Andrew Cann [ARCHIVE] / is on Nostr

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🗓️ Active from 2020-03-23 to 2020-03-29
💬 Posted a total of 4 messages
📚 Participated in the following categories: bitcoin-dev
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2023-06-07 18:23:31

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📅 Original date posted:2020-03-29
📝 Original message:> Fortunately in our case, only the top 4,000,000 weight worth of transactions
> gets in a block. Every bitcoin spender has an incentive to spend as little
> as possible to get into this top 4,000,000 weight and no more, but they still
> have to outbid every other user who wants the same security. Some bitcoin
> spender will then decide that overpaying slightly to ensure that they do not
> drop out of the top 4,000,000 weight even in case of a "slow" block.
>
> Thus, there will always be a need for *some* block weight limit, and that is
> what ensures that miners can get paid.
Yes, but how does this ensure that miners get paid *enough*? Every individual
making a transaction needs the miners to get paid enough for the transaction to
be meaningful, but they each individually only have the incentive to pay the
market rate for block space which is set purely by supply and demand.
It's the same as the fish farming analogy. Everyone making a transaction could
collectively decide how much miners need to get paid and agree to split the
costs. But then each individual has the incentive to renege on the agreement
and only pay the minimum they need to get their transaction included in the
block while everyone else pays for the transaction's security. My voting idea
is one potential way they could break the Nash equilibrium.
> Now it was brought up earlier that people are moving transactions offchain,
> but that is perfectly fine, because every offchain mechanism first needs an
> onchain setup, and will at some point need an onchain teardown. This
> allows increasing the effective capacity, while still ensuring that onchain
> fees remain at a level that will still ensure continued healthy operation of
> the blockchain layer. Basically, the offchain mechanism does not remove
> onchain fees, it only amortizes the onchain fees to multiple logical
> transactions.
I concede that every bitcoin user pays transaction fees, if not directly then
indirectly, so whether miners get paid through transaction fees or a block
reward is irrelevant. My concern is that moving things off-chain reduces the
transaction fees by reducing demand for block-space and that this could cause
miner revenue to drop lower than what's required to keep the network secure.
Is there any good reason to think this won't happen?
- Andrew
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2023-06-07 18:23:31

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2023-06-07 18:23:30

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📅 Original date posted:2020-03-27
📝 Original message:> To change the supply is far too big a change.
It would also be a big change if bitcoin became unusable due to mining profits
dropping low enough for a state actor with a warehouse full of asics to mount a
51% attack and mine empty blocks all day.
> What happens if I own a few million Bitcoin and then accidentally lose my
> private keys in a tragic ear-cleaning accident?
> Then the vote of that UTXO containing a few million Bitcoins will remain
> forever fixed and unable to change according to whatever you believe would
> make us as a community decide to change the inflation rate.
All that matters is whether the long-term rate of deflation due to lost coins
is less or greater than the rate of inflation. This determines whether the
proportion of coins whose signaled inflation rate is fixed in time would tend
towards zero or one. I think it's /fairly/ safe to assume that it would remain
less. People obviously have a pretty strong incentive to not lose their coins -
particularly people who are holding massive amounts of bitcoin - and as bitcoin
becomes more mainstream, regular users will necessarily be using forms of
protection against losing their coins (whatever they might be). Contrast this
against the inflation rate which should remain high enough to prevent very
wealthy entities from being able to mount a 51% attack. What proportion of the
total market cap of bitcoin do you think your least favorite government could
plausibly be willing to spend to take down bitcoin for a month? And do you
think it's less or greater than the proportion of all bitcoins that get lost in
a month?
> It is helpful to remember that as a UTXO gets buried deeper, its security is
> inevitably better, and once I have a sufficient level of security in my
> ownership of the coin, I will not particularly care about any improved
> security and will not be interested in paying for more.
If we're talking about the possibility of your coin becoming worthless because
someone out there can unwind transactions at will and prevent you from spending
it then you should definitely be interested.
> If I want to *spend* my Bitcoins on something --- and nothing has value until
> I actually utilize it --- then I *will* pay transaction fees. The receiver of
> the coin would want to ensure that the received UTXO is deeply buried to the
> point that it has sufficient security for the receiver, before releasing or
> providing me with whatever I am exchanging the coin for.
>
> Thus, if I find that there are no miners at all, I could offer a high fee to
> get my transaction mined. Of course, you might say that this only pays for
> one block.
>
> But in most cases I will have more value remaining beyond what I spend to the
> receiver, i.e. I have a change output from that transaction.
>
> In such a case, I can pay for more blocks by re-spending the change output
> to myself, paying a transaction fee each time, until the original transaction
> that spends to the receiver is deeply buried and the receiver credits it and
> then releases the product or service I am exchanging *for*. Alternately the
> receiver can do the same for its *own* UTXO, and will increase the payment it
> demands from me in order to perform this itself; thus I still end up paying
> for the security of the *transaction* and not the security of the *holding*.
In your example though it's just you or the receiver paying for blocks. In that
case you're only paying for your own security and so there's no tragedy of the
commons and the system works. But once you have a thousand people putting
transactions in every block and everyone is collectively paying for everyone's
collective security then, without some mechanism to force everyone to pay their
fair share, you're inviting Moloch to the party.
Here's a better explanation than I could write of the phenomenon I'm talking
about:
> As a thought experiment, let’s consider aquaculture (fish farming) in a lake.
> Imagine a lake with a thousand identical fish farms owned by a thousand
> competing companies. Each fish farm earns a profit of $1000/month. For a
> while, all is well.
>
> But each fish farm produces waste, which fouls the water in the lake. Let’s
> say each fish farm produces enough pollution to lower productivity in the
> lake by $1/month.
>
> A thousand fish farms produce enough waste to lower productivity by
> $1000/month, meaning none of the fish farms are making any money. Capitalism
> to the rescue: someone invents a complex filtering system that removes waste
> products. It costs $300/month to operate. All fish farms voluntarily install
> it, the pollution ends, and the fish farms are now making a profit of
> $700/month – still a respectable sum.
>
> But one farmer (let’s call him Steve) gets tired of spending the money to
> operate his filter. Now one fish farm worth of waste is polluting the lake,
> lowering productivity by $1. Steve earns $999 profit, and everyone else earns
> $699 profit.
>
> Everyone else sees Steve is much more profitable than they are, because he’s
> not spending the maintenance costs on his filter. They disconnect their
> filters too.
>
> Once four hundred people disconnect their filters, Steve is earning
> $600/month – less than he would be if he and everyone else had kept their
> filters on! And the poor virtuous filter users are only making $300. Steve
> goes around to everyone, saying “Wait! We all need to make a voluntary pact
> to use filters! Otherwise, everyone’s productivity goes down.”
>
> Everyone agrees with him, and they all sign the Filter Pact, except one
> person who is sort of a jerk. Let’s call him Mike. Now everyone is back using
> filters again, except Mike. Mike earns $999/month, and everyone else earns
> $699/month. Slowly, people start thinking they too should be getting big
> bucks like Mike, and disconnect their filter for $300 extra profit…
>
> A self-interested person never has any incentive to use a filter. A
> self-interested person has some incentive to sign a pact to make everyone use
> a filter, but in many cases has a stronger incentive to wait for everyone
> else to sign such a pact but opt out himself. This can lead to an undesirable
> equilibrium in which no one will sign such a pact.
Won't a thousand bitcoin-spenders, individually paying for their transactions
but collectively paying for their security, end up falling into the same
dynamic?
- Andrew
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2023-06-07 18:23:30

