I've been analyzing the long term results of the block chain. In the process I realized the relationship between the distribution of coins over time, transaction fees, and coins being lost. The full paper is available here and is about 3 pages long:


If this is accurate would the transaction fee system we transition to be a commission model?


Not entirely. In a commission model you generally pay a percentage of what the transaction is, whereas in Bitcoin you just pay for the bytes the transaction requires. The setup is less like a commission model and more like a bank transfer fee model - banks generally don`t charge you for how much you transfer, but for the transfer itself.

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    That's a common misunderstanding. Transaction fees pay for two completely separate things, the marginal cost of handling the transaction and the amortized cost of hashing. The former is proportional to the data size and number of ECDSA signatures. The latter has nothing to do with those and will likely be proportional to the transaction value. Aug 8 '12 at 10:41
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    @Serith: The difficulty needs to be high to protect the network for attackers. Transaction fees need to be high enough for mining to be profitable with a high difficulty. Aug 8 '12 at 12:26
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    @MeniRosenfeld: while they need to be that high, there will need to be something in the protocol which actually enables that, i.e. to avoid the much feared tragedy of the commons. I'm quite optimistic about that, though.
    – o0'.
    Aug 8 '12 at 19:02
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    @Lohoris - right, I skipped that part. My bet is that there will be a hardcoded limit on the total transaction value in a Block, forcing transactions to compete on offering the most fees for a given value. Aug 9 '12 at 3:53
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    @KristopherIves: The difficulty will increase only if there are enough fees to incentivize miners to mine at the higher difficulty. And for that, there needs to be a way to give miners bargaining power. Aug 9 '12 at 3:54

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