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No, you're conflating two things. The 'cost' of bitcoin the system, is in the inflation of its money supply. That's indeed about $1m a year. (let's not try to do an equivalent calculation for the many billions of dollars of value that are lost from dollar inflation per year). But recognise that it's $1m a year whether there are 0 transactions or 1 trillion. It's not a transaction cost, it's not related to the amount of transactions. It's a fixed system cost in the form of inflation. Calling it a transaction cost is misleading straight away. The actual transaction costs are a few cents or so on average. Of course, it's still costing money, but not to the person making the transaction. After all, if I send you a bitcoin and you forward it, you pay 5 cents. You don't pay for any inflation, only bitcoin holders do, which don't have to necessarily be those who transact. Similarly I, at times, make payments in dollars on dollar-denominated financial systems. I pay transaction costs, which are completely separate from the cost of dollar-inflation which I don't incur as I don't hold my wealth in dollars (european here). These two things are not the same. Do bitcoin holders lose value due to bitcoin inflation in the form of unrealised gains? Absolutely, but then also recognise it's the best performing currency of the past 5 years, or indeed last year, and that they don't really care. Further also recognise that in the code of bitcoin it's written that the inflation will permanently drop to sub 1% levels pretty soon, a level of inflation lower than any major currency. Actual transaction fees will probably rise somewhat to compensate for mining rewards dropping over time, but not by much. For one miners are deemed to be overcompensated from the perspective of the level of security they offer, and if you scale transactions by 10x or 100x (which from an economics point of view is pretty trivial, although the political ramifications of bigger blocks aren't) you can keep the transaction fee really low while massively scaling fee rewards to miners, further compensating a drop in mining rewards. (and if bitcoin doesn't scale, who cares if it's economically sustainable, if it doesn't grow then it'll stay trivial and I couldn't care less). |