<h2>Relative economic advantage</h2>

<p>As you've noted, transaction fees are paid for block space and not relative to the amount that is transferred. This causes an obvious economic advantage to larger value transfers and would inevitably push out smaller transfers if supply remains the same and demand increases.</p>

<h2>Supply increase</h2>

<p>This is why for several years, there have been proposals to increase the blockspace supply. This would probably mitigate the problem in the short term, however would probably quickly reestablish the same problem at a lower fee level that would continue to rise as demand catches up.</p>

<p>There have been some proposals to create automatically adapting blocksizes, but these proposals have so far been incomplete and especially deficient in providing a mechanism to push for blocksize decreases. The latter is important to actually achieve a self-balancing system as a quickly growing blocksize would cause other parts of the system to fail due to vastly driving up the cost-of-node-option.</p>

<h2>Demand management</h2>

<p>The other side of increasing the supply would be to manage the demand. This has happened in the past to some degree by transactions moving offchain, e.g. into third party custodial wallets such as the service ChangeTip that facilitated tipping internet contributions or wallets such as Coinbase. A lot of work has gone into a decentralized second layer that basically acts as a aggregation layer for transactions. This Lightning Network is thought to settle on a fee system relative to the transferred value as the costs of relaying payments scale with the amount transferred. If it should gain widespread use it is expected to provide a haven for small value transactions that automatically rebalances with on-chain demand.</p>

CC BY-SA 3.0
2017-06-11T19:56:32.970Z
Thanks! Is this the same with all crypto currencies that you know?
Richard
CC BY-SA 3.0
2017-06-11T19:59:55.283Z
@Richard: No, some cryptocurrencies like Ripple have chosen to make different tradeoffs.
Murch
CC BY-SA 3.0
2017-06-11T16:06:09.343Z
2017-06-11T16:06:09.343Z
Murch
<p>I think if Bitcoin were the only cryptocurrency out there; it would be more of an issue. Cryptocurrency will affect; and be adopted first and foremost people in 3rd world countries, the bank-less; etc. Cryptocurrency, for the first time in history, will allow billions of people who don't have an ATM Card; or Online Bill Pay, or a Checkbook; or easy access to cash (places like this do exist - in fact much of the world population uses "old money"). If you've ever been to an isolated, 3rd world country, you'd know just how old, and dirty, and tattered, the actual bills are. </p>

<p><em>Now; all of these people-- billions of people, have the ability; or soon will have; the ability to send money instantly to anyone in the world from their smartphone app. Smartphones-- they do have, or have access to.</em> </p>

<p>This I believe is how blockchain technology; <em>namely Bitcoin</em>, but also the many altcoins in circulation; will be a profound game changer in terms of how we, as people; use our "money". I think in truth the mass media; politicians; governments; and even big banking institutions; have <em>yes</em>- taken notice to the fact that Bitcoin is here and here to stay, but have and are grossly underestimating just how profound this technology will be in the decades moving forward. Think 10, 20, 30 years. </p>

<p>Simply put; it's as big a game changer as the internet. Or cel phones. Or sliced bread. </p>

<p>Paper money in 2047, 30 years from now, will be like a payphone... have you seen one recently? </p>

<p>That said; the TX fees for Bitcoin I really don't think will be a deal breaker in the long run. Yes; fees for small transactions have become prohibitive; considering what it cost just a year ago when BTC was trending at 1/5 the price and the number of transactions was far lower allowing for lower fees to be included in the next or next few blocks. </p>

<p>Forking the current Bitcoin protocol; is needless to say, complicated- technicalities aside... It's the politics involved within the Crypto community that are stiffling any major changes or new adoptions to the existing blockchain structure. </p>

<p><strong>However; I think that the crypto community as a whole will, and, has already found ways or are developing workable solutions to sending digital currencies with little to no TX fee.</strong> </p>

<ol>
<li><p>Treating BTC as your primary currency or bank, and relying on the larger trading exchanges to convert BTC to the countless alt-coins, some of which have fairly, if not very, stable trading price ranges. This specifically applies to the some of the long term established altcoins that trade in the double, triple, or quadruple satoshi range. </p></li>
<li><p>Having altcoins which trade with very narrow rivers (sometimes a single satoshi) allows users to convert their BTC to "alt" and then withdraw to their alt-wallet. Many of the alts have very low TX fees; some you can send large amounts of BTC value (in altcoin currency) for no TX fee at all. </p></li>
<li><p>While not a huge concern of mine; people also are using the altcoins for better anonymity for their transactions. This includes the Cryptonote coins, such as Monero. </p></li>
</ol>

