Dear Bitcoin-Dev Mailing list,
I’d like to share a research paper I’ve recently completed titled “A
Transaction Fee Market Exists Without a Block Size Limit.” In addition to
presenting some useful charts such as the cost to produce large spam blocks, I
think the paper convincingly demonstrates that, due to the orphaning cost, a
block size limit is not necessary to ensure a functioning fee market.
The paper does not argue that a block size limit is unnecessary in general, and
in fact brings up questions related to mining cartels and the size of the UTXO
set.
It can be downloaded in PDF format here:
https://dl.dropboxusercontent.com/u/43331625/feemarket.pdf
Or viewed with a web-browser here:
https://www.scribd.com/doc/273443462/A-Transaction-Fee-Market-Exists-Without-a-Block-Size-Limit
Abstract. This paper shows how a rational Bitcoin miner should select
transactions from his node’s mempool, when creating a new block, in order to
maximize his profit in the absence of a block size limit. To show this, the
paper introduces the block space supply curve and the mempool demand curve.
The former describes the cost for a miner to supply block space by accounting
for orphaning risk. The latter represents the fees offered by the transactions
in mempool, and is expressed versus the minimum block size required to claim a
given portion of the fees. The paper explains how the supply and demand curves
from classical economics are related to the derivatives of these two curves,
and proves that producing the quantity of block space indicated by their
intersection point maximizes the miner’s profit. The paper then shows that an
unhealthy fee market—where miners are incentivized to produce arbitrarily large
blocks—cannot exist since it requires communicating information at an
arbitrarily fast rate. The paper concludes by considering the conditions under
which a rational miner would produce big, small or empty blocks, and by
estimating the cost of a spam attack.
Best regards,
Peter
_______________________________________________
bitcoin-dev mailing list
bitcoin-dev@lists.linuxfoundation.org
https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