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2023-06-07 18:23:29

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📅 Original date posted:2020-03-25
📝 Original message:Hi, thanks for the replies.
> Anyway, yes, your idea is fundamentally broken because a zero block reward
> happens because creating even one more satoshi will push the amount of
> bitcoin over 21,000,0000, breaking the meaning of "bitcoin," or, if you
> like, creating a fundamental contradiction in our use of the term.
I wouldn't really consider that fundamentally broken. It changes the meaning of
"bitcoin", but so does every upgrade to the protocol. The worst problem I can
see with this is that there's probably a lot of software out there which
assumes a cap of 21M. But we'd have years to find and fix those bugs.
> They already do so, via an implicit "field", known as the transaction fee.
> This makes the vote for how much security is needed to be costly to the
> voter, which is appropriate: you pay for your security.
This isn't the same thing though, economically / game-theoretically speaking.
Transaction fees are only paid when bitcoins get moved. There's no on-going
cost for people holding bitcoins (assuming they're doing their day-to-day
transactions almost entirely off-chain, which is something that's only going to
become more common). More to the point, the transaction fee is only set by the
current demand for block space. If transaction fees drop too low to maintain a
secure hash rate then people *could* willingly pay more than they need to to
get their transactions mined, but it's unlikely they will since it'd be cheaper
to just pay the minimum and hope that everyone else covers the costs of keeping
the network secure for them.
With the voting idea everyone decides what everyone pays (via dilution) to keep
the network secure. Choosing to signal a high inflation rate doesn't mean you
pay more than everyone else, just that you might shift the median, so there's
no tragedy-of-the-commons problem. Also, votes are weighted by the value of
the utxo, so people both vote and pay in proportion to the amount of bitcoin
they're holding.
Does this make sense? Or is there some game-theoretic reason I'm not seeing for
why transaction fees can never drop dangerously low in the first place?
- Andrew
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2023-06-07 18:23:29

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2023-06-07 18:23:28

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📅 Original date posted:2020-03-23
📝 Original message:Hi, noob question here: Is there a long-term plan for if the block reward drops
too low to ensure the security of the network?
IIUC miners only make profit from block rewards and transaction fees, and once
the block reward drop to zero we're merely hoping that transaction fees will
keep mining expensive enough to stop a state actor or someone from buying
enough hash power to attack the network. If that's the case, should we start
making plans now to change the protocol to allow an adjustable block reward?
Here's a half-baked idea I had of how that could work: Since the block reward
dilutes the value of the currency bitcoin holders have an incentive to keep the
reward low. However, since the block reward is also (partly) what incentivizes
mining, bitcoin holders also have an incentive to keep the reward high enough
to keep the network secure. So if bitcoin holders were able to vote to decide
the block reward they "should", hypothetically, reliably choose a value that
balances these two concerns. You could implement this voting by adding an
optional extra field to every txout that signals what the holder thinks the
inflation rate should be. If the field is missing you just assume the default
value based on the current protocol. Then, whenever a new block is mined, you
take the median inflation rate of all the pre-existing utxos, weighted by the
utxo value, to calculate the block's reward.
Is this idea fundamentally broken somehow? Or are there already better ideas
for how to tackle this problem (I don't follow this list very closely)? Or is
this actually a non-issue to start with?
- Andrew
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2023-06-07 18:23:28

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