Three Things Killed By High Bitcoin Transaction Fees
As the bitcoin blocksize debate rages, we take a look at 3 things taken for granted a year back, but which have been made impossible due to high transaction fees.
As the Bitcoin block size debate rages, unconfirmed transactions pile up and the minimum transaction fee recommended while sending Bitcoins continues to increase, we take a look at three things taken for granted a year back, but which have been made impossible due to high transaction fees.
Redeeming physical Bitcoins
Physical Bitcoins come in all shapes and sizes. Casascius coins, which were made during the initial days of Bitcoin, range from 1 BTC to 1000 BTC. Physical Bitcoins produced later hold a much smaller value of Bitcoins.
Bitcoin chips produced by BTCC start from 1K bits (or 1 mBTC). In case you want to redeem the Bitcoins contained in the chips, it would cost you more in transaction fees. This makes the chips worthless, except as collectibles.
“Core's small block & high fee policy have now made @YourBTCC physical Bitcoins worth less than the fee to redeem them. #Irony.”
Spending small change
Every transaction generates change outputs. Sometimes, these change outputs are smaller than 1 mBTC, which means that they cannot be economically included as inputs in a transaction. If they were added to a transaction, the increase in transaction fees would be greater than their value. A perusal of the outputs over a full day indicates that ~5 BTC per day of output (change or otherwise) currently cannot be economically spent.
In the early days of Bitcoin, content publishers often added their Bitcoin address to their articles. People who felt that these articles were deserving often tipped the authors a small amount of Bitcoin. While this is still technically possible, it would cost you $2 in transaction fees to tip an author $1. This kills the incentive for tipping small amounts. Microtransactions, in general, have become infeasible due to the high transaction fees.
The solution to high transaction fees is simple – increase the transaction capacity of the Bitcoin Blockchain. Whether this is to be done through larger blocks or implementing SegWit is a deeply divisive debate. The Bitcoin community, however, remains optimistic about a solution being found.