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Bitcoin-to-bitcoin transactions have negligible cost only if one refers to the _apparent_ cost to the user. However, the nominal 'transaction fee' paid with Bitcoin does not cover the actual cost of the transaction.
A recent research paper (http://fc16.ifca.ai/bitcoin/papers/CDE+16.pdf) estimated the cost for hardware, electricity, etc for a single transaction to USD $6.20 at present, with a theoretical lower limit of $1.4. Even if that were taken to be a high-end estimate, it is a very large per-transaction cost given that it essentially represents the computer-hardware and electricity costs of the transaction alone.
Currently these costs are borne by the 'mining' of new Bitcoins, i.e. through inflation. However the supply of future bitcoins is limited by design (e.g. the mining 'reward' is set to halve this year). The users will eventually be forced to shoulder the actual costs, should the network survive to that point.
Is Bitcoin Really Frictionless?
Alexander Kroeger and Asani Sarkar Bitcoin is the most popular virtual currency yet developed. Proponents assert that bitcoin can remove frictions involved in payment and settlement systems by eliminating the need for the financial intermediaries that exist in traditional currencies. In thi...
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Mar 23, 2016
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