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

From: Matt Corallo <lf-lists@mattcorallo•com>
To: Daniele Pinna <daniele.pinna@gmail•com>,
	bitcoin-dev@lists•linuxfoundation.org
Subject: Re: [bitcoin-dev] On the Nature of Miner Advantages in Uncapped Block Size Fee Markets
Date: Sat, 29 Aug 2015 21:07:58 +0000	[thread overview]
Message-ID: <55E21F2E.9000308@mattcorallo.com> (raw)
In-Reply-To: <CAEgR2PHggX-8r+FZm=pod9KQv3E3=8wo-9nOB02-YDmy5NGsZQ@mail.gmail.com>

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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