<p>Compare this with the increasing adoption of contactless payment in western countries. There is a fee involved but it is small and invisible to the consumer. The retailer pays the fee (and passes the cost to the consumer in higher prices).</p>

<p>So long as the transaction fees are low, and people value the other benefits, this won't be a problem.</p>

CC BY-SA 4.0
2021-04-15T05:48:09.090Z
But wouldn't miners need to charge very high amount of transaction fees to break even on the resources required to mine?
Raj Shah
CC BY-SA 4.0
2021-04-15T08:56:42.413Z
@RajShah: If The mining-reward has halved to a negligible amount and transaction fees are the only significant reward for mining, then miners whose operations are unsustainable without excessive fees will not break even and will go out of business. I believe many other factors influence tx fees not just miners needs.
RedGrittyBrick
CC BY-SA 4.0
2020-03-11T10:04:34.680Z
2020-03-11T10:28:45.397Z
2020-03-11T10:28:45.397Z
RedGrittyBrick
<p>There are two scenarios we could see as the block subsidy (inflation) halves every ~4 years:</p>

<ol>
<li>The number of fee-paying transactions increase per block whilst median next-block fee remains low/negligible</li>
<li>The fee per on-chain transaction increases</li>
</ol>

<p>We are currently seeing scenario 2 play out, where most user transactions are expected to take place off-chain. Transactions that are made on-chain are expected to be settlements of many off-chain transactions, likely collecting a large number of smaller fees within.</p>

<p>Both scenarios are fueled mostly by adoption of the network, and until the subsidy is gone (zero inflation), increases in coin price will help to sustain miner incentive.</p>

CC BY-SA 4.0
2020-03-14T16:15:50.087Z
where does that first point come from? can you explain your reasoning?
Janus Troelsen
CC BY-SA 4.0
2020-03-12T11:37:55.643Z
2020-03-12T11:37:55.643Z
TGollowitsch
<blockquote>
  <p>why would someone choose to use bitcoin and pay a transaction fee over
  fiat currency without a fee?</p>
  
  <p>what are the specific use cases that make it more appealing, even with
  the necessity of transaction fees?</p>
</blockquote>

<p>Bitcoin as a form of payment offers great incentives to both buyer and seller depending on the transaction use case involved, regardless of the fee involved. <strong>Some</strong> of these would include: </p>

<ul>
<li>Convenient (Ease of use in international payments)</li>
<li>No risk of inflation. See <a href="https://bitcoin.stackexchange.com/questions/4172/are-bitcoins-really-immune-to-inflation">this</a> for more details.</li>
<li>Smart payments: Through smart contracts, automatic/self executing payments can be made based on specified conditions. (Not possible with cash without reliance on a third party)</li>
<li>Cheaper (compared to situations where fiat currency conversions would required.)</li>
</ul>

<blockquote>
  <p>Does this mean bitcoin is fundamentally infeasible as a general use
  form of currency?</p>
</blockquote>

<p>As bitcoin adoption grows, scaling solutions such as <a href="https://lightning.network/" rel="nofollow noreferrer">Lightning Network</a> will allow for micro payments. Over time the fees from settling these micro transactions would be significant and therefore incentivize miners. </p>

CC BY-SA 4.0
2020-03-29T17:51:13.487Z
2020-03-29T17:51:13.487Z
Skelli
<p>Apologies for any naivety in the question, as my understanding of the subject is still basic.</p>

<p>My understanding is that once all the coins have been mined, the incentive for miners comes solely from client transaction fees. When that happens, why would someone choose to use bitcoin and pay a transaction fee over fiat currency without a fee?</p>

<p>Does this mean bitcoin is fundamentally infeasible as a general use form of currency? If so, what are the specific use cases that make it more appealing, even with the necessity of transaction fees? If not, what would compel general use adoption?</p>

<transaction-fees><economic-theory>
What is the incentive to use bitcoin due to transaction fees?
octosquakk
# What is the incentive to use bitcoin due to transaction fees?

(Asked by: username_0 on 2020-03-11)

Apologies for any naivety in the question, as my understanding of the subject is still basic.

My understanding is that once all the coins have been mined, the incentive for miners comes solely from client transaction fees. When that happens, why would someone choose to use bitcoin and pay a transaction fee over fiat currency without a fee?

Does this mean bitcoin is fundamentally infeasible as a general use form of currency? If so, what are the specific use cases that make it more appealing, even with the necessity of transaction fees? If not, what would compel general use adoption?

**Tags:** transaction-fees, economic-theory


---

## 3 answers

### Answer by username_1 on 2020-03-11. Score: 1 | Accepted answer

Compare this with the increasing adoption of contactless payment in western countries. There is a fee involved but it is small and invisible to the consumer. The retailer pays the fee (and passes the cost to the consumer in higher prices).

So long as the transaction fees are low, and people value the other benefits, this won't be a problem.

> **Comments:**
> **username_2**: But wouldn't miners need to charge very high amount of transaction fees to break even on the resources required to mine?  
> **username_1**: @username_2: If The mining-reward has halved to a negligible amount and transaction fees are the only significant reward for mining, then miners whose operations are unsustainable without excessive fees will not break even and will go out of business. I believe many other factors influence tx fees not just miners needs.  

---

### Answer by username_3 on 2020-03-12. Score: 2

There are two scenarios we could see as the block subsidy (inflation) halves every ~4 years:

1. The number of fee-paying transactions increase per block whilst median next-block fee remains low/negligible
2. The fee per on-chain transaction increases

We are currently seeing scenario 2 play out, where most user transactions are expected to take place off-chain. Transactions that are made on-chain are expected to be settlements of many off-chain transactions, likely collecting a large number of smaller fees within.

Both scenarios are fueled mostly by adoption of the network, and until the subsidy is gone (zero inflation), increases in coin price will help to sustain miner incentive.

> **Comments:**
> **username_4**: where does that first point come from? can you explain your reasoning?  

---

### Answer by username_5 on 2020-03-29. Score: 0

> why would someone choose to use bitcoin and pay a transaction fee over
> fiat currency without a fee?
>
> what are the specific use cases that make it more appealing, even with
> the necessity of transaction fees?

Bitcoin as a form of payment offers great incentives to both buyer and seller depending on the transaction use case involved, regardless of the fee involved. **Some** of these would include:

* Convenient (Ease of use in international payments)
* No risk of inflation. See [this](https://bitcoin.stackexchange.com/questions/4172/are-bitcoins-really-immune-to-inflation) for more details.
* Smart payments: Through smart contracts, automatic/self executing payments can be made based on specified conditions. (Not possible with cash without reliance on a third party)
* Cheaper (compared to situations where fiat currency conversions would required.)

> Does this mean bitcoin is fundamentally infeasible as a general use
> form of currency?

As bitcoin adoption grows, scaling solutions such as [Lightning Network](https://lightning.network/) will allow for micro payments. Over time the fees from settling these micro transactions would be significant and therefore incentivize miners.


---

