How can market-based transaction fees scale? Can someone please explain to me what I am missing?
I don't see how variable, market-based transaction fees can scale. I go to a merchant's website to buy, how do I select a mining peer to pay transaction fee to? Do I attach some bounty that any peer can earn if that peer wins the Proof-of-Work block? But what if my bounty isn't high enough to attract a peer given high transaction volume competing for priorities? Or not enough to cover any peer's mining overhead. How do I know how much to bid to be sure my transaction completed in a timely manner?
This sounds very complex and unreliable and not at all like something that can scale to customers. Customers want to click one button and be done with the purchase and not waiting unknown hours debugging their payment processing. Amazon's One Click.
I don't see how with different peers charging different fees (to match their market dynamics), the sender of a transaction can know the amount to bid to get in the next block? It is impossible because the tx fees are not uniform and the random selection of the next peer is not knowable in advance.
The blockchain is public, and every block has (amongst other things) the following information for each transaction (or it can be calculated):


The size of the transaction, in bytes
The fee paid by the initiator of the transaction


Miners in future are likely to calculate the earnings per byte for each transaction when selecting which ones to include in a block, so that they earn the maximum profit from the block. At the moment they mostly just include them all, provided there is at least a token fee.

Furthermore, transactions that have not yet been included in a block are publicly available.

From this information a user could estimate the transaction fee they will need to pay to get their transaction included in the next block, or within one of the next few blocks. Of course in the long run, it won't be a user that has to seek out this information; it'll just be part of the information readily available as they initiate a transaction. At least, that's how I see it working.

The idea has also been floated that the receiver of a transaction could pay a small fee to get the transaction into a block sooner (to ensure they receive their payment).

Reporting on the level of fees needed to process a transaction is minimal at the moment because it's not particularly difficult to get transactions included in a block with either no fee or just a token fee (say 0.00001BTC). This is because we haven't hit the block size limit (at least, we're not constantly hitting it).