Content-Type: text/plain; charset=iso-8859-1
Mime-Version: 1.0 (Mac OS X Mail 8.2 \(2102\))
From: Oleg Andreev <oleganza@gmail.com>
In-Reply-To: <1706574.Be1RBGpNr6@coldstorage>
Date: Fri, 31 Jul 2015 14:32:53 +0200
Content-Transfer-Encoding: quoted-printable
Message-Id: <2B69B87D-CAF8-4817-B637-34E91E0A07FD@gmail.com>
References: <CADZB0_ZgDMhVgCUh2PTAPDL7k_W8QGt_HLYdkwv_qQ5xEMn8HA@mail.gmail.com>
	<55BA8ED0.4080600@thinlink.com>
	<CABm2gDqCdrVvEzOfUZMBTbEfw5-nfNjBpDcWS-zmNey+_n-qMQ@mail.gmail.com>
	<1706574.Be1RBGpNr6@coldstorage>
To: Thomas Zander <thomas@thomaszander.se>
Cc: Bitcoin Dev <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev]
 =?utf-8?q?R=C4=83spuns=3A_Personal_opinion_on_the_f?=
 =?utf-8?q?ee_market_from_a_worried_local_trader?=
Precedence: list


> On 31 Jul 2015, at 11:56, Thomas Zander via bitcoin-dev =
<bitcoin-dev@lists.linuxfoundation.org> wrote:
>=20
> On Friday 31. July 2015 03.21.07 Jorge Tim=F3n via bitcoin-dev wrote:
>> If I was a miner and you want me to include your transaction for =
free,
>> you're asking me to give you money
>=20
> What?
>=20
> Ask yourself; why do miners include transactions at all? What it the =
incentive=20
> if there really is only less than 0.8% of income to be derived from =
fees?
>=20
> Miners don't get payed by fees.  They won't need to get payed by fees =
for=20
> decades to come. Maybe you want to re-do your math, it seems off.

Fees should be compared not with the total revenue, but with the profit =
margin. If a miner invested/spends 24 BTC per block and earns 0.25 in =
fees, then his total profit is 1.25 BTC per block and fees comprise a =
whopping 20% of the profit.=20

Today I think profit margins are quite high, so fees do not matter much. =
But it's not hard to imagine that in just a couple of years BTC may =
appreciate a lot more, attract more investors and even bigger foundries =
to, say, print chips and mine right at the foundry, thus driving profit =
margins lower. Fees will begin to matter regardless of the total =
subsidy.=20

Just some hypothetical calculation.

Lets say in 2015 one block costs 5 BTC and fees bring 0.25 BTC. Profit =
is thus 20.25 BTC and fees comprise 1.2% of that amount.

Lets say in late 2016 halving happens, BTC appreciates and resulting =
competition drives up the cost to 6 BTC (yes, BTC itself is more =
expensive, but so is the profit too, so increased competition must drive =
down the profit margin). Now the block brings 6.75 BTC in profit. Fees, =
if unchanged now make 4% of the total profit.

If all goes well, in mid 2020 another halving happens (6.25 BTC/block) =
and even if the BTC-denominated cost stays the same miner now will earn =
0.25 BTC profit from subsidy and fees now can account for 100% of that =
amount.=20

Of course it's a very rough estimate and most likely to be far from =
reality, but it shows how fees can begin to matter rather quickly under =
pressure of separate factors: halving and growing valuation and mining =
competition.