Why can I not choose my own custom transaction fee? Does this affect privacy in anyway?

Question

I was just wondering why users do not have the ability to have their own custom fees and if by allowing users to choose their own fees would this badly affect privacy in anyway?

Answer 1

You can choose a multiplier. Choosing a custom fee could give away certain pattern and enable clustering of transactions matching the pattern.

When choosing a multiplier, you can still give priority to the TX, but your TX wouldn't stand out as 'special', since everyone is using multipliers.

Choosing some other fee smaller than the minimum fee would be pointless as it wouldn't get mined and it would get stuck in the mempool.

The minimum fee has been designed to keep the 'status quo' of the blocksize. Using the minimum is ok for 'normal' times, as miners wouldn't earn more if they should increase the block size. In case of increased use, users would use a multiplier to 'bribe' the miners to bump the block size. After the new median has been established, miners would stop losing part of block reward and users could go back to minimum fee (which would be lower than what we started with!), but the blocksize cap will remain as long as there's actual network use to sustain it.

Some ideal cycle would be like this:

1. Steady state, block size cap sufficient to let everyone get in the first block
2. Increased use, some delays experienced, impatient users paying more fee and making it economically viable for miners to increase the block size cap
3. Bigger blocks make the median larger
4. After 100 blocks, a new median is set and miners stop losing block reward, but increased cap is 'won'.
5. If the cap is enough and blocks are again not getting full, everyone can go back to the minimum fee and continue to use the network as usual, but now with smaller minimum fee and more capacity!
6. If there's no use, we go back to bigger min. fee and smaller blocks
7. If there comes more use, we repeat the cycle to get bigger blocks and smaller min. fee!

At the new steady state, users get cheaper TX-es and it's all the same for the miners (they're not penalized anymore, but the fees go back to min.). However, if they would drop some TX-es, they would lose out fee revenue so there's always incentive to keep the status-quo, until some fee pressure builds up...