Hi Dave, Thank you for the feedback regarding my paper.
> The paper is nicely done, but I'm concerned that there's a real problem with > equation 4. The orphan rate is not just a function of time; it's also a > function of the block maker's proportion of the network hash rate. > Fundamentally a block maker (pool or aggregation of pools) does not orphan > its own blocks. With the benefit of hindsight, I think the paper would be stronger if it also analyzed how the model changes (or doesn't) if we assume zero propagation impedance for intra-miner communication, as you suggested (the "you don't orphan your own blocks" idea). Note that the paper did briefly discuss miner-dependent propagation times in the second paragraph of page 9 and in note 13. > In a degenerate case a 100% pool has no orphaned blocks. Agreed. In this case there's no information to communicate (since the miner has no peers) and so the Shannon-Hartley limit doesn't apply. My model makes no attempt to explain this case. > Consider that a 1% miner must assume a greater risk from orphaning than, say, > a pool with 25%, or worse 40% of the hash rate. I'd like to explore this in more detail. Although a miner may not orphan his own block, by building on his own block he may now orphan two blocks in a row. At some point, his solution or solutions must be communicated to his peers. And if there's information about the transactions in his blocks to communicate, I think there's a cost associated with that. It's an interesting problem and I'd like to continue working on it. > I suspect this may well change some of the conclusions as larger block makers > will definitely be able to create larger blocks than their smaller > counterparts. It will be interesting to see. I suspect that the main result that "a healthy fee market exists" will still hold (assuming of course that a single miner with >50% of the hash power isn't acting maliciously). Whether miners with larger value of h/H have a profit advantage, I'm not sure (but that was outside the scope of the paper anyways). Best regards, Peter >> On 3 Aug 2015, at 23:40, Peter R via bitcoin-dev >> <bitcoin-dev@lists.linuxfoundation.org> wrote: >> >> 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 >
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