The economics of Bitcoin transaction fees

Nicolas Houy (houy@gate.cnrs.fr)
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Nicolas Houy: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique

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Abstract: We study the economics of Bitcoin transaction fees in a simple static partial equilibrium model with the specificity that the system security is directly linked to the total computational power of miners. We show that any situation with a fixed fee is equivalent to another situation with a limited block size. In both cases, we give the optimal value of the transaction fee or of the block size. We also show that making the block size a non binding constraint and, in the same time, letting the fee be fixed as the outcome of a decentralized competitive market cannot guarantee the very existence of Bitcoin in the long-term.

Keywords: Bitcoin; transaction fee; mining; crypto-currency (search for similar items in EconPapers)
Date: 2014-02-24
New Economics Papers: this item is included in nep-com and nep-mon
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00951358v1
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Citations: View citations in EconPapers (18)

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Working Paper: The economics of Bitcoin transaction fees (2014)
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