Will Bitcoin Monetary Usage Price Out Spam?

[00:00:00]This is Matthew Crowder's Bitcoin University. Today I want to answer the question, will Bitcoin monetary usage price out spam or non-monetary usage?

[00:00:10]Now, when you send money, what's the highest transaction fee that you'd be willing to pay? Probably somewhere between 1 and 3%. Obviously, less than 1% is ideal. Merchants who accept credit cards usually pay about 3% to the credit card company, or at least they have historically. But here's the question.

[00:00:24]Would you ever pay a 22% transaction fee to send or receive money? because there are tens of millions of transactions on Bitcoin that do just that. Here's an inscription transaction, for example. We can see the input on the left and the output on the right. The input is 697 SATs. The output is 546 SATs, which is only about 36 cents. That tells you something already. And this 546 SATs sits right at the legacy dust limit, which already tells you that there's something wrong here. They're basically paying the bare minimum that ensures that the transaction gets mined. So, there's a hint already that this is a non-monetary transaction, but here's the real thing. They're paying 151 sat transaction fee. If you do the math, that's about a 22% transaction fee.

[00:01:09]There's really no one in the world who would ever agree to pay such a high fee, a high transaction fee to send money.

[00:01:14]So, there's clearly something else going on here where the sender is receiving compensation from outside the Bitcoin blockchain. Basically, they're selling an NFT or BRC20 token, other scam like that. And so the sender doesn't care that he just burned up 22% of the value of his money of his UTXO. So explain to me again how people who are willing to pay 22% transaction fees, often going up to 95% or 99% even for some of these transactions. Explain to me how people who are willing to pay such high fees are going to get priced out by normal monetary usage. They can only tolerate fees up to about 3% as we said.

[00:01:49]Meanwhile, guess who has to keep track of this dust UTXO? this 546 sat UTXO and store this transaction from now until the end of time. That's right. It's the uncompensated Bitcoin node runners like you and me who came to Bitcoin to use it as money and ended up getting saddled with spam like this. And who profits from the spam? People like David Bailey who have funded Bitcoin spam companies like Taproot Wizards which have massively bloated the UTXO set.

[00:02:16]Transaction fees are the ultimate filter. You'll often hear our opponents say no they're absolutely not. How would you like to live in a world with very high onchain transaction fees and blocks completely full of non-monetary transactions like tokens on Bitcoin, NFTts, etc.? Well, you don't have to imagine this because this already happened a couple years ago where the fees were up to almost 10,000 SATs per VBte. The median fee was 653 sats per vite or about $26 and the blocks were completely full of inscriptions as we can see here. So transaction fees are not the ultimate filter and Satoshi knew as much which is why he said there are other things we can do if transaction fees aren't working like meo filters and also banning certain things at the consensus level like bip 110 does if you want to learn more about how we're trying to fight this sort of stuff on chain. I'll put a link to bip.org in the description notes below as well as my video that explains exactly what bip does and why we're going to win. But hopefully this video debunks the absurd notion that monetary uses of the blockchain can price out non-monetary uses. The problem here is these non-monetary uses have off-chain dynamics, often gamified spam dynamics that allow them to pay up to 95% or higher transaction fees, which monetary transactions simply cannot compete with.

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