Quote from: niko on February 25, 2013, 05:50:58 AM

One particular detail that I would like discussed is the question of the economics of transaction fees. This is what got me thinking...What are your thoughts?

You need to think some more and come back when you understand Bitcoin a little better.

The only reason that transaction fees are paid for now is because clients will not relay messages unless they have a minimum fee (to prevent spam). This minimum fee can be zero for unspent coins that have sufficiently aged. Aside from this minimum fee for relaying transactions, there is currently NOTHING that creates a market for transaction fees, because:

1) There is no scarcity of transaction space in the block chain (we are not reaching the 1MB limit at all)

2) The block subsidy of 25BTC is orders of magnitude larger than the sum of transaction fees in a block.

In short, there is very little incentive for anyone to pay fees now. Which is why the total amount of fees per block is so low.

Anyone can figure this out on their own by just reading the available literature. This goes for most of the people who are posting in these max block size threads.

To answer your question, limited block space DOES NOT create a market for transaction fees TODAY; But there are still some fees because of the rules clients impose on relayed transactions. However, when the average transaction volume regularly exceeds the space available in a block (i.e. we always reach the maximum block size), this will create a market for transaction fees.