Return-Path: Received: from smtp1.linuxfoundation.org (smtp1.linux-foundation.org [172.17.192.35]) by mail.linuxfoundation.org (Postfix) with ESMTPS id C155B486 for ; Sun, 30 Aug 2015 21:03:10 +0000 (UTC) X-Greylist: whitelisted by SQLgrey-1.7.6 Received: from mail-lb0-f176.google.com (mail-lb0-f176.google.com [209.85.217.176]) by smtp1.linuxfoundation.org (Postfix) with ESMTPS id 917CAE2 for ; Sun, 30 Aug 2015 21:03:09 +0000 (UTC) Received: by lbvd4 with SMTP id d4so15021269lbv.3 for ; Sun, 30 Aug 2015 14:03:07 -0700 (PDT) DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=gmail.com; s=20120113; h=mime-version:in-reply-to:references:from:date:message-id:subject:to :cc:content-type; bh=aNLpUpi10xZ1CezDtJ2+AIFHuaLE14JhjN+1+G7UXzw=; b=XIoItiHGaNrgKr3g3FOgXe3iCbcxEV6Xs704oKYwgIxlY42PaYqap7uAI/GMT3Ynal kx/T4lWnE4uZTPNtjMcH00tKtsj6Csc2/qMH1rjuvXhAJGz1GWW/RzrhabqcGS2iuL8x q30j70IsJRfTJHf2uG7ghAUOVvWOwuwUOP3JzEpQyaZL3b31xmsRBEk3E82lNtWYRkS9 xs78DRVLMmsLOwh3/0wrP3Z/mbZbSjVDLxNo4vre5yQnodDd5WEPl62lEkV588nPS/xE 2MJjzNfVY6Fpf52hEhemJ91NenqDwUqEedMUowb6RSVONzYemgjawnxiGvPUN6naUS8d PoHw== X-Received: by 10.152.6.73 with SMTP id y9mr9050949lay.45.1440968587485; Sun, 30 Aug 2015 14:03:07 -0700 (PDT) MIME-Version: 1.0 Received: by 10.112.143.229 with HTTP; Sun, 30 Aug 2015 14:02:48 -0700 (PDT) In-Reply-To: <8A71E9FB-1901-4044-B2E0-04DEFE58C045@gmx.com> References: <1438640036.2828.0.camel@auspira.com> <6ED57388-6EC3-4515-BF3F-E753301537AB@gmx.com> <6FED5604-4A6F-4CE1-B42E-36626375D557@gmx.com> <6BA86443-7534-4AAA-92BC-EC9B1603DE5F@gmx.com> <27B16AB4-0DAD-4665-BF08-7A0C0A70D8D8@gmx.com> <8A71E9FB-1901-4044-B2E0-04DEFE58C045@gmx.com> From: Daniele Pinna Date: Sun, 30 Aug 2015 23:02:48 +0200 Message-ID: To: Peter R Content-Type: multipart/alternative; boundary=089e01494220ca2dcd051e8da4da X-Spam-Status: No, score=-2.7 required=5.0 tests=BAYES_00,DKIM_SIGNED, DKIM_VALID,DKIM_VALID_AU,FREEMAIL_FROM,HTML_MESSAGE,RCVD_IN_DNSWL_LOW autolearn=ham version=3.3.1 X-Spam-Checker-Version: SpamAssassin 3.3.1 (2010-03-16) on smtp1.linux-foundation.org Cc: bitcoin-dev@lists.linuxfoundation.org Subject: Re: [bitcoin-dev] "A Transaction Fee Market Exists Without a Block Size Limit"--new research paper suggests X-BeenThere: bitcoin-dev@lists.linuxfoundation.org X-Mailman-Version: 2.1.12 Precedence: list List-Id: Bitcoin Development Discussion List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Sun, 30 Aug 2015 21:03:10 -0000 --089e01494220ca2dcd051e8da4da Content-Type: text/plain; charset=UTF-8 "However, that is outside the scope of the result that an individual miner's profit per block is always maximized at a finite block size Q* if Shannon Entropy about each transaction is communicated during the block solution announcement. This result is important because it explains how a minimum fee density exists and it shows how miners cannot create enormous spam blocks for "no cost," for example. " Dear Peter, This might very well not be the case. Since the expected revenue ** in our formulas is but a lower bound to the true expected revenue, and the fee supply curve [image: M_s(Q)\propto 1/\langle V\rangle], if the true expected revenue doesn't decay faster than the mempool's average transaction fee (or, more simply, if it doesn't decay to zero) then the maximum miner surplus will be unbounded and unhealthy fee markets will emerge. Best, Daniele Daniele Pinna, Ph.D On Sun, Aug 30, 2015 at 10:08 PM, Peter R wrote: > Hi Daniele, > > I don't think there is any contention over the idea that miners that > control a larger percentage of the hash rate, *h */ *H*, have a > profitability advantage if you hold all the other variables of the miner's > profit equation constant. I think this is important: it is a centralizing > factor similar to other economies of scale. > > However, that is outside the scope of the result that an individual > miner's profit per block is always maximized at a finite block size Q* if > Shannon Entropy about each transaction is communicated during the block > solution announcement. This result is important because it explains how a > minimum fee density exists and it shows how miners cannot create enormous > spam blocks for "no cost," for example. > > Best regards, > Peter > > > 2) Whether it's truly possible for a miner's marginal profit per unit of > hash to decrease with increasing hashrate in some parametric regime.This > however directly contradicts the assumption that an optimal hashrate exists > beyond which the revenue per unit of hash *v' < v *if *h' > h. * > *Q.E.D * > > This theorem in turn implies the following corollary: > > *COROLLARY: **The marginal profit curve is a monotonically increasing of > miner hashrate.* > > This simple theorem, suggested implicitly by Gmaxwell disproves any and > all conclusions of my work. Most importantly, centralization pressures will > always be present. > > > --089e01494220ca2dcd051e8da4da Content-Type: text/html; charset=UTF-8 Content-Transfer-Encoding: quoted-printable
"However= , that is outside the scope of the result that an individual miner's pr= ofit per block is always maximized at a finite block size Q* if Shannon Ent= ropy about each transaction is communicated during the block solution annou= ncement.=C2=A0 This result is important because it explains how a minimum f= ee density exists and it shows how miners cannot create enormous spam block= s for "no cost," for example. "

