Quote from: redHeadBlunder on October 09, 2014, 04:25:37 AM

What is your source of this graph? It looks like something that was "drawn" with excel. I would disagree that the max block size would affect the amount that people are willing to pay for their TX to get confirmed.

I did "draw" the charts myself on excel, as you suggest. The max block size does not directly impact demand, however it impacts the supply curve and therefore the price.

Quote from: Eisenhower34 on October 11, 2014, 07:40:15 PM

Even if the block space is available there is noting that says each block must be "filled" to the max block size. Even if the max block size is large, miners to have a small incremental cost for including each additional TX in their found block so they would likely not wish to include a lot of no fee TXs

Miners may have a small marginal cost of including a transaction and therefore there is likely to be some low fee level. However, in a competitive mining industry and unrestricted market, price will equal marginal cost. At this level the equilibrium difficulty level may be too low. We need artificial restrictions on the market to increase fees and therefore have a higher equilibrium difficulty.

Quote from: Meni Rosenfeld on November 03, 2014, 02:17:28 PM

Suppose all the miners form a cartel. They will have no problem funding themselves; they can all agree not to include any tx that doesn't pay high fees. The users would pay this fee because they have no other choice.

Some users will try to pay a fee lower than the cartel's threshold. One miner decides to defect from the cartel; he includes in his block all these low-fee transactions. This costs him nothing, so this is a net profit for him (he benefits).

Seeing this, users will know that even if they don't pay the cartel's high fees, they can still get their tx included eventually. Thus, their willingness to pay high fees is lower (that is, the miner consumed their willingness). Thus, more users will try to pay low fees, and the total revenue of all miners decreases.

But it's not just the one miner. Every miner will, individually, have an incentive to include low-fee txs. This means that even with a low fee, it's easy to get a tx to the block. Thus, no user will want to pay high fees, and the total revenue of miners will be low (this is the tragedy - for the miners, and due to the effect on network health, for all Bitcoin users).

This is completely analogous to the classical instance of tragedy of the commons, where all herders would benefit if they all grazed just their fair share, but everyone is incentivized to defect and overgraze, depleting the resource and causing everyone to suffer.