Today I want to take a look at the transaction fees for Bitcoin, how they’ve decreased, why they’ve decreased, and how they compare with DigiByte. This gets slightly technical, but I hope I can explain this in such a way that it makes sense even for a non-technical reader. The views expressed here are my own and do not necessarily reflect that of the DigiByte Foundation.
They are an on-going issue we’ve seen for Bitcoin, and it’s an issue that DigiByte has been totally unaffected by.
At the time of writing (Feb 2018), there’s a total of 15,000 pending transactions: https://blockchain.info/unconfirmed-transactions
This is significantly less than a couple of months ago, when it was sometimes over 200,000 pending Bitcoin transactions.
For those unfamiliar with how Bitcoin and DigiByte work, here’s a quick primer:
Every byte you send as part of a transaction, you pay a tiny fee to the miners who come along and verify your transaction (That you have sufficient funds etc) and for them to include it in the next block in the blockchain. An average transaction might be 300–1000 bytes, depending on a few things, but we’ll stick with around 300 bytes just for simplicity.
Now when you want to send a transaction, this goes into what’s called the “mempool”, think of it like a great big fish tank with your transaction swimming around in there waiting for a miner to take it and include it in the next block. The miners will naturally prioritize the fish with the most ‘meat’ on them, the miner fee, and include those where possible in the next block.
Now to clarify, one Satoshi is 0.00000001 of a DigiByte or Bitcoin, as DigiByte / Bitcoin is divisible to 8 decimal places, and the smallest amount is nicknamed a “Satoshi”.
On DigiByte, you’ll likely pay around 80–100 Satoshis per byte of data that your transaction takes up on the blockchain. So let’s say you’re paying USD$4 for a cup of coffee, then for a 300 byte transaction that’ll be 0.00003000 of a DigiByte, or, USD$0.000001038. It’s genuinely *nothing*, you could make over 1000 transactions and it’d cost you a cent.
On Bitcoin, because there are so many transactions waiting in the pool, if you want your fish to be chosen, you’ve got to make sure it’s a meaty fish that includes a lot of incentive for the miner. If you were to include 0.00003000 of a Bitcoin, or, approx USD$0.32 at the time of writing, your transaction will forever be swimming around in the mempool because the miners won’t want to touch it.
What we were seeing is that at the start of 2018, if you weren’t paying 500 Satoshis per-byte (Remember that Bitcoin was worth roughly double than it is now), your transaction would forever be swimming around in the mempool. This 500 Satoshis per-byte works out to be around 0.001500000 of a Bitcoin, or, USD$30 on top of your transaction, just so it will be verified and mined into a block.
Now nobody really uses Bitcoin to buy coffee, even if it’s a commonly used example online. However, a lot of “average Joe” investors want to dip their toes in the water with $50 or $100, to put it into cryptocurrencies to see what all the hype is about, learn about it etc.
If you start off buying $50 worth of Bitcoin at, say, Localbitcoin.com, then it would have cost you $30 to move the Bitcoin out of the website and into your own wallet. By the time you then want to send that Bitcoin anywhere, it would effectively be all gone, in fees.
Now don’t get me wrong, things aren’t too bad now at the end of February 2018, as there’s only 15,000 waiting transactions in the Bitcoin mempool vs the 200,000+ there was, you can likely get away with including a LOT less, but even if you’re only including 100 Satoshis per byte, that’ll still come to approx $3 worth of fees for sending Bitcoin, and even then you MAY still not get it sent for hours or possibly even days.
So why is this not an issue for DigiByte?
Well, firstly, we have 1000:1 DigiByte vs Bitcoin ratio, so where there will only ever be 21 million Bitcoin, there will be 21 billion DigiByte. This means that DigiByte is not likely to be worth USD$10,000 as a Bitcoin is right now.
The DigiByte blockchain also adds new blocks every 15 seconds, vs Bitcoin at 10 minutes, so a “full” block will be added faster, meaning that every second the DigiByte blockchain can handle WAY more transactions compared with Bitcoin. If you check out https://digibyte.io under blockchain, there’s a fantastic image that shows this off:
Why is this relevant?
Well, if you have between 15,000 and 200,000 transactions pending, you’re not likely going to want to wait and wait for your Bitcoin to be sent, so you’ll pay a little more of a fee. Miners will then include your transaction in the block, prioritized over somebody else. However, another person will then come along, who will also want theirs included, so they’ll pay a slightly higher fee again to get theirs included, and on and on it snowballs.
But, what if your blocks were never full, and people didn’t have to pay extreme fees? If miners could simply include ALL the transactions in the mempool, for every single block?
This is why the fees for DigiByte will stay stay low, because of the capacity of DigiByte meaning you never have to pay excessive fees as you would with Bitcoin.
This is where DigiByte shines!
You’d be able to get away with your $4 cup of coffee costing you $4.000001, which is genuinely not even worth mentioning the fee at that price.
It would mean you could buy $50 worth of DigiByte, send it to your phone, and you’d still have close enough to $50 worth of DigiByte you wouldn’t even notice. You could send it back and forth between your PC and your Cellphone over a hundred times before it cost you a cent!
You could do away with your credit card and the fees from that, because it’s both faster and cheaper to use DigiByte.
It would mean you can use DigiByte for a variety of applications over and above just straight payments, and, DigiByte could handle it.
It would mean if CryptoKitties came to DigiByte, you wouldn’t cause transactions to be backed up for hours and hours on end, and the fees for you using it would be an order of magnitude less too.
But what if Lightning Network comes along?
I’ve written before on DigiByteGuide.com about my thoughts on Lightning Network. It’s pretty obvious, I’m not a fan.
The very fact you have to take your transactions off the blockchain, and pay a centralized “hub” to use your blockchain sounds like a new wave of 21st century blockchain-banking to me. Why would you leave your traditional banking scheme for another, when the new one is potentially worse?
You’ll still have to pay fees (Though they’re supposedly going to be less on Lightning Network), but again you now have limitations on how you can spend that money, only going through centralized hubs?
There are even theories that Ethereum won’t be able to scale like Bitcoin can: https://www.bitsonline.com/bitcoin-scalable-ethereum/
The choice is clear: DigiByte with it’s on-chain scaling and minimal fees is the faster and most cost-effective choice, both now and into the future!