Let’s imagine Bitcoin fees increase 10-fold. This would mean a transaction would cost (gasp!) 20 cents. What is the nature of this fee?
- Simple, one-time payment (only the spender has to pay)
- Goes to an anonymous miner on a decentralized network
- Directly pays for security of the network (miners sell coins → lower prices → allow you to buy more, meaning fees are going straight into proof-of-work electricity bills)
- Settlement occurs immediately (~1 hour)
Now take a look at credit card processing fees. What is the nature of these fees?
- Complex fees for both consumer and merchant
- Goes to rent-seeking companies with legal privileges
- Pays directly to pockets of oligopolists (profit margins are ~50%, see image below), indirectly for benefits provided (e.g. fraud detection)
- Settlement occurs… eventually
Oh, and at the very least, they are 20 cents (plus additional fees).
Visa annual income (source)
Many bitcoiners dread the scalability problem, assuming higher fees will detract adoption. As we can see, this is silly for a few reasons. First, Bitcoin competes with other currencies, not other payment systems per se. When considering whether Bitcoin adoption will occur, we must look at transaction costs of other currencies vs. Bitcoin, not transaction costs of Visa or PayPal vs. Bitcoin. As shown below, Bitcoin blows the competition out of the water on all fronts. Second, even on these grounds, it will take a very large increase in fees before we can even imagine Bitcoin not competing as a payment system. Even at a higher price than credit cards, users would be paying but a reasonable premium for incredible trustless benefits that cannot be understated.
It should also be pointed out that merely finding a way to keep fees low doesn’t spur adoption. I have never heard anyone ever say, “Well, I’m really interested in this Bitcoin thing, but I hear it costs a whole penny to send money instantly to anyone in the world on an extremely secure, decentralized ledger.”
If fees are your concern for Bitcoin, you are not ready for Bitcoin.