Bitcoin Blog a1

Thursday, June 4, 2015

Feeless to some, the shortcoming of bitcoin for small transactions

Bitcoin is praised for having low transaction fees. But what if I told you that isn't always true? Well that is in fact the case; bitcoin can have quite large transaction fees!

I learned this much to my dismay when I sent BTC to my first exchange. I sent 4 dollars of BTC, from many faucet payouts, to the exchange. I incurred nearly 40 cents of fees!!

For example, most of my BTC comes from faucets, each  payment increases the number of inputs when I send my bitcoins. In two satoshi, my most read article, I said:

Just for fun I think this is how transaction fees work :
148*I + 34*O + 10
This answer is in bytes. “I” is the number of inputs and “O” is the number of outputs. There is also a one byte variation for addresses that start with 0x80

The transaction fee is for each KByte of the transaction, and 0.0001 BTC per KByte is the fee. Naturally the transaction size is rounded up to the next Kbyte.

Let's try the math! In my wallet I have about 70 inputs that make up about $3.96. 148*70+10+34*1= 10404 Bytes, which rounds to 11kb. 0.0001 btc *11kb =.0011 or about $.25
This calculation was done with current exchange rates so it is off a little bit. Also, since there is some change ( that is, the amount I sent doesn't add up perfectly to the amount I have received) I am also an input on the transaction

But fear not! Because, BTC can also have fee-less transactions! The transaction must consist of at least .01 BTC and can have no more that 50 inputs. Currently, there is not a program that will send you bitcoins in the most efficient way possible. I think this is a major flaw, not in the coin itself, but in the the infrastructure surrounding it.

Dogecoin on the other hand does not have this issue currently. A dogecoin transaction will generally cost 1 doge. The coins' coding to calculate the cost is the same. This being said, all of the transactions in doge I have personally dealt with have had a one doge transaction fee. So, for small transactions, doge has worked much better for me.

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