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To: Peter R <peter_r@gmx.com>
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From: Matt Corallo <lf-lists@mattcorallo.com>
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Date: Sun, 30 Aug 2015 02:35:10 +0000
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Cc: bitcoin-dev@lists.linuxfoundation.org,
	Daniele Pinna <daniele.pinna@gmail.com>
Subject: Re: [bitcoin-dev] On the Nature of Miner Advantages in Uncapped
 Block Size Fee Markets
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Of course this assumes the network does not change any as a result of
such a system. But such a system provides strong incentives for the
network to centralize in other ways (put all the mining nodes in one DC
for all miners, etc).

Matt

On 08/30/15 02:33, Matt Corallo via bitcoin-dev wrote:
> It is not a purely academic scenario that blocks contain effectively no
> information (that was not previously relayed). I'm not aware of any
> public code to do so, but I know several large miners who pre-relay the
> block(s) they are working on to other nodes of theirs around the globe.
> This means at announce-time you have only a few bytes to broadcast (way
> less than a packet, and effects of using smaller packets to relay things
> vs larger packets are very small, if anything). After you've broadcast
> to all of your nodes, hops to other mining nodes are probably only a
> handful of ms away with very low packet loss, so relay time is no longer
> connected to transaction inclusion at all (unless you're talking about
> multi-GB blocks). Of course, this is relay time for large miners who can
> invest time and money to build such systems. Small miners are completely
> screwed in such a system.
> 
> Thus, the orphan risk for including a transaction is related to the
> validation time (which is only DB modify-utxo-set time, essentially,
> which maybe you can optimize much of that away, too, and only have to
> pass over mempool or so). Anyway, my point, really, is that though
> miners will have an incentive to not include transactions which will
> trigger validation by other nodes (ie things not already in their
> mempool), the incentive to not include transactions which have already
> been relayed around sufficiently is, while not theoretically zero, as
> near to zero in practice as you can get.
> 
> Matt
> 
> On 08/29/15 23:17, Peter R wrote:
>> Hello Matt and Daniele,
>>
>>>  this seems to ignore the effects of transaction validation caches and
>>> *block
>>> compression protocols. *
>>
>> The effect of block compression protocols is included.  This is what I
>> call the "coding gain" and use the Greek letter "gamma" to represent. 
>>
>> As long as the block solution announcements contain information (i.e.,
>> Shannon Entropy) about the transactions included in a block, then the
>> fee market will be "healthy" according to the definitions given in the
>> linked paper (see below).  This is the case right now, this is the case
>> with your relay network, and this would be the case using any
>> implementation of IBLTs that I can imagine, so long as miners can still
>> construct blocks according to their own volition.  The "healthy fee
>> market" result follows from the Shannon-Hartley theorem; the SH-theorem
>> describes the maximum rate at which information (Shannon Entropy) can be
>> transmitted over a physical communication channel.   
>>
>>  https://dl.dropboxusercontent.com/u/43331625/feemarket.pdf
>>
>> I've exchanged emails with Greg Maxwell about (what IMO is) an academic
>> scenario where the block solutions announcements contain *no information
>> at all* about the transactions included in the blocks.  Although the fee
>> market would not be healthy in such a scenario, it is my feeling that
>> this also requires miners to relinquish their ability to construct
>> blocks according to their own volition (i.e., the system would already
>> be centralized).  I look forward to a white paper demonstrating otherwise!
>>
>> Best regards,
>> Peter
>>
>>
>>
>> On 2015-08-29, at 2:07 PM, Matt Corallo via bitcoin-dev
>> <bitcoin-dev@lists.linuxfoundation.org
>> <mailto:bitcoin-dev@lists.linuxfoundation.org>> wrote:
>>
>>> I believe it was pointed out previously in the discussion of the Peter R
>>> paper, but I'll repeat it here so that its visible - this seems to
>>> ignore the effects of transaction validation caches and block
>>> compression protocols. Many large miners already have their own network
>>> to relay blocks around the globe with only a few bytes on the wire at
>>> block-time, and there is also the bitcoinrelaynetwork.org
>>> <http://bitcoinrelaynetwork.org> network, which
>>> does the same for smaller miners, albeit with slightly less efficiency.
>>> Also, transaction validation time upon receiving a block can be rather
>>> easily made negligible (ie the only validation time you should have is
>>> the DB modify-utxo-set time). Thus, the increased orphan risk for
>>> including a transaction can be reduced to a very, very tiny amount,
>>> making the optimal blocksize, essentially, including everything that
>>> you're confident is in the mempool of other reasonably large miners.
>>>
>>> Matt
>>>
>>> On 08/29/15 16:43, Daniele Pinna via bitcoin-dev wrote:
>>>> I'd like to submit this paper to the dev-list which analyzes how miner
>>>> advantages scale with network and mempool properties in a scenario of
>>>> uncapped block sizes. The work proceeds, in a sense, from where Peter
>>>> R's work left off correcting a mistake and addressing the critiques made
>>>> by the community to his work.
>>>>
>>>> The main result of the work is a detailed analysis of mining advantages
>>>> (defined as the added profit per unit of hash) as a function of miner
>>>> hashrate. In it, I show how large block subsidies (or better, low
>>>> mempool fees-to-subsidy ratios) incentivize the pooling of large
>>>> hashrates due to the steady increasing of marginal profits as hashrates
>>>> grow.
>>>>
>>>> The paper also shows that part of the large advantage the large miners
>>>> have today is due to there being a barrier to entry into a
>>>> high-efficiency mining class which has access to expected profits an
>>>> order of magnitude larger than everyone else. As block subsidies
>>>> decrease, this high-efficiency class is expected to vanish leading to a
>>>> marginal profit structure which decreases as a function of hashrate.
>>>>
>>>> This work has vacuumed my entire life for the past two weeks leading me
>>>> to lag behind on a lot of work. I apologize for typos which I may not
>>>> have seen. I stand by for any comments the community may have and look
>>>> forward to reigniting consideration of a block size scaling proposal
>>>> (BIP101) which, due to the XT fork drama, I believe has been placed
>>>> hastily and undeservedly on the chopping block.
>>>>
>>>> https://www.scribd.com/doc/276849939/On-the-Nature-of-Miner-Advantages-in-Uncapped-Block-Size-Fee-Markets
>>>>
>>>>
>>>> Regards,
>>>> Daniele
>>>>
>>>>
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