Dear Peter,

This might very well not be the case. Since the expected revenue= <V> in our formulas is but a lower bound to the true e= xpected revenue, and the fee supply curve 3D"M_s(Q)\propto, i= f the true expected revenue doesn't decay faster than the mempool's= average transaction fee (or, more simply, if it doesn't decay to zero)= then the maximum miner surplus will be unbounded and unhealthy fee markets= will emerge.

Best,
Daniele=



Daniele Pinna, Ph.D

On Sun, Aug 30, 2015 at 10:08 PM, Peter R <pe= ter_r@gmx.com> wrote:
Hi Daniele,

I don't t= hink there is any contention over the idea that miners that control a large= r percentage of the hash rate, h / H, have a profitability ad= vantage if you hold all the other variables of the miner's profit equat= ion constant.=C2=A0 I think this is important: it is a centralizing factor = similar to other economies of scale. =C2=A0

Howeve= r, that is outside the scope of the result that an individual miner's p= rofit per block is always maximized at a finite block size Q* if Shannon En= tropy about each transaction is communicated during the block solution anno= uncement.=C2=A0 This result is important because it explains how a minimum = fee density exists and it shows how miners cannot create enormous spam bloc= ks for "no cost," for example. =C2=A0

Be= st regards,
Peter


2) Whether it's truly possible for a miner'= ;s marginal profit per unit of hash to decrease with increasing hashrate in= some parametric regime.This however directly contradicts the assump= tion that an optimal hashrate exists beyond which the revenue per unit of h= ash=C2=A0v' = < v=C2=A0i= f=C2=A0=C2=A0h' > h.=C2=A0
Q.E.D=C2=A0
=
This theorem in turn implies the following corollary:

<= span style=3D"font-size:12.8000001907349px">COROLLARY:=C2=A0<= span style=3D"font-size:12.8000001907349px">The marginal profit curve is= a monotonically increasing of miner hashrate.

<= span style=3D"font-size:12.8000001907349px">This simple theorem, suggested = implicitly by Gmaxwell disproves any and all conclusions of my work. Most i= mportantly, centralization pressures will always be present.=C2=A0


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