<p>I think BTC has certainly claimed it's stake as the elephant in the room; there is at this point far too much money invested in ASIC usage; as well as future development of faster ASIC wafers; the existing BTC mining infrastructure both on the hardware side and software side dominates like the USA Military Budget compared to the next 10 Countries Budget's combined; and last, people simply now know what it is. </p>

<p>However; the Altcoin economy is no doubt (as a whole) a huge part of the cryptocurrency market. And altcoins are where 99% of the innovations are taking place in terms of blockchain technology. </p>

<p>Yes most altcoins get released and die a quick death; but some tread water for some time; and some swim the long haul. </p>

<p>In closing; I think BTC will be more of your "primary transactions for funding spend accounts"... think "Paycheck"; and Altcoins will be what you use to spend; seeing them as vehicles to spend (check, debit card; cash; etc). </p>

CC BY-SA 3.0
2017-07-16T13:43:42.887Z
2017-07-16T13:51:57.477Z
2017-07-16T13:51:57.477Z
McFlySoHigh
<p>You raise a point that I am not sure is being thoroughly vetted or tested. These rising fees are going to completely redefine Bitcoin's role globally. There is going to be a fundamental change in the nature and type of transactions and I have not seen any published analysis of the risks (or perhaps rewards) of this fundamental change we are seeing. Remember, Bitcoin was originally developed as a transactional tool, not a store of wealth and certainly not a proper vehicle for pure speculators. </p>

<p>As in the real world, the prototype and functioning model began widening very quickly. Bitcoin is no longer an idealist, libertarian project that serves the under-banked in developing countries. It is also no longer just a good way to buy things anonymously online. The divide has become vast and anyone purporting to have a good model on where Bitcoin is heading is being disingenuous at best.</p>

<p>What can be safely surmised;
Bitcoin's price will reach an equilibrium where the market will decide whether the transaction fee is too high for each particular transaction. </p>

<p>For example, paying a fee of $0.20 for a $1 cup of coffee will likely be too much for some people considering that traditional transaction fees for credit and debit cards are way below that level. </p>

<p>However, paying a $10 fee for a $400k house purchase seems not only reasonable, but a dream come true. </p>

<p>So, eventually the coffee will be done off-chain but in general the lost coffee sale is replaced by larger, more important transactions which are done on-chain. That's the extent of the "givens". Viability of Bitcoin, while a great subject to debate and discuss, does not have enough inputs at this point to garner much predictive value.</p>

CC BY-SA 3.0
2017-07-08T09:43:51.493Z
Perhaps there will be a scenario where Bitcoin will be your bank/savings account and an altcoin will be your spending account, where the fees are low.
Richard
CC BY-SA 3.0
2017-07-06T19:05:04.220Z
2017-07-06T19:05:04.220Z
Rob Guthm
<p>I've been thinking about this for quite some time, and spent some time searching for information online, but haven't really found good answers. </p>

<p>The transaction fees of crypto currencies are relatively low for large transfers, but high for small transfers. As the price of bitcoin rises, the transaction cost also rises. Won't this cause issues in the long run for normal day-to-day use of Bitcoin, resulting in it only being used for (fairly) large transfers or money?</p>

<p>According to <a href="https://bitcoinfees.21.co/" rel="nofollow noreferrer">https://bitcoinfees.21.co/</a>: </p>

<blockquote>
  <p><em>The fastest and cheapest transaction fee is currently 360 satoshis/byte, shown in green at the top.
  For the median transaction size of 226 bytes, this results in a fee of <code>81,360</code> satoshis.</em></p>
</blockquote>

<p>Currently, <a href="http://www.xe.com/currencyconverter/convert/?Amount=0.00081360&amp;From=XBT&amp;To=EUR" rel="nofollow noreferrer">that price translates to</a> <code>EUR 2.07001</code> or <code>USD 2.31862</code>, according to <a href="https://www.xe.com" rel="nofollow noreferrer">https://www.xe.com</a>. If you're sending e.g. <code>1000 EUR</code>, then that amount is fine, but if you're sending <code>10 EUR</code> (I'm imagining a Bitcoin ATM), the transaction fees will be way to high.</p>

