bitcoin, few newbie question

seatbeltnoob

I had to pay an overseas retailer $35.

Payment method to me were bank transfer, echeque or bitcoin.

having paid huge fees in the past for bank transfer I decided to try bitcoin. I assumed it was a cheap currency... big mistake.

I needed a wallet so I got one from bitcoin.com, I went on to buy currency and put into the wallet. I used bitcoin.com own currency ourchasing system. The minimum was $50 so I had to buy $15 more than I needed and also pay a $12 credit card fee for the privelage.

At that point I should have stopped and realised a bank transfer is going to be cheaper. so being stubborn that I am I decided to proceed.

Then I realsied I purchased BCH and not BTC, I need to use changelly.com to convert it for me. They slapped on a near 10% charge and I lost $5 so now have $45.

I then sent the retailer the $35 of BTC that they wanted and the wallet again charged me, this time 5% (around $3) to send the money.

I now have $5 worth left of bitcoin, and the seller cannot verify whether the received my payment or not. In addition to this, I just realised I paid about $25 in fees to do this transaction.

I thought this was meant to be a very low cost of transaction service and meant to be cheaper than banks? My little experience has taught me that the volatility of the currency just makes people charge a much heftier fee for transactions. It's all good when the currency is increasing in value because the bitcoin handlers get a positive ROI just by holding the currency for the short time it's going up. But when the currency is going down, then it's toxic and processors want to take a huge commision for dealing with it.

Also dealing with currency is 0.005183 is ridiculous, it's so easy to misplace a decimal point if you're not careful and you'll make a costly mistake.

Trentenders

I think you missed the question off.

esuhl

Apparently, the current high transaction fees are as a result of demand/supply. Only so many transactions can occur per second, and the more transactions, the higher the fee that people will be willing to pay to ensure the transaction is made in a timely fashion.

At present, people are using BitCoin as an investment/gamble. It's supposed to be a payment system, but it's complicated enough to put the average person off, and so few places accept it as payment. So most transactions are currently of high value, where (say) a $20 transaction fee equates to a tiny percentage that people are willing to pay.

I've heard that this will/might change in future as the system expands so it can process more payments, which will push down the price.

But... I don't quite understand how the payment system works in Bitcoin...

Is mining an arbitrary process of rationing the creation of Bitcoins, or does the mining process itself verify transactions on the Bit--chain.

With the transaction fees so high, is it worth setting up a mining server and allowing my computer to be used to verify transactions in exchange for a small fee?

forgotmyname

Yes mining is verifying the transaction is real, but it went from a few verifications to many many millions, so the chance of your hardware getting a bite got smaller and when it takes your hardware .1 seconds to verify it, a million other pieces of hardware will have already done it, so you get nothing for your time except a larger electricity bill.

seatbeltnoob

There in lies a series flaw in the system. Nobody is mining bitcoins from the goodness of their hearts. They're doing it to earn bitcoins and since the computer calculations are becoming more and more complex it's more and more difficult to generate bitcoins firstly and now it's become uneconomical to mine as the cost of energy is going up and the ROI is going down.

So fewer people actually mining, and increasing the transaction costs too.

I think there are serious flaws in this model if it requires so much computing power to compute and keep the system alive but there's less and less of an incentive to do it.

forgotmyname

Who will mine it when the initial download will be measured in petabytes?