Smarter feesfor Bitcoin
Instead of being paying the same miner fee every time, the new Bitcoin wallet promises smart fees by examining how long transactions take to confirm, even sending them for free if it belives it will transact and confirm freely. Below is a graph of how it works, taken from the Bitcoin Foundation’s blog post regarding this.
The new feature is described as a target. Set it to one, and the fee is adjusted to where the transaction will most likely be included in the next block to confirm. Set it to 6, and it’ll be included in the next 6 blocks.
There is a new option that lets you control how quickly you’d like your transactions to confirm: txconfirmtarget. The default value is 1, meaning “I’d like my transactions to be sent with enough fee or priority so they are very likely to be included in the next block.” Set it to 6 and it will take on average six blocks for your transactions to get their first confirmation. – Gavin Andresen
According to the post, the red-yellow-green lines correspond to the current fee, meaning transactions take anywhere from 2-6 minutes to confirm, or around 20-60 minutes assuming average block time is 10 minutes. But when the new Bitcoin Core releases, the post says it will make a typical 250-something-byte transaction pay 0.0001 BTC — or around 0.0004 BTC per kilobyte.
As you can see by the graph, most fees per kilobyte usually produce a certain time to confirm, except the blue line. The dark blue line is consistently higher than all the other lines but the value changes, but it still manages to get next block confirms.
Gavin Andresen belives it’s either a wallet implementation of another source or someone is setting the paytxfee option in Bitcoin Core.
This is all still a bandaid on the impending problem at hand, how will miners sustain a larger transaction volume? Sure developers could increase or optimize the fee to discourage people spamming low transactions, but it still doesn’t solve the problem of that big transactions or free transactions take several hours to confirm, if they confirm at all.
I expect to see transaction fees rise until a good solution for optimizing the propagation of blocks across the network is deployed, because I expect transaction volume to increase and I don’t think miners will include more transactions in their blocks until somebody fixes the “bigger blocks take longer to broadcast” problem. – Gavin Andresen
In the end it seems the miners are the ones winning. People will undoubtedly pay more for their transactions to be confirmed first, meaning more Bitcoin essentially for the miners. This will just incentivize miners to keep on doing what they are doing, long after the 21 millionth Bitcoin is produced.
For more information visit Bitcoin Foundations blog post: https://bitcoinfoundation.org/2014/07/07/floating-fees/