Subject: Re: [bitcoin-dev] Transaction Merging (bip125 relaxation)

From: Moral Agent <[email-masked]>
Date: Sun, 28 Jan 2018 13:08:33 -0500

As you point out, depending on the mempool, sometimes a miner makes more
fee by including A and B, while other times a miner makes more fee by
including C (the replacement for A and B) and D (a hypothetical transaction
that cannot be fit into a block that contains A and B but can be fit into a
block with C.

So what are we to make of this? Is it better to relay C or better to not
relay C?

Clearly it is better for the miner if they know about C, because knowing
about C costs them nothing, but not knowing about C will sometimes result
in them earning less fees.

Clearly it is better for the people who are creating C for those
transactions to be mined instead of the more expensive A and B transactions.

Everyone else is better off in that more transactions would get included in
blocks.

A concern about burdening full nodes with extra transactions to relay that
may not be more profitable to mine than the transactions they replace is
still rational -- though intuitively it seems like there would be a limit
on how many times an attacker could cheaply reorganize transactions into
something with a higher fee rate.

Perhaps there are also concerns with reconstruction of blocks from compact
blocks, given that miners would have more decisions to make about which tx
to include?

On Sun, Jan 28, 2018 at 12:29 PM, David A. Harding via bitcoin-dev <
[email-masked]> wrote:

> On Sun, Jan 28, 2018 at 05:43:34PM +0100, Sjors Provoost via bitcoin-dev
> wrote:
> > Peter Todd wrote:
> > > In fact I considered only requiring an increase in fee rate, based on
> the
> > > theory that if absolute fee went down, the transaction must be smaller
> and thus
> > > miners could overall earn more from the additional transactions they
> could fit
> > > into their block. But to do that properly requires considering whether
> or not
> > > that's actually true in the particular state the mempool as a whole
> happens to
> > > be in, so I ditched that idea early on for the much simpler criteria
> of both a
> > > feerate and absolute fee increase.
> >
> > Why would you need to consider the whole mempool?
>
> Imagine a miner is only concerned with creating the next block and his
> mempool currently only has 750,000 vbytes in it.  If two 250-vbyte
> transactions each paying a feerate of 100 nanobitcoins per vbyte (50k
> total) are replaced with one 325-vbyte transaction paying a feerate of
> 120 nBTC (39k total), the miner's potential income from mining the next
> block is reduced by 11k nBTC.
>
> Moving away from this easily worked example, the problem can still exist
> even if a miner has enough transactions to fill the next block.  For
> replacement consideration only by increased feerate to be guaranteed
> more profitable, one has to assume the mempool contains an effectively
> continuous distribution of feerates.  That may one day be true of the
> mempool (it would be good, because it helps keep block production
> regