
The True Cost of Bitcoin Transactions - lisper
http://moneyandstate.com/the-true-cost-of-bitcoin-transactions/
======
pmorici
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first started but those have all since been superseded by improvements in the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...](https://medium.com/@johnblocke/a-brief-and-incomplete-history-of-
censorship-in-r-bitcoin-c85a290fe43#.ihsr0xkhf)

~~~
steveklabnik
> 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.

~~~
pmorici
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.

~~~
cloakandswagger
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)

~~~
pmorici
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superseded.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.

------
ac29
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](https://blockchain.info/charts/cost-per-transaction)

~~~
pmorici
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.

~~~
checksauce
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.

~~~
pmorici
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.

~~~
checksauce
Yes some devs believe there is centralization pressure of mining blocks caused
by the propogation delay of 1MB blocks. Further increasing the size of blocks
would thus increase centralization pressure. Changing any number of variables
leads to emergent properties which change mining behaviors. Game theory needs
to be considered before tweaking the consensus protocols of Bitcoin. The open
source nature of Bitcoin allows for many opinions and critisms and hopefully
many more proposals for change in the future.

~~~
pmorici
The issue of propagation delays with bigger blocks was fixed with xthin blocks
(aka: compact blocks) months ago. That is no longer a valid reason for
limiting the block size.

~~~
checksauce
There is very limited technical documentation on xthin so it is hard for the
community to accept and test it. If Bitcoin were to implement xthin (or an
alternative proposal such as compact blocks) it would be much better to
release outside of the block increase. again the main contention is the
mechanism for change that the Bitcoin unlimited enthusiasts want to impose, a
contentious hard fork

And to clarify, the software may have been released (in Bitcoin unlimited's
release), but is not used by the Bitcoin network as a whole. Very few nodes
are running this implementation. And to many is untested/unproven

~~~
pmorici
You are just spouting false propaganda now. The Core equivalent to Xthin,
"Compact Blocks", has been released in Bitcoin Core since version 13.0.0

~~~
checksauce
Please point out where I am spouting false propaganda.... You previously
conflated xthin and compact blocks as if they were the same thing. Xthin is
not being used by the network. And there are developers who have reasons to
believe that increasing the block size will have a centralizing effect on
mining. This is not "fixed" as you stated before.

~~~
pmorici
You said: "If Bitcoin were to implement xthin (or an alternative proposal such
as compact blocks) it would be much better to release outside of the block
increase."

Fact: Both xthin and compact blocks are different implementations of the same
idea. Both have already been implemented and released and are in active
production.

------
juskrey
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.

~~~
Laforet
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)

~~~
juskrey
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.

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

------
sigi45
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.

------
Animats
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.

------
danbruc
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.

~~~
pmorici
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.

~~~
danbruc
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, ...

~~~
pmorici
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.

------
hnolable
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).

~~~
pmorici
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_...](https://np.reddit.com/r/Bitcoin/comments/5f507l/core_is_the_new_big_blocker_37mb_mined_on_testnet/dahjg2w/)

~~~
hnolable
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.

~~~
pmorici
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.

~~~
hnolable
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.

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

~~~
nadaviv
The comment you linked to refers to blocks that were specifically made to be
big using non-standard scripts that are larger than usual.

For the current mix of transactions happening on the bitcoin network, SegWit
will give us an effective block size of 2.1MB (or 2.1x transactions compared
to today), and a bit more over time as people start using more advanced
scripts.

~~~
Laforet
According to the video below SegWit creates 4x effective transaction space in
the same 1MB block. I assume that is a theoretical ceiling unlikely to be
achievable in reality?

[https://www.youtube.com/watch?v=DzBAG2Jp4bg](https://www.youtube.com/watch?v=DzBAG2Jp4bg)

~~~
nadaviv
No, it creates 4x effective transaction space in blocks that can now be as
large as 4MB. It does not compress data more efficiently or makes transactions
smaller in any way, it is a block size increase in every sense of the word.

The only ones who see this as 1MB block are old nodes that didn't upgrade to a
segwit-compatible client. But for nodes that do upgrade, the block is simply
larger.

But you're right in that 4MB is the maximum theoretical ceiling. That 2.1MB
number I mentioned is what we get according to kind of transactions that we
have on the network today. It'll go a bit higher as bitcoin users start using
more advanced scripts, but not by much.

------
zump
What they did to Mike Hearn was a disgrace.

~~~
SwellJoe
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?)

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

------
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?

