Published on: 2015-10-28T02:13:59+00:00
The discussion on Bitcoin's lightning payment system raises the question of whether miners can operate as a cartel and increase fees. It is suggested that if miners were to use a soft-fork protocol, they could act as a cartel. However, the constraints on transaction capacity per block are not tied to miner costs, so there would be no significant increase in supply capacity with increased fees. This means that alternative payment methods could undercut prices and steal market share, resulting in bitcoin fees remaining at "free market" rates.In a conversation between Rusty Russell and Anthony Towns, they discuss the impact of bitcoin adoption on fees. Towns argues that as adoption increases, fees will rise or the number of transactions per block will increase proportionally. He introduces the concept of Metcalf's law, which states that both sides need to "know about bitcoin" for it to be adopted. Russell creates a formula to calculate the probability of a transaction based on whether the consumer and merchant can use bitcoin. They discuss the potential growth of bitcoin adoption and its implications.An email exchange addresses the assumption that Bitcoin and Lightning Network transactions are completely independent. It is pointed out that anchor transactions make this assumption not entirely true. The frequency of anchor transactions is considered, and it is noted that their occurrence could significantly impact block size.The article explores the possibility of miners not being an effective cartel and unable to force fees higher. It suggests that a free market with many independent actors would lead to lower prices than a monopoly/cartel-operated market. However, there are natural limits to including transactions in blocks due to costs. The author estimates that miners will continue to include transactions until it takes almost ten minutes to download and verify a block. Different miners also take different times to download and verify blocks, which was not accounted for in the estimations.The idea of using a market to determine Bitcoin's capacity is proposed. It is argued that fixing this in code would lead to poor results, and there is no sensible algorithm to determine prices without market input. Variable fees based on transaction size are introduced, with Bitcoin handling both large nominal volumes and low transaction volumes, while a second layer handles low nominal values and high transaction volumes. The impact of anchor transactions on the independence of Bitcoin and Lightning transactions is discussed.In an email conversation, Pierre responds to aj's consideration of bitcoin and lightning transactions as independent. Pierre points out that anchor transactions make this assumption not entirely true and suggests explicitly stating this. The conversation ends cordially.Anthony Towns highlights that the micropayments market is significantly smaller compared to other markets, with a volume of only $10 billion per year. He explains that payments under $12 are considered micropayments and discusses the potential opportunities in this segment.The impact of the Lightning Network on miner fees is discussed. It is believed that the number of Lightning transactions that can be done before reducing security is determined by market forces. Numerical conclusions show different scenarios depending on the adoption rate and the presence of Lightning. The post on the Bitcoin subreddit suggests revenue-maximizing strategies for miners using different block sizes and fees. However, these suggestions come with several caveats, including the accuracy of assumptions and the nature of substitutes between Visa, Bitcoin, and Lightning.Overall, the discussion explores various aspects related to Bitcoin's lightning payment system, miner fees, adoption rates, and the potential effects of the Lightning Network.
Updated on: 2023-07-31T18:26:34.094584+00:00