One of the more difficult to understand, and frankly, strange, aspects of Bitcoin and similar cryptocurrency are the transaction fees.
The general idea of Bitcoin is that there is a global, public, unforgeable ledger containing an indisputable record of all transactions. One of the key technical innovations of Bitcoin is the mechanism for enabling “anyone” to post a transaction (i.e., transfer Bitoin), and have “the Internet” verify and enshrine the transaction into the global ledger (the Blockchain).
The mechanism is designed to be uncheatable, because it requires substantial amounts of computation to confirm and seal the transaction. To motivate and compensate for this work, operators are rewarded with a present (this is called “mining”) and with optional processing fees attached to the transaction.
For many years, advocates have been boasting that Bitcoin will revolutionize digital financial systems, because it offers extremely low transaction fees compared to conventional financial companies.
The problem with this claim is that each node decides which transactions to process, and they can simply ignore any transaction they care to. This means that a given node may “charge” whatever fee it wants to. Other transactions will be delayed or possibly never get into the blockchain at all (and the network has absurdly long latencies, best case.)
This peculiar system means that (a) there is no way to know what fee will be needed and (b) there is no way to know what quality of service will be provided. If you want your transaction processed promptly, you need to guess what fee will be needed to “motivate” the processing nodes to take it. If you guess wrong, your transaction may languish for a long time.
This is, frankly, a totally crazy system.
Who would want to sell something, no knowing if or when the transaction will be completed, or how much overhead will be entailed?
Not to be deterred by mere insanity, 21 Inc has stepped in to provide a “solution” to this problem: an online service that predictively models Bitcoin Transaction Fees and transaction latency.
The resulting chart gives you a reasonable guess for what fee you need to attach in order to get a given response time, based on the last three hours of transactions.
OK, this service is moderately clever.
But honestly, it should not even exist.
This service just highlights how totally batshit crazy the Bitcoin network has become, and how totally useless Bitcoin is for real commerce.
Notice that the estimated time to service a transaction with no “fee” attached is “infinity”. You need to pay a penny or more per transaction (30 Satoshi / byte is about a US penny for 100 bytes) to get the (predicted) delay down to ten minutes.