<p>To me it seems these fees will be a huge impediment on the acceptance of the currency by "civilians"?</p>

CC BY-SA 3.0
2017-06-11T15:46:44.670Z
related: https://bitcoin.stackexchange.com/q/53915/5406, https://bitcoin.stackexchange.com/q/53648/5406
Murch
<transaction-fees>
Viability of Bitcoin due to transaction fee?
Richard
# Viability of Bitcoin due to transaction fee?

(Asked by: username_0 on 2017-06-11)

I've been thinking about this for quite some time, and spent some time searching for information online, but haven't really found good answers.

The transaction fees of crypto currencies are relatively low for large transfers, but high for small transfers. As the price of bitcoin rises, the transaction cost also rises. Won't this cause issues in the long run for normal day-to-day use of Bitcoin, resulting in it only being used for (fairly) large transfers or money?

According to <https://bitcoinfees.21.co/>:

> *The fastest and cheapest transaction fee is currently 360 satoshis/byte, shown in green at the top.
> For the median transaction size of 226 bytes, this results in a fee of `81,360` satoshis.*

Currently, [that price translates to](http://www.xe.com/currencyconverter/convert/?Amount=0.00081360&From=XBT&To=EUR) `EUR 2.07001` or `USD 2.31862`, according to <https://www.xe.com>. If you're sending e.g. `1000 EUR`, then that amount is fine, but if you're sending `10 EUR` (I'm imagining a Bitcoin ATM), the transaction fees will be way to high.

To me it seems these fees will be a huge impediment on the acceptance of the currency by "civilians"?

**Tags:** transaction-fees

> **Comments:**
> **username_1**: related: https://bitcoin.stackexchange.com/q/53915/5406, https://bitcoin.stackexchange.com/q/53648/5406  

---

## 3 answers

### Answer by username_1 on 2017-06-11. Score: 4

## Relative economic advantage

As you've noted, transaction fees are paid for block space and not relative to the amount that is transferred. This causes an obvious economic advantage to larger value transfers and would inevitably push out smaller transfers if supply remains the same and demand increases.

## Supply increase

This is why for several years, there have been proposals to increase the blockspace supply. This would probably mitigate the problem in the short term, however would probably quickly reestablish the same problem at a lower fee level that would continue to rise as demand catches up.

There have been some proposals to create automatically adapting blocksizes, but these proposals have so far been incomplete and especially deficient in providing a mechanism to push for blocksize decreases. The latter is important to actually achieve a self-balancing system as a quickly growing blocksize would cause other parts of the system to fail due to vastly driving up the cost-of-node-option.

## Demand management

The other side of increasing the supply would be to manage the demand. This has happened in the past to some degree by transactions moving offchain, e.g. into third party custodial wallets such as the service ChangeTip that facilitated tipping internet contributions or wallets such as Coinbase. A lot of work has gone into a decentralized second layer that basically acts as a aggregation layer for transactions. This Lightning Network is thought to settle on a fee system relative to the transferred value as the costs of relaying payments scale with the amount transferred. If it should gain widespread use it is expected to provide a haven for small value transactions that automatically rebalances with on-chain demand.

> **Comments:**
> **username_0**: Thanks! Is this the same with all crypto currencies that you know?  
> **username_1**: @username_0: No, some cryptocurrencies like Ripple have chosen to make different tradeoffs.  

---

### Answer by username_2 on 2017-07-16. Score: 2

I think if Bitcoin were the only cryptocurrency out there; it would be more of an issue. Cryptocurrency will affect; and be adopted first and foremost people in 3rd world countries, the bank-less; etc. Cryptocurrency, for the first time in history, will allow billions of people who don't have an ATM Card; or Online Bill Pay, or a Checkbook; or easy access to cash (places like this do exist - in fact much of the world population uses "old money"). If you've ever been to an isolated, 3rd world country, you'd know just how old, and dirty, and tattered, the actual bills are.

