[bitcoin-dev] On the Nature of Miner Advantages in Uncapped Block Size Fee Markets

[Peter R]

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 at 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 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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