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Date: Wed, 5 Aug 2015 10:33:13 +0200
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From: Benjamin <benjamin.l.cordes@gmail.com>
To: Peter R <peter_r@gmx.com>
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Cc: Bitcoin Dev <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] "A Transaction Fee Market Exists Without a Block
Size Limit"--new research paper suggests
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Very interesting paper. When you talk about a market, what are you
referring to exactly? A market means that demand and supply are matched
continuously, and Bitcoin has no such mechanism. A lot of discussion has
been around fixing the "supply" of blocksize. A floating number would mean
that a hardcoded number or function would be replaced by a decision process
involving users (demand). I don't think a fee market exists and that demand
or supply are not easily definable. Ideally supply of transaction
capability would completely depend on demand, and a price would exist such
that demand can react to longterm or shorterm supply constraints. In such a
scenario there would be no scalability concerns, as scale would be almost
perfectly elastic.
On Tue, Aug 4, 2015 at 8:40 AM, Peter R via bitcoin-dev <
bitcoin-dev@lists.linuxfoundation.org> wrote:
> Dear Bitcoin-Dev Mailing list,
>
> I=E2=80=99d like to share a research paper I=E2=80=99ve recently complete=
d titled =E2=80=9CA
> Transaction Fee Market Exists Without a Block Size Limit.=E2=80=9D In ad=
dition 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 functioni=
ng
> 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 th=
e
> 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-With=
out-a-Block-Size-Limit
>
> *Abstract. *This paper shows how a rational Bitcoin miner should select
> transactions from his node=E2=80=99s 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 b=
y
> accounting for orphaning risk. The latter represents the fees offered by
> the transactions in mempool, and is expressed versus the minimum block si=
ze
> required to claim a given portion of the fees. The paper explains how th=
e
> supply and demand curves from classical economics are related to the
> derivatives of these two curves, and proves that producing the quantity o=
f
> block space indicated by their intersection point maximizes the miner=E2=
=80=99s
> profit. The paper then shows that an unhealthy fee market=E2=80=94where =
miners are
> incentivized to produce arbitrarily large blocks=E2=80=94cannot exist sin=
ce it
> requires communicating information at an arbitrarily fast rate. The pape=
r
> concludes by considering the conditions under which a rational miner woul=
d
> 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
>
>
--089e01182252e1b4cf051c8c4025
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<div dir=3D"ltr">Very interesting paper. When you talk about a market, what=
are you referring to exactly? A market means that demand and supply are ma=
tched continuously, and Bitcoin has no such mechanism. A lot of discussion =
has been around fixing the "supply" of blocksize. A floating numb=
er would mean that a hardcoded number or function would be replaced by a de=
cision process involving users (demand). I don't think a fee market exi=
sts and that demand or supply are not easily definable. Ideally supply of t=
ransaction capability would completely depend on demand, and a price would =
exist such that demand can react to longterm or shorterm supply constraints=
. In such a scenario there would be no scalability concerns, as scale would=
be almost perfectly elastic.</div><div class=3D"gmail_extra"><br><div clas=
s=3D"gmail_quote">On Tue, Aug 4, 2015 at 8:40 AM, Peter R via bitcoin-dev <=
span dir=3D"ltr"><<a href=3D"mailto:bitcoin-dev@lists.linuxfoundation.or=
g" target=3D"_blank">bitcoin-dev@lists.linuxfoundation.org</a>></span> w=
rote:<br><blockquote class=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;borde=
r-left:1px #ccc solid;padding-left:1ex"><div style=3D"word-wrap:break-word"=
><div>Dear Bitcoin-Dev Mailing list,</div><div><br></div><div>I=E2=80=99d l=
ike to share a research paper I=E2=80=99ve recently completed titled =E2=80=
=9CA Transaction Fee Market Exists Without a Block Size Limit.=E2=80=9D =C2=
=A0In addition to presenting some useful charts such as the cost to produce=
large spam blocks, I think the paper convincingly demonstrates that, due t=
o the orphaning cost, a block size limit is not necessary to ensure a funct=
ioning fee market. =C2=A0</div><div><br></div><div>The paper does not argue=
that a block size limit is unnecessary in general, and in fact brings up q=
uestions related to mining cartels and the size of the UTXO set. =C2=A0=C2=
=A0</div><div><br></div><div>It can be downloaded in PDF format here:</div>=
<div><br></div><div><a href=3D"https://dl.dropboxusercontent.com/u/43331625=
/feemarket.pdf" target=3D"_blank">https://dl.dropboxusercontent.com/u/43331=
625/feemarket.pdf</a></div><div><br></div><div>Or viewed with a web-browser=
here:</div><div><br></div><div><a href=3D"https://www.scribd.com/doc/27344=
3462/A-Transaction-Fee-Market-Exists-Without-a-Block-Size-Limit" target=3D"=
_blank">https://www.scribd.com/doc/273443462/A-Transaction-Fee-Market-Exist=
s-Without-a-Block-Size-Limit</a></div><div><br></div><div><b>Abstract. =C2=
=A0</b>This paper shows how a rational Bitcoin miner should select transact=
ions from his node=E2=80=99s mempool, when creating a new block, in order t=
o maximize his profit in the absence of a block size limit. To show this, t=
he paper introduces the block space supply curve and the mempool demand cur=
ve.=C2=A0 The former describes the cost for a miner to supply block space b=
y accounting for orphaning risk.=C2=A0 The latter represents the fees offer=
ed by the transactions in mempool, and is expressed versus the minimum bloc=
k size required to claim a given portion of the fees.=C2=A0 The paper expla=
ins how the supply and demand curves from classical economics are related t=
o the derivatives of these two curves, and proves that producing the quanti=
ty of block space indicated by their intersection point maximizes the miner=
=E2=80=99s profit.=C2=A0 The paper then shows that an unhealthy fee market=
=E2=80=94where miners are incentivized to produce arbitrarily large blocks=
=E2=80=94cannot exist since it requires communicating information at an arb=
itrarily fast rate.=C2=A0 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. =C2=A0</div><div><br></div><div>B=
est regards,</div><div>Peter</div></div><br>_______________________________=
________________<br>
bitcoin-dev mailing list<br>
<a href=3D"mailto:bitcoin-dev@lists.linuxfoundation.org">bitcoin-dev@lists.=
linuxfoundation.org</a><br>
<a href=3D"https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev" =
rel=3D"noreferrer" target=3D"_blank">https://lists.linuxfoundation.org/mail=
man/listinfo/bitcoin-dev</a><br>
<br></blockquote></div><br></div>
--089e01182252e1b4cf051c8c4025--
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