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July 08, 2014

Transaction Fee Update Big Part of New Bitcoin Core Version

Bitcoin has proven to be one of the most controversial and yet biggest developments in the field in some time. As some businesses like Overstock.com start to take the digital currency in trade for goods, and other businesses follow suit, the idea that one day the paper in our wallets may instead be completely replaced by a universal coin of the planet is not so outlandish as it may once have been. But with any new development comes a certain amount of difficulty, and that's a difficulty that the progenitors of Bitcoin are out to remove with a new update focused on transaction fees.

The Bitcoin Foundation, by way of its chief scientist Gavin Andresen, has brought out some details which are set to be part of the next Bitcoin Core release. In particular, the details focused on the point of new transaction fees. The updated code, Andresen describes, will in turn allow for what are called “smarter” fees, focused on the length of time required to confirm a transaction on the network. In turn, transactions will confirm more efficiently, and likely make the system as a whole easier to use.

Andresen elaborates, saying “Instead of using hard-coded rules for what fees to pay, the code observes how long transactions are taking to confirm and then uses that data to estimate the right fee to pay so the transaction confirms quickly – or decides that the transaction has a high enough priority to be sent for free but still confirm quickly.” Under the old system, the transaction fee code had what were called “needless complexities,” making confirmation periods both inconsistent across transactions and almost universally time-consuming.

Additionally, there are also some improvements for those who send large numbers of Bitcoin all at once. Large transactions could be bogged down, especially for those transmissions that measured near or over one megabyte. Meanwhile, transactions sent at no charge also get some help here, as previously, free transactions got a low place in the network, resulting again in further delay. Fees in general, meanwhile, were likely to increase as transaction volume was likely also to increase.

Basically, this seems to be a move designed to make Bitcoin overall much easier to work with. The harder it is to handle Bitcoin in general, the less likely it is to be used. But the converse is also true, so keeping users moving smoothly through the larger Bitcoin environment is more likely to keep users turning in this direction. If Bitcoin is really to catch on as a medium of exchange and investment, then it needs to be at least somewhat accessible. Perhaps the best analogy here is to compare Bitcoin to gold; if all the gold on Earth were located near the center of the Earth, yes, it would be valuable due to its scarcity, but who would go after it? The chances of a successful recovery would be so slim as to be almost meaningless. But if, as it is now, it's located in hard to reach locations near the surface of the Earth, it becomes scarce yet accessible, and is therefore valuable, and useful as an investment tool.

Only time will tell just what kind of impact these new rules and code changes have on Bitcoin in general, but improving the experience while maintaining the scarcity is just what's needed to elevate Bitcoin to the level of viable investment tool.




Edited by Maurice Nagle




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