<p>The 'race to the bottom' is still continuing in the mining market and hopefully will continue. If any of the miners tweaks transcation inclusion like you suggest that would make them less competitive in this market.</p>

<p>The miners have pretty much no power to enforce transcation fees while the market is functioning as intended, so your question is somewhat moot. 
If the miners do hold the network hostage that would be a sign that a cartel has formed and the mining/fee market has broken down.</p>

<p>If that happens it may well be that the users and developers will augment the protocol such that the miners are once more 'held hostage' by market forces.</p>

<p>The difficulty evolution is often described as 'difficulty follows price', this does not model the cheapening of the hardware but otherwise describes the market forces pretty well (by assuming that block rewards and fees won't change rapidly).</p>

CC BY-SA 3.0
2013-09-21T08:33:49.967Z
2013-09-21T08:33:49.967Z
Anonymous
<p>There has to be an incentive for people to mine and at present the transaction fees are no where near enough to cover electricity, let alone the cost of the hardware. I don't see how this is sustainable as the prospect of earning revenue from mining decreases at an exponential rate.</p>

CC BY-SA 3.0
2013-12-03T12:47:54.790Z
Luckily, at present the mining reward is not supposed to be mainly composed by the transaction fees, but rather still through creation of new coins. With a bigger number of transactions and perhaps an arising competition to make it into blocks by merit of transaction fee, this might be changing in the future and I don't think it is valid to conclude from the current state that it is never going to be sustainable in the future.
Murch
CC BY-SA 3.0
2013-12-03T10:31:27.677Z
2013-12-03T10:31:27.677Z
Antony
<p>I can imagine a future in which banks or other financial institutions (operating with Bitcoins, of course) run their own mining rigs and include their (outbound) clients' transactions in the blocks they mine as a service. Should they either extract a fee from their users (for keeping their money "safe") or apply a partial reserve system (so they earn money by lending), it would be a fee by another name meaning their mining would still be profitable even though they wouldn't be earning money directly through collection of transaction fees. There's money to be made in many ways...</p>

CC BY-SA 3.0
2013-12-03T16:33:45.540Z
2013-12-03T16:33:45.540Z
Joe Pineda
<p>I can see a trend coming where miners will likely hold the network "hostage" by mining blocks with no transactions in them... even when the block reward nears zero. This would leave transactions in the perpetual pending state.</p>

<p>The reason I suspect this will happen is so that miners will need to cover the expense of hardware that will never be recuperated otherwise.</p>

<p>This scenario can also happen if the value of BTC drops to a very low value.</p>

<p>I'd like to understand the variables that would cause a miner, a mining pool, or anything that would cause them to demand a transaction fee in order to accept the transaction.</p>

<p><strong>Question</strong></p>

<ul>
<li>What ratios, statistics, or variables are useful in tracking what the miners will demand the transaction fee to be?</li>
</ul>

<p>Some ideas would likely include</p>

<ul>
<li><p>Quantity of transactions -vs- fee paid  (the higher the fee, the fewer transactions will be conducted... supply/demand)</p></li>
<li><p>Network difficulty "beta"  (a beta is a Finance term discussing rate-of-change)</p></li>
<li><p>Blocks that accept no-fee-transactions vs blocks without</p></li>
<li><p>Transaction delay time (before being included in a block)</p></li>
<li><p>average miner investment in hardware</p></li>
</ul>

<transaction-fees><risk-mitigation><mining-profitability><mining-theory>
Will ASIC miners hold the network "hostage" and demand a fee for their services?
makerofthings7
# Will ASIC miners hold the network "hostage" and demand a fee for their services?

(Asked by: username_0 on 2013-09-20)

I can see a trend coming where miners will likely hold the network "hostage" by mining blocks with no transactions in them... even when the block reward nears zero. This would leave transactions in the perpetual pending state.

The reason I suspect this will happen is so that miners will need to cover the expense of hardware that will never be recuperated otherwise.

This scenario can also happen if the value of BTC drops to a very low value.

I'd like to understand the variables that would cause a miner, a mining pool, or anything that would cause them to demand a transaction fee in order to accept the transaction.

**Question**

* What ratios, statistics, or variables are useful in tracking what the miners will demand the transaction fee to be?

Some ideas would likely include

* Quantity of transactions -vs- fee paid (the higher the fee, the fewer transactions will be conducted... supply/demand)
* Network difficulty "beta" (a beta is a Finance term discussing rate-of-change)
* Blocks that accept no-fee-transactions vs blocks without
* Transaction delay time (before being included in a block)
* average miner investment in hardware

**Tags:** transaction-fees, risk-mitigation, mining-profitability, mining-theory


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## 3 answers

### Answer by username_1 on 2013-09-21. Score: 2

The 'race to the bottom' is still continuing in the mining market and hopefully will continue. If any of the miners tweaks transcation inclusion like you suggest that would make them less competitive in this market.

The miners have pretty much no power to enforce transcation fees while the market is functioning as intended, so your question is somewhat moot.
If the miners do hold the network hostage that would be a sign that a cartel has formed and the mining/fee market has broken down.

If that happens it may well be that the users and developers will augment the protocol such that the miners are once more 'held hostage' by market forces.

The difficulty evolution is often described as 'difficulty follows price', this does not model the cheapening of the hardware but otherwise describes the market forces pretty well (by assuming that block rewards and fees won't change rapidly).


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### Answer by username_2 on 2013-12-03. Score: 0

There has to be an incentive for people to mine and at present the transaction fees are no where near enough to cover electricity, let alone the cost of the hardware. I don't see how this is sustainable as the prospect of earning revenue from mining decreases at an exponential rate.

> **Comments:**
> **username_3**: Luckily, at present the mining reward is not supposed to be mainly composed by the transaction fees, but rather still through creation of new coins. With a bigger number of transactions and perhaps an arising competition to make it into blocks by merit of transaction fee, this might be changing in the future and I don't think it is valid to conclude from the current state that it is never going to be sustainable in the future.  

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### Answer by username_4 on 2013-12-03. Score: 0

I can imagine a future in which banks or other financial institutions (operating with Bitcoins, of course) run their own mining rigs and include their (outbound) clients' transactions in the blocks they mine as a service. Should they either extract a fee from their users (for keeping their money "safe") or apply a partial reserve system (so they earn money by lending), it would be a fee by another name meaning their mining would still be profitable even though they wouldn't be earning money directly through collection of transaction fees. There's money to be made in many ways...


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