What fee would be fair?

The driver of fees is scarcity of block space. There is an other scarce resource we should also price in, the use of UTXO.

Bitcoin transaction fees rise if block space is scarce thereby take into account current use of a scarce resource, the block space. This is all fine but is not fully aligned with the costs implied by a transaction.

A transaction spends inputs and creates some new outputs. The new outputs become member of the UTXO set, the actual coins of bitcoin, and the spent inputs that were earlier outputs are deleted from the UTXO set.

The UTXO set is huge and ever increasing. It is not as big as the block chain but is still gigabytes with increasing trend. While the block chain can be pruned in a full node, the UTXO can not as it is the ultimate guard against double spending a coin.

Every transaction validation looks up the UTXO set and this operation is takes longer as the set grows. An output that is in the UTXO set increases processing time for all subsequent queries of the set until it is finally deleted because spent.

This means a transaction that spends an UTXO that was long standing is the final opportunity to charge for the term of its UTXO use and that is what we should do.

I suggest that miner impose a minimum fee to transactions that is not only taking into account the byte-size of the transaction but is also increasing with the age of the inputs. This does not have to be net increase of fees, but transactions that spend recently acquired coins might be even cheaper than now.

There is no fork needed for this as miner are free to implement any transaction filter, rejecting transactions that do not meet their particular taste.

I urge them to consider implementing a requirement that makes required fee increasing with the sum of spent coin’s age as this aligns fees with actual costs that the owner of those outputs imposed to the network.

Some miner might ignore this suggestion, actually I am sure most will for now, since they are focused on short term revenue that is highest if picking highest fee-per-byte transactions. Some might however recognize with time that alignment of costs with actual resource use will lead to higher revenues on the long run as it sets the right incentives on UTXO use.