Quote from: sngwinner on June 06, 2013, 06:38:54 PM

Quote from: canth on June 06, 2013, 06:09:07 PM

Quote from: sngwinner on June 06, 2013, 05:57:29 PM

This may be bitcoin 101 that I just missed but it would be great if someone could flush out some justification to what Friedcst said about transaction fees becoming a bigger part of the reward for mining a block. Why is it that this will happen? 15 btc per block seems like a lot in fees. What sort of fee per transaction would that equate to?

We're doing a lot of extrapolation here since the number of BTC issued per block isn't set to halve again until ~ 2017. At today's transaction amounts - aka 50K transactions per day or about 350 transactions per block this would be about .04 BTC per transaction. However, we have to presume that the number of BTC transactions will significantly increase as BTC gains more popularity. Anyone want to take a guess about how many transactions per block in 2-3 years?

Do we have any idea what portion if transaction fees AM is currently collecting on each block in addition to the created btc?

A related question is how is btc designed to continue after all block have been solved? I know this is decades away but I'm curious if this isn't a problem to worry about or if this is something that will be solved eventually.

I guess I'm thinking that since the amount of rewarded btc for every block halves eventually the reward for solving a block wil be .00001 btc and miner will continue because they will be paid a transaction fee. If that's the case then eventually the transaction fees might be a decent percentage of a regular transaction. Seems a little worrisome in the long term to a currency that has a major advantage because of low transaction fees.

Yes, you can check the mined ASICMiner blocks and their fees here - http://blockchain.info/blocks/ASICMiner

You are correct. BTC is designed to be supported solely by fees once all coins have been mined. The idea is that as the block reward is halved, the number of transactions will have likely increased and will offset (to a degree) the reduced mining reward. The key here is to estimate the transaction total per block and avg fee size per transaction. For 15 BTC in fees per block, at today's numbers (randomly selected: 394 trx @ 0.2812 btc fees), we're looking at ~.0007 btc fee per trx, or 21000 transactions per block. That's an increased transaction volume of roughly 47x to yield 15 BTC in fees.

Now, if the relative value of BTC/fiat goes up, then the fee will likely have an inversely correlated drop - BTC doubles, fee halves. If we assume a doubling of BTC/fiat value by the next block halve, and a halving of the average fee to .00035 btc, we would need 42000 transactions per block to yield 15 BTC in fee rewards. We're getting close to a required transaction volume increase of 100x with this scenario. I think major retailers would need to start accepting BTC to yield these numbers in either example. The acceptance bar here is to make sure BTC is simple enough to acquire, secure, and spend that my parents could start buying things with it at Costco.

Please feel free to critique my numbers and approach, but this is my back-of-the-napkin approximation.