Comparing Fees: Lost Purchasing Power Matters

2019-05-24T12:49:15.000Z Honest Cash

When users observe that Bitcoin Cash (BCH) fees are lower than BTC fees as measured in USD, it is often argued that fees are more similar when measured in satoshis per byte.

However, what really matters is the amount of purchasing power lost to fees. With Bitcoin Cash, the purchasing power lost to fees is significantly lower than the purchasing power lost to fees with BTC.

The easiest way to compare purchasing power lost to fees is to convert the fees to the same units so they can be compared directly.

Converting both Bitcoin Cash fees and BTC fees to their equivalent value in USD, EUR, or some other fiat currency offers the most intuitive comparison.

You could also convert both fee amounts into loaves of bread. For example, the fees on a Bitcoin Cash transaction might only cost you 0.002 loaves of bread, whereas the fees on another network might be equivalent to 2 loaves of that same bread.

However, you cannot directly compare Bitcoin Cash satoshis to BTC satoshis because they are units of different currencies.

If beer "X" costs 5 dollars and beer "Y" costs 5 dollars, do they cost the same amount? Not if beer "X" is priced in US dollar units and beer "Y" is priced in Canadian dollar units. The units have similar names (US dollar and Canadian dollar), but they are units of different currencies.

If fee "X" is 300 satoshis and fee "Y" is 300 satoshis, are they the same amount? Not if fee "X" is priced in Bitcoin Cash satoshi units and fee "Y" is priced in BTC satoshi units. The units have similar names, but they are units of different currencies.

As the Purchasing Power of Bitcoin Cash Increases, the Fee Measured in Satoshis Can Be Reduced

Another common argument is that if the purchasing power of Bitcoin Cash increases significantly, the value of fees would also increase significantly. However, this is not the case.

In Bitcoin Cash, most people currently pay 1000 satoshis/kB (1 sat/B) for a transaction fee. As the purchasing power of Bitcoin Cash increases, the fee can be reduced to 100 sat/kB, 10 sat/kB, or 1 sat/kB.

Beyond that, fractional satoshis are on the Bitcoin Cash roadmap and can be used to keep fees low forever.

If the Bitcoin Cash Network Processed the Same Number of Transactions as BTC, Would Fees Be As High As with BTC?

No, because the Bitcoin Cash network can process significantly more transactions than the BTC network.

High fees on the BTC network are caused by its limited transaction capacity. BTC's limited capacity causes a fee war between people attempting to use the system.

The Bitcoin Cash network already has an order of magnitude greater transaction capacity than the BTC network. The Bitcoin Cash roadmap includes an adaptive block size limit. The idea is to keep network transaction capacity above actual usage so that fees remain low.

Bitcoin Cash miners will be rewarded for securing the network through a large number of low fee transactions. The roadmap aims for 50 transactions per day for 10 billion people.

Upgraded Money

Bitcoin Cash has low fees. Bitcoin Cash is easy to use. Bitcoin Cash has reliable transactions. Bitcoin Cash has a limited supply. Bitcoin Cash has the transaction capacity to support significant growth.

Bitcoin Cash can be sent anywhere, anytime, nearly for free, with no middlemen or banks.

Bitcoin Cash (BCH) is upgraded money for the world.

Responses


RE: Comparing Fees: Lost Purchasing Power Matters

by @Telesfor

BTC has, measured in satoshis, 25 times higher fees than BCH


RE: RE: Comparing Fees: Lost Purchasing Power Matters

by @HenryCashlitt

> BTC has, measured in satoshis, 25 times higher fees than BCH

No. You cannot directly compare Bitcoin Cash satoshis to BTC satoshis because they are different units of different currencies.

You cannot directly compare a distance measured in inches to another distance measured in centimeters.

You cannot directly compare a fee measured in US dollars to another fee measured in Canadian dollars.

You cannot directly compare a fee measured in Bitcoin Cash satoshis to another fee measured in BTC satoshis.

To compare two items, you must first convert them to the same units of measurement.


RE: Comparing Fees: Lost Purchasing Power Matters

by @molecular

1 kB will always be 1024 bytes for me. Fuck kibiBytes.