Engel’s Coefficient on the Blockchain: When Your Transfer Fee Expenses Exceed Your Living Expenses

Engel’s coefficient is used to reflect the affluence of a person’s life, and “miner’s fee coefficient” is used to reflect the relevance of a person’s life to the blockchain.

Engel's Coefficient on the Blockchain: When Your Transfer Fee Expenses Exceed Your Living Expenses

Today I sent 7 ethereum transactions, one bitcoin transaction, two bitcoin cash transactions, n BSC transactions, m HECO chain transactions, n and m are both greater than 5. The cumulative miner’s fee spent is more than $1000.

And for my living expenses today, I spent 299 RMB to renew my hotel room, 51 RMB to eat two take-out meals, and 46 RMB to take two drops. That’s a total of 396 RMB, which translates to $61 USD.

Although I didn’t have detailed statistics on my long-term expenses on blockchain, nor did I have serious statistics on my living expenses, the former definitely far exceeded the latter. The money spent on getting by includes food, clothing, housing, treats, etc.

I was quite surprised to think of this today.

Economists have come up with a whole Engel coefficient, which describes the proportion of spending on food to a person’s total spending, and is used to reflect how well off a person is. The greater the proportion of food, the poorer, and vice versa, the richer.

I think we in the cryptocurrency circle can come up with a miner’s fee coefficient, which describes the proportion of a person’s spending on miner’s fee to his total spending, and is used to reflect the degree of relevance of a person’s life to the blockchain. The larger the proportion of the miner’s fee, the more a person is a cryptocurrency person, and vice versa, the less a person is a cryptocurrency person.

My miner’s fee factor is about 1, so I am a proper cryptocurrency person.

Let’s change our perspective, we can further refine the analysis of the use of miner’s fee.

For example, if we use WeChat to pay 20 yuan for a meal, 0.6% of the fee is usually the cost of payment, i.e. 0.12¥. We can think of this 0.6% fee as the “miner’s fee” for fiat currency.

When transferring money by bank card, many banks will charge 0.1% transfer fee, which is also the fiat miner’s fee.

The fiat miner’s fee is generally in the range of 0.1% to 3%, and may be as high as 5% in some countries that are not financially developed, such as Africa. Our country is basically at the level of 0.0%, because we mainly use WeChat payment, Alipay and UnionPay, which are all at this fee level. It’s still relatively low.

The miner’s fee on blockchain will not be charged proportionally, like bitcoin, ethereum, basically block resource auction to determine the fee users need to pay.

If you define one, x1 = (blockchain miner’s fee) divided by (total amount of blockchain transactions), defined as a factor. This gives a sense of the cost of living on the blockchain, which is the transaction friction factor of blockchain finance.

If you let x1 “fiat miner’s fee” be compared, you can get a rough sense of the efficiency of running the blockchain financial world and the fiat financial world, or you can compare the transaction friction comparison between the two.

I think, for now, the majority of people (retail investors) probably have far more transaction friction in blockchain finance than in fiat finance. Only large investors can enjoy the low transaction friction of blockchain finance.

In the earliest days of Bitcoin, we all advertised that the fees for using Bitcoin to transfer money were low, but blockchain has evolved to the point where the miner fees are frighteningly high.

But if you break down the expense scenario a bit more, you may come up with a different feeling.

The miner’s fee I spend on blockchain is mainly in DeFi, which is the miner’s fee paid by using various decentralized financial products. Basically, no coins are taken for spending (e.g. buying things online).

In the fiat financial system, the ‘miner’s fee’ for using financial products, such as stock trading, finding a bank to borrow money, and the various costs spent on these activities can be seen as ‘miner’s fee’.

If the miner’s fee is positioned on financial products, the miner’s fee of blockchain finance should have an advantage. However, I don’t have data for quantitative analysis, just feelings.

And in the field of consumer life, the miner’s fee of blockchain is going to be higher than the miner’s fee of fiat currency.

From this perspective, if blockchain wants to penetrate more areas of daily life, it is necessary to further expand the capacity to reduce the miner’s fee.

But if the blockchain is only positioned in the financial field, the expansion is not so necessary, because the miner’s fee of the competitor (fiat finance) is even higher.

What is your miner fee factor, close to 1?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/engels-coefficient-on-the-blockchain-when-your-transfer-fee-expenses-exceed-your-living-expenses/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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