*Now; all of these people-- billions of people, have the ability; or soon will have; the ability to send money instantly to anyone in the world from their smartphone app. Smartphones-- they do have, or have access to.*

This I believe is how blockchain technology; *namely Bitcoin*, but also the many altcoins in circulation; will be a profound game changer in terms of how we, as people; use our "money". I think in truth the mass media; politicians; governments; and even big banking institutions; have *yes*- taken notice to the fact that Bitcoin is here and here to stay, but have and are grossly underestimating just how profound this technology will be in the decades moving forward. Think 10, 20, 30 years.

Simply put; it's as big a game changer as the internet. Or cel phones. Or sliced bread.

Paper money in 2047, 30 years from now, will be like a payphone... have you seen one recently?

That said; the TX fees for Bitcoin I really don't think will be a deal breaker in the long run. Yes; fees for small transactions have become prohibitive; considering what it cost just a year ago when BTC was trending at 1/5 the price and the number of transactions was far lower allowing for lower fees to be included in the next or next few blocks.

Forking the current Bitcoin protocol; is needless to say, complicated- technicalities aside... It's the politics involved within the Crypto community that are stiffling any major changes or new adoptions to the existing blockchain structure.

**However; I think that the crypto community as a whole will, and, has already found ways or are developing workable solutions to sending digital currencies with little to no TX fee.**

1. Treating BTC as your primary currency or bank, and relying on the larger trading exchanges to convert BTC to the countless alt-coins, some of which have fairly, if not very, stable trading price ranges. This specifically applies to the some of the long term established altcoins that trade in the double, triple, or quadruple satoshi range.
2. Having altcoins which trade with very narrow rivers (sometimes a single satoshi) allows users to convert their BTC to "alt" and then withdraw to their alt-wallet. Many of the alts have very low TX fees; some you can send large amounts of BTC value (in altcoin currency) for no TX fee at all.
3. While not a huge concern of mine; people also are using the altcoins for better anonymity for their transactions. This includes the Cryptonote coins, such as Monero.

I think BTC has certainly claimed it's stake as the elephant in the room; there is at this point far too much money invested in ASIC usage; as well as future development of faster ASIC wafers; the existing BTC mining infrastructure both on the hardware side and software side dominates like the USA Military Budget compared to the next 10 Countries Budget's combined; and last, people simply now know what it is.

However; the Altcoin economy is no doubt (as a whole) a huge part of the cryptocurrency market. And altcoins are where 99% of the innovations are taking place in terms of blockchain technology.

Yes most altcoins get released and die a quick death; but some tread water for some time; and some swim the long haul.

In closing; I think BTC will be more of your "primary transactions for funding spend accounts"... think "Paycheck"; and Altcoins will be what you use to spend; seeing them as vehicles to spend (check, debit card; cash; etc).


---

### Answer by username_3 on 2017-07-06. Score: 1

You raise a point that I am not sure is being thoroughly vetted or tested. These rising fees are going to completely redefine Bitcoin's role globally. There is going to be a fundamental change in the nature and type of transactions and I have not seen any published analysis of the risks (or perhaps rewards) of this fundamental change we are seeing. Remember, Bitcoin was originally developed as a transactional tool, not a store of wealth and certainly not a proper vehicle for pure speculators.

As in the real world, the prototype and functioning model began widening very quickly. Bitcoin is no longer an idealist, libertarian project that serves the under-banked in developing countries. It is also no longer just a good way to buy things anonymously online. The divide has become vast and anyone purporting to have a good model on where Bitcoin is heading is being disingenuous at best.

What can be safely surmised;
Bitcoin's price will reach an equilibrium where the market will decide whether the transaction fee is too high for each particular transaction.

For example, paying a fee of $0.20 for a $1 cup of coffee will likely be too much for some people considering that traditional transaction fees for credit and debit cards are way below that level.

However, paying a $10 fee for a $400k house purchase seems not only reasonable, but a dream come true.

So, eventually the coffee will be done off-chain but in general the lost coffee sale is replaced by larger, more important transactions which are done on-chain. That's the extent of the "givens". Viability of Bitcoin, while a great subject to debate and discuss, does not have enough inputs at this point to garner much predictive value.

> **Comments:**
> **username_0**: Perhaps there will be a scenario where Bitcoin will be your bank/savings account and an altcoin will be your spending account, where the fees are low.  

---

