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Yet it remains true that even if fee's remain at the levels they are or even drop a bit, for most people on chain transactions will become too expensive.

When bitcoin hits £100,000,000, or 1sat/£, a tx which costs 5k sats will be 5k GBP equivalent and the majority will never do that.

Beyond a certain price point most people will only ever interact with bitcoin via layer 2/3 methods. For some it'll be a miracle if they ever save enough sats to even make an on chain transaction.

ᴛʜᴇ ᴅᴇᴀᴛʜ ᴏꜰ ᴍʟᴇᴋᴜ 1y ago

on chain is still needed fairly regularly

i get paid for my job on a monthly basis on chain, it is more private and secure for me to do that on my own node

the amounts i push to my offramps are big enough to be still cheaper than if i were using other payment systems like paypal or wise or whatever (way cheaper than moneygram and WU that's for sure)

every time demand for on chain transactions rises new ways to reduce onchain data sizes continues to arise

btw, the fee rate is related to the exchange rate not to the satoshis themselves, that's part of the reason why the fees keep dropping also... bitcoin price goes up, margin goes down when denominated in sats

maybe after the halvening fees might at most double but when you consider how many transactions is in a block and if the fee rates go up to maintain the same DOLLAR value of blocks then ... it's still deflating... bitcoin on chain transactions are still cheap compared to most other money transfer services for small payments

the arguments for big blocks just don't match up with the needs of the network and its users

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Discussion

Matt 1y ago

A tx now might cost 5k sats, which is approx £2.50.

At £5m per bitcoin, assuming the fee's remain stable, a 5k sat tx now costs the equivalent of £250.

At £50m per bitcoin that tx, again assuming fee's remain stable, £2500.

At that point noone outside of early adopters, business and large institutions are going to make on chain payments.

It's true, sats per vbyte can drop, and they can also rise. UTXO management can also reduce your exposure to higher fee's. But at some price point it doesn't matter what you do, ordinary people will be priced out of on chain transactions.

ᴛʜᴇ ᴅᴇᴀᴛʜ ᴏꜰ ᴍʟᴇᴋᴜ 1y ago

if you assume that nobody finds more ways to squeeze more transaction capacity out of the protocol then you are right, but history says otherwise

a lot of bitcoin transaction demand has moved to lightning, more than enough to keep on chain fees competitive with fiat market clearinghouse rates

Matt 1y ago

Fiat market clearing house rates? I think we're talking about different things. If you assume transaction fee's in sats/vbyte are going to drop then maybe...but I doubt that. There'll be periods where it's lower, periods where it's higher, but there'll always be fee's and in £/sat terms, as the bitcoin price rises so does the cost of online transactions, which will price a majority out of on chain use.

ᴛʜᴇ ᴅᴇᴀᴛʜ ᴏꜰ ᴍʟᴇᴋᴜ 1y ago

yes, competition against fiat money transfer costs is very relevant

for all transactions on chain above about $1000 nominal exchange rate value the fee rates are close to 0.1%, and as you increase your tx size this overhead cost drops proportionally

a large majority of small transactions are now being done off chain with LN... i pay my VPS bill with btcpayserver... many businesses are adopting this easy to deploy system and this is bitcoin payment volume that never sees the chain in any substantial way

Matt 1y ago

Okay we seem to be talking at cross purposes. My maths is right, that much I know absolutely, so I'll happily leave it there 😁