The Claim of Low Bitcoin Fees is a Fraud
One of the claims for BTC is ‘low transaction fees’ compared to traditional financial institutions. Nothing could be further from the truth.
Current direct fees are around $5 per transaction, but have recently been above $16.
This is regardless of the amount transacted… so not much good for a cup of coffee.
But that’s only the start of the problem.
BTC already consumes more electricity than Ireland, and if demand for the coins was to keep increasing at the projected rate it could consume a large percentage of the world’s electricity within just a few years.
Each transaction now costs around the same in electricity as 9 US households use in a day, approx $36 (very rough estimate, but the right order of magnitude). Making for a very expensive coffee indeed!
But this is only the base transaction cost. The true cost is hidden in the rising price of the coins themselves.
Effectively, the rising price represents a transfer of purchasing power from the wider community to coin holders just to effect the transactions.
There is no validity to the claim BTC are a ‘store of value’. A store retains what is put in it. As nothing has been put in, the coins should be worth what they were when first issued, namely: nothing.
So, why do people pay more and more to get BTC?
To avoid the claim they are a ponzi scheme (with everyone paying more simply in the expectation that others will pay even more in the future); the only argument can be that the coins enable secure transactions with low fees.
So what’s the true cost to the community of BTC providing secure transactions?
Since inception to 1 Dec. 2017, there have been 277,040,706 transactions.
The current (5.06 pm on 3 December 2017) price is USD 11,063.
The total number of BTC on issue is around 16.7 million.
This gives a total value transferred of $184,752,000,000 from the community to the holders of BTC as the cost of effecting 277, 040,706 transactions.
Giving the cost per transaction of USD 666 — for every transaction that has ever been done on the Bitcoin blockchain.
Yet, we could go further and look at the current running cost of transactions.
The price of BTC on 1 Nov 2017 was $6,527, giving a price increase of $4,536 by the end of the month. This gives a total uplift in the value of all BTC on issue of: 16.7 million x $4,536 = $75,751,200.000.
This increase in price could be seen as the marginal cost to effect all transactions over the month: 9,351,311
The cost is therefore around USD 8,100 per transaction for Nov 2017! (I know this is not a strict measure as, if the price falls it would suggest a negative cost, but it does show the madness inherent in the pricing).
Imagine if, instead of hiding the transaction cost in the rising price of the coin, we offered a stable crypto, but charged every user a fee of USD 666 or worse, $8,100 for every transaction. You’d want to be buying a pretty expensive cup of coffee to warrant those sort of fees.
There’s no doubt that we will one day get a crypto that has a stable price from the time of issue, that does not consume huge amounts of electricity. But Bitcoin is not it.
We should outlaw BTC (and all deflationary crypto) to prick this speculative bubble and get everyone’s focus on developing a stable secure crypto we can actually use as money, that holds its value over time and consumes little electricity… so everyone can properly account their profit and loss on trading in real goods and services.