Effect of Bitcoin fee on transaction-confirmation process

TL;DR

This paper models Bitcoin's transaction-confirmation process as a priority queueing system to analyze how transaction fees and block size influence confirmation times, especially for micro payments.

Contribution

It introduces a queueing theory model for Bitcoin transaction confirmation, incorporating fee-based prioritization and block size constraints, providing quantitative insights.

Findings

Low-fee transactions increase confirmation time.

Maximum block size impacts confirmation delay.

Model helps predict confirmation times for micro payments.

Abstract

In Bitcoin system, transactions are prioritized according to transaction fees. Transactions without fees are given low priority and likely to wait for confirmation. Because the demand of micro payment in Bitcoin is expected to increase due to low remittance cost, it is important to quantitatively investigate how transactions with small fees of Bitcoin affect the transaction-confirmation time. In this paper, we analyze the transaction-confirmation time by queueing theory. We model the transaction-confirmation process of Bitcoin as a priority queueing system with batch service, deriving the mean transaction-confirmation time. Numerical examples show how the demand of transactions with low fees affects the transaction-confirmation time. We also consider the effect of the maximum block size on the transaction-confirmation time.