Transaction Fee Market Develops Amid Surge in Transaction Volume

This week a flood of transactions which has alternately been called a spam attack or a stress test has forced Bitcoin users to adapt to a competitive transaction fee market for the first time since early 2013 when blocksize was consistently near default soft limit of 250 kilobytes. Numerous Bitcoin users and businesses are adapting to the flood of transactions by increasing their own transaction fees. At the present there are more than seventy megabytes of unconfirmed transactions leading to more naive users on Reddit and other social media to revert to speculating about blocksize hardforks which would merely amplify the problems this sort of flooding attack poses.

As has been predicted earlier on Qntra and Trilema, the Bitcoin network is operating perfectly fine and with the growing transaction fee market, Bitcoin is actually healthier than it was prior aside from the BIP 66 induced risk of blockchain forks which persists. Before where the transaction fee was enforced only be convention that it serve as an anti-spam measure there was no actual market any more than Medicaid is a market. Addressing Gavin's pseudo arguments for a blocksize increase earlier this year Mircea Popescu wrote:

Should blocks ever become full, older coinbases will be prioritized over newer coinbases, and larger mining fees and transactions prioritized over smaller mining fees and smaller transactions. This means that someone who wishes to pay for very little with Bitcoin will be forced to use something else, so to speak is forced to "give his seat" to someone richer. This is exactly the point and the intent of Bitcoin : to force the poor to yield to the rich, universally, as a matter of course.

Now the actors flooding the network and filling blocks at the present are using both old coinbases with some substantial age as well as setting their transaction fees at a higher rate than much of the rest of the network is. The illusion that every coffee might end up on the blockchain has faded to week to reveal the glory of a robust, attack and censorship resistant settlement network of actual value. If you have Bitcoin and can afford to spend coins on the blockchain now, you will be able to continue doing so into the future unless you gift them to a scammer.

Even if the current backlog of unconfirmed transactions is mined and transaction fee pressure abates for a while, Bitcoin has clearly passed a milestone this week. Prepare your procedures for a robust transaction fee market. Welcome to the future and enjoy your privilege.

9 thoughts on “Transaction Fee Market Develops Amid Surge in Transaction Volume

  1. Very nice article, congrats.

    A quick & dirty thought: a hard limit makes sense because the space in Blockchain are in fact an scarce resource. If Bitcoin suddenly starts to have a huge demand as payment system, it is impossible to fit ALL world transactions (plus the spam) in Blockchain right now (without a hard limit, it would be worse, the nodes would die). So, if there is a hard limit and if the demand increase naturally, they'll fight for a place and the fee will increase controlling the scarce resource. However, today there is an "optimal point" of legitimate transactions around max 2 tx/s. Much less than that is bad for the miners (no competition, less fees), but much more (near the limit 3~4 tx/s) it will make the fees skyrocket exponentially and this is actually bad because in fact some legitimate transaction could not play anymore, even increasing the fee a lot (because of the exponential nature). But these days, I guess we're living near this "optimal point", so we can survive in a spam storm if we adjust the fee a little in our legitimate txs. I'm not sure how yet (it's a challenge), but we have to be prepared to adjust the Blockchain size somehow considering the legitimate use, if we want to see Bitcoin as a reasonable payment system in the future.

    The main problem I see today is that: https://www.reddit.com/r/Bitcoin/comments/3ci25k/the_current_spam_attack_on_bitcoin_is_not/ – a lot of tinny unspendable UTXO is not good. A mintxfee for each output makes a lot of sense. This patch / pull request could be accepted by the core devs (or similar solution) to the default behavior and the miners should adopt this kind of filter to avoid this kind of attack.

  2. You make a factual mistake here. During the attack, even relatively high fee transactions went indefinitely unconfirmed (12+ hours). For example, someone who transferred bitcoin with a $0.04 fee likely went unconfirmed for 12+ hours. The most popular bitcoin websites and wallets don't allow users to specify a fee. So, bitcoin was effectively temporarily shut down and destroyed by the spam. Bitcoin was less useful than a Greek bank during that period to an average user.

    • It's not so much Bitcoin that's less useful than a Greek bank, it's the average user themself that's barely more useful than dirt.

      Using a popular wallet or website, as these "average users" seem so inclined to do, quite rightly means nothing in Bitcoin or to Bitcoin. If you don't like the shitty services provided by the various scammers and scam promoters demeaning themselves with populism, download the reference client, set your own tx fees, and be done with it.

      This isn't fiat here, people, this is Bitcoin. Absolute control is right there in front of you. If you don't reach out and grab it, you've no one to blame but yourself.

    • >You make a factual mistake here. During the attack, even relatively high fee transactions went indefinitely unconfirmed (12+ hours). For example, someone who transferred bitcoin with a $0.04 fee likely went unconfirmed for 12+ hours. The most popular bitcoin websites and wallets don't allow users to specify a fee. So, bitcoin was effectively temporarily shut down and destroyed by the spam. Bitcoin was less useful than a Greek bank during that period to an average user.

      Ey? I've been doing $0.03 cent fees, on fairly new outputs, and done about six of these in the past 72 hours without any delay

  3. my vomit bucket is filled up after this quote:

    This is exactly the point and the intent of Bitcoin : to force the poor to yield to the rich, universally, as a matter of course.

    quote by mircea mengele

  4. And an eventual spammer will just run out of BTC, it is the same model Monero adopted despite not having block limits.

    Its the fees, stupid.

  5. > despite not having block limits

    That's why I don't understand *either* side of the block size debate. It does not matter, only the fee requirements will determine block size in the end. Allowing 20 MB blocks does not mean 20 MB blocks because miners are not stupid.

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