# .01 PPC transaction fee: Impact on the long-term value/exchange rate of 1 PPC?

This seems like one of those obvious things that must make sense, but that I’m not getting my head around. With the design of PPC, we have a fixed 0.01 PPC transaction fee for all transactions. Assuming, for the short term, parity with the USD, it’s a well-positioned price point, as its \$0.01. But as the price of 1 PPC becomes greater than the price of a USD, I start to see what appears to be a problem with how far the currency can develop:

# 1 PPC @ Exchange Rate : Transaction Fee Exchange Rate

\$1 : \$0.01
\$10: \$0.10
\$100: \$1
\$1000: \$10
\$10000: \$100

That’s most likely fine if you’re purchasing something like a car or a house (“that will be 20 PPC, please…”), but if the transaction fee is tied to the exchange rate of 1 PPC, what is the benefit of a fungible monetary unit if anything less than 0.01 PPC actually ends up not being viable because the cost of transaction is HIGHER than the cost of the item you are buying? At an exchange rate of 1 PPC = \$1000 USD, to attempt to buy anything that costs \$10 USD or less is going to cost you \$20 USD in coin (0.01 PPC purchase + 0.01 PPC transaction).

Who’d want to do process charge for 0.0001 PPC? The transaction fee is 100x larger than the purchase.

What am I missing? I get that PoS provides a mechanism for getting some of that back, but if I’m only earning back 0.01 PPC per coin held over the course of a year, if I conduct more than 1 transaction in that year, I’ve effectively lost the benefit of PoS.

I’m not an economist or a statistician, so there may be other market factors that I’m missing, or that the long-term use of PPC is to act as a cold-storage for your assets until you really needed them, but I don’t know many people who have significant assets who are sitting on their cash – they tend to move it in and out investments, depending on need and financial strategy.

What I’ve heard is that as the value of ppc increases, transactions would start to be carried out off the blockchain by 3rd parties. This is something that can’t be done safely with Bitcoin, because moving transactions off the blockchain with Bitcoin would mean that miners don’t get paid for those transactions. As moving off the blockchain increases, more and more people will stop mining because of the lack of reward and the network will become less secure as a result. Peercoin doesn’t have this problem because of proof-of-stake.

This is at least the explanation I’ve read on the forum. Please correct me somebody if I’m mistaken on something. Also, I’d actually like to know what moving transactions off the blockchain would entail. How exactly would this be carried out by businesses and would it be less anonymous because of it?

From my point of view, I think the cryptocurrency movement needs at least one 'backbone' currency, or more, that maintains high degree of decentralization, maintains high level of security, but not necessarily providing high volume of transactions. Thinking of savings accounts and gold coins, you don't transact them at high velocity but they form the backbone of the monetary systems.

In other words, if I understand this correctly it was specifically designed as to not be used for small transactions in order to cut down on transaction bloat…

The number of transactions BTC will have if it reaches mass adoption is a potential problem they may have to deal with in some way:

https://bitcointalk.org/index.php?topic=332631.0

Just food for thought.

[quote=“Ben, post:1, topic:758”]Who’d want to do process charge for 0.0001 PPC? The transaction fee is 100x larger than the purchase.

What am I missing? I get that PoS provides a mechanism for getting some of that back, but if I’m only earning back 0.01 PPC per coin held over the course of a year, if I conduct more than 1 transaction in that year, I’ve effectively lost the benefit of PoS.[/quote]

The purpose of the 0.01 transaction fee per KB is to discourage “dust” which basically is a form of spam or a DoS on the network and doesn’t scale well.

Coinbox.me is an example of a site that processes micropayments (aka dust) for BITCOIN and keeps them off the blockchain until you save up a minimum of 0.00005500 BTC and then it is transferred.

Coinbox.me might have a PPC service at some point that will wait until you have a minimum of 0.01 PPC saved up and then transfer it to you.

You should start to see other other micropayment processing sites pop up for PPC for transactions smaller than 0.01

Also don’t forget, all Sunny has to do is change the transaction fee if he wants in future major releases (a hard fork). But I think he’s pretty firm about not wanting the blockchain to contain transactions costing less than 0.01 per Kilobyte

Think of PPC like gold bars for storage of cryptocurrency wealth. Read on…

Here’s some quotes from Sunny King I found on Bitcoin talk that may help:

[quote=“Yurizhai, post:3, topic:758”]The number of transactions BTC will have if it reaches mass adoption is a potential problem they may have to deal with in some way:

Wow, that guy on there is a know it all jackass the way he treats people. I saw how he responded to you bringing up Peercoin also.

[quote=“Sentinelrv, post:5, topic:758”][quote=“Yurizhai, post:3, topic:758”]The number of transactions BTC will have if it reaches mass adoption is a potential problem they may have to deal with in some way:

Wow, that guy on there is a know it all jackass the way he treats people. I saw how he responded to you bringing up Peercoin also.[/quote]

Indeed. But I thought it was an interesting point. I know a friend who simply lives on a road where everyone there is restricted to shitty satellite internet. It takes him hours and hours to sync if doesn’t stay up to date for a few days.

Yes, he does bring up good points, but I think he could have handled it a bit better.

Thanks for the links, I’ll check them all out.

The transaction fees still make me nervous, but I’ll keep studying up on it and see if I grow more comfortable with exposure.

Is there any consideration (technical or otherwise) being given for how a single person could transfer PPC between their own wallets without having to incur a transaction fee? Perhaps it is not an issue that would affect a majority of users, but given how I’m moving coins around right now, I can see it sucking in the long term