaviv24• 9 years ago

But SegWit is a block size increase. It allows twice as many on-chain transactions by making the blocks twice as big.

This "SegWit vs block-size increase" talk makes no sense to me.

https://segwit.org/is-segwit-a-block-size-increase-705df6a87...

lawn6• 9 years ago

for instant & nearly free txs via the Lightning Network

It's amazing we're putting all our hopes on a technology best labeled as vaporware. You make it out like it's readily available but the fundamental problem of decentralized routing hasn't been solved and it may even be unsolvable.

The simple fact is that blockstream is pushing segwit precisely for it being a necessity for lightning network, not because it's a good thing for bitcoin.

The correct solution would have been a blocksize increase long ago but the same people supporting segwit has been actively blocking all attempts at a blocksize increase previously. Why the sudden change? As another comment said, "Follow the money, it's not baffling at all."

codingmyway4• 9 years ago

This political argument that it's all just a plot by Blockstream is what is causing the division where the technical benefits of segwit are clear to anybody who knows what they are talking about.

As soon as it became about people and BS conspiracies instead of technical rational solutions it was only going to end up in slagging match.

mhluongo7• 9 years ago

Appreciate the pragmatic, user-focused view. There's rarely empathy for new users in this space, and it's refreshing.

ac29• 9 years ago

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

pmorici26• 9 years ago

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.

checksauce4• 9 years ago

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.

simulx5• 9 years ago

Blocks are supposed to be full, otherwise fees are zero. The question is what fees should be, and what the minimum reasonably transaction amount should be for it to be included on the chain... not what blocksize should be. "Fullness" is not a thing.

danbruc2• 9 years ago

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.

pmorici26• 9 years ago

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.

danbruc2• 9 years ago

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, ...

Animats• 9 years ago

That's just the transaction fee paid to miners. You also have to consider the currency conversion cost of getting into and out of Bitcoin. Most sellers use Coinbase to immediately get out of Bitcoin. There's also a volatility risk.

crocodileJS• 9 years ago

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?

juskrey2• 9 years ago

Pretty funny to see that SEPA money transfer from Kraken to EU bank account costs just €0.09 for any amount. Arrival is guaranteed (though can be late too of course). So the cheapness of bitcoin and high cost of modern fiat transactions are both overstated.

Laforet4• 9 years ago

The same way Uber was/is cheaper than Taxi, the cost is subsidised by someone else (Uber's investors, or in this case miners and speculators of Bitcoin)

juskrey2• 9 years ago

I don't think physical automatic wire transaction cost is more expensive than SMS. High transfer/transaction fees in most banks are, on contrary, are subsidizing losses from other risky activities.

mhluongo7• 9 years ago

In eg the US, a domestic wire will cost you $30. In the US and EU I believe, credit card fees are much worse (1.5-3%). If paying internationally cross-currency, you'll often lose quite a bit in the exchange.

Though I see that you said "modern fiat transactions", so maybe payments in the US don't count :)

zump2• 9 years ago

What they did to Mike Hearn was a disgrace.

SwellJoe• 9 years ago

Who is "they" and what did they do to Mike Hearn? (I know Hearn left the Bitcoin community and pronounced it a failed experiment, and I know there was some harsh criticism for that assertion...but, did it go beyond that?)

zump2• 9 years ago

Bitcoin core team. Ostracized him for forking BitcoinXT, impugned his reputation, etc.

sigi45• 9 years ago

One point which your post/this post is missing:

Transaction fee = power consumption + profit.

Bitcoin fee has to hit a fee amount which has less eco impact than a normal banking system.

The True Cost of Bitcoin Transactions

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