Stefan Thomas [ARCHIVE] on Nostr: 📅 Original date posted:2012-06-15 📝 Original message:Thanks Mike for the ...

📅 Original date posted:2012-06-15
📝 Original message:Thanks Mike for the writeup - I'm very sad to have missed the discussion
on IRC since fee economics are probably my favorite topic, but I'll try
to contribute to the email discussion instead.

> (4) Making the block size limit float is better than picking a new
> arbitrary threshold.

Fees are a product of both real and artificial limits to transaction
validation.

The artificial limits like the block size limit are essentially putting
a floor on prices by limiting supply beyond what it would otherwise be.
E.g. the network could confirm more transactions theoretically, but the
block size limit prevents it.

The real limits are the bandwidth, computing and memory resources of
participating nodes. For the sake of argument suppose a 1 TB block was
released into the network right now and we'll also assume there was no
block size limit of any kind. Many nodes would likely not be able to
successfully download this block in under 10-30 minutes, so there is a
very good chance that other miners will have generated two blocks before
this block makes its way to them.

What does this mean? The miner generating a 1 TB block knows this would
happen. So in terms of economic self interest he will generate the
largest possible block that he is still confident that other miners will
accept and process. A miner who receives a block will also consider
whether to build on it based on whether they think other miners will be
able to download it. In other words, if I receive a large block I may
decide not to mine on it, because I believe that the majority of mining
power will not mine on it - because it is either too large for them to
download or because their rules against large blocks reject it.

It's important to understand that in practice economic actors tend to
plan ahead. In other words, if there is no block size limit that doesn't
mean that there will be constant forks and total chaos. Rather, no miner
will ever want to have a block rejected due to size, there is plenty of
incentive to be conservative with your limits. Even if there are forks,
this simply means that miners have decided that they can make more money
by including more transactions at the cost of the occasional dud.

Therefore, from an economic perspective, we do not need a global block
size limit of any kind. As "guardians of the network" the only thing we
need to do is to let miners figure out what they wanna do.

HOWEVER, the existing economic incentives won't manifest unless somebody
translates them into code. We have to give our users (miners & endusers)
the tools to create a genuine fee-based verification market.

On the miner side: I would make the block size limit configurable with a
relatively high default. If the default is too low few people will
bother changing it, which means that it is not worth changing (because a
majority uses the default anyway), which means even fewer people will
change it and so on.

The block size limit should also be a soft rather than a hard limit -
here are some ideas for this:

- The default limit for accepting blocks from others should always be
significantly greater than the default limit for blocks that the client
itself will generate.

- There should be different size limits for side chains that are longer
than the currently active chain. In other words, I might reject a block
for being slightly too large, but if everyone else accepts it I should
eventually accept it too, and my client should also consider
automatically raising my size limit if this happens a lot.

The rationale for the soft limit is to allow for gradual upward
adjustment. It needs to be risky for individual miners to raise the size
of their blocks to new heights, but ideally there won't be one solid
wall for them to run into.

On the user side: I would display the fee on the Send Coins dialog and
allow users to choose a different fee per transaction. We also talked
about adding some UI feedback where the client tries to estimate how
long a transaction will take to confirm given a certain fee, based on
recent information about what it observed from the network. If the fee
can be changed on the Send Coins tab, then this could be a red, yellow,
green visual indication whether the fee is sufficient, adequate or
dangerously low.

A criticism one might raise is: "The block size limit is not to protect
miners, but to protect end users who may have less resources than miners
and can't download gigantic block chains." - That's a viewpoint that is
certainly valid. I believe that we will be able to do a lot just with
efficiency improvements, pruning, compression and whatnot. But when it
comes down to it, I'd prefer a large network with cheap
microtransactions even if that means that consumer hardware can't
operate as a standalone validating node anymore. Headers-only mode is
already a much-requested feature anyway and there are many ways of
improving the security of various header-only or lightweight protocols.

(I just saw Greg's message advocating the opposite viewpoint, I'll
respond to that as soon as I can.)


> (1) Change the mining code to group transactions together with their
> mempool dependencies and then calculate all fees as a group.

+1 Very good change. This would allow miners to maximize their revenue
and in doing so better represent the existing priorities that users
express through fees.


> There was discussion of some one-off changes to address the current
> situation, namely de-ranking transactions that re-use addresses.

Discouraging address reuse will not change the amount of transactions, I
think we all agree on that. As for whether it improves the
prioritization, I'm not sure. Use cases that we seek to discourage may
simply switch to random addresses and I don't agree in and of itself
this is a benefit (see item 4 below). Here are a few reasons one might
be against this proposal:

1) Certain use cases like green addresses will be forced to become more
complicated than they would otherwise need to be.

2) It will be harder to read information straight out of the block
chain, for example right now we can pretty easily see how much volume is
caused by Satoshi Dice, perhaps allowing us to make better decisions.

3) The address index that is used by block explorers and lightweight
client servers will grow unnecessarily (an address -> tx index will be
larger if the number of unique addresses increases given the same number
of txs), so for people like myself who work on that type of software
you're actually making our scalability equation slightly worse.

4) You're forcing people into privacy best practices which you think are
good, but others may not subscribe to. For example I have absolutely
zero interest in privacy, anyone who cares that I buy Bitcoins with my
salary and spend them on paragliding is welcome to know about it.
Frankly, if I cared about privacy I wouldn't be using Bitcoin. If other
people want to use mixing services and randomize their addresses and
communicate through Tor that's fine, but the client shouldn't force me
to do those things if I don't want to by "deprioritizing" my transactions.

5) We may not like firstbits, but the fact remains that for now they are
extremely popular, because they improve the user experience where we
failed to do so. If you deprioritize transactions to reused addresses
you'll for example deprioritize all/most of Girls Gone Bitcoin, which
(again, like it or not) is one of the few practical, sustainable niches
that Bitcoin has managed to carve out for itself so far.


> Having senders/buyers pay no fees is psychologically desirable even
> though we all understand that eventually, somebody, somewhere will be
> paying fees to use Bitcoin

Free is just an extreme form of cheap, so if we can make transactions
very cheap (through efficiency and very large blocks) then it will be
easier for charitable miners to include free transactions. In practice,
my prediction is that free transactions on the open network will simply
not be possible in the long run. Dirty hacks aside there is simply no
way of distinguishing a spam transaction from a charity-worthy
transaction. So the way I envision free transactions in the future is
that there may be miners in partnership with wallet providers like
BlockChain.info that let you submit feeless transactions straight to
them based on maybe a captcha or some ads. (For the purist, the captcha
challenge and response could be communicated across the bitcoin network,
but I think we agree that such things should ideally take place
out-of-band.)

That way, the available charity of miners who wish to include feeless
transactions would go to human users as opposed to the potentially
infinite demand of auto-generated feeless transactions.



On 6/15/2012 1:29 PM, Mike Hearn wrote:
> I had to hit the sack last night as it was 2am CET, but I'd like to
> sum up the discussion we had on IRC about scalability and SatoshiDice
> in particular.
>
> I think we all agreed on the following:
>
> - Having senders/buyers pay no fees is psychologically desirable even
> though we all understand that eventually, somebody, somewhere will be
> paying fees to use Bitcoin
>
> - In the ideal world Bitcoin would scale perfectly and there would be
> no need for there to be some "winners" and some "losers" when it comes
> to confirmation time.
>
> There was discussion of some one-off changes to address the current
> situation, namely de-ranking transactions that re-use addresses. Gavin
> and myself were not keen on this idea, primarily because it just
> avoids the real problem and Bitcoin already has a good way to
> prioritize transactions via the fees mechanism itself. The real issue
> is that SatoshiDice does indeed pay fees and generates a lot of
> transactions, pushing more traditional traffic out due to artificial
> throttles.
>
> The following set of proposals were discussed:
>
> (1) Change the mining code to group transactions together with their
> mempool dependencies and then calculate all fees as a group. A tx with
> a fee of 1 BTC that depends on 5 txns with zero fees would result in
> all 6 transactions being considered to have a fee of 1BTC and
> therefore become prioritized for inclusion. This allows a transition
> to "receiver pays" model for fees. There are many advantages. One is
> that it actually makes sense ... it's always the receiver who wants
> confirmations because it's the receiver that fears double spends.
> Senders never do. What's more, whilst Bitcoin is designed to operate
> on a zero-trust model in the real world trust often exists and it can
> be used to optimize by passing groups of transactions around with
> their dependencies, until that group passes a trust boundary and gets
> broadcast with a send-to-self tx to add fees. Another advantage is it
> simplifies usage for end users who primarily buy rather than sell,
> because it avoids the need to guess at fees, one of the most
> problematic parts of Bitcoins design now.
>
> The disadvantages are that it can result in extra transactions that
> exist only for adding fees, and it requires a more modern payment
> protocol than the direct-IP protocol Satoshi designed.
>
> It would help address the current situation by avoiding angry users
> who want to buy things, but don't know what fee to set and so their
> transactions get stuck.
>
> (2) SatoshiDice should use the same fee algorithms as Bitcoin-Qt to
> avoid paying excessive fees and queue-jumping. Guess that's on my
> plate.
>
> (3) Scalability improvements seem like a no brainer to everyone, it's
> just a case of how complicated they are.
>
> (4) Making the block size limit float is better than picking a new
> arbitrary threshold.
>
> On the forums Matt stated that block chain pruning was a no-go because
> "it makes bitcoin more centralized". I think we've thrashed this one
> out sufficiently well by now that there should be a united opinion on
> it. There are technical ways to implement it such that there is no
> change of trust requirements. All the other issues (finding archival
> nodes, etc) can be again addressed with sufficient programming.
>
> For the case of huge blocks slowing down end user syncing and wasting
> their resources, SPV clients like MultiBit and Android Wallet already
> exist and will get better with time. If Jeff implements the bloom
> filtering p2p commands I'll make bitcoinj use them and that'll knock
> out excessive bandwidth usage and parse overheads from end users who
> are on these clients. At some point Bitcoin-Qt can have a dual mode,
> but who knows when that'll get implemented.
>
> Does that all sound reasonable?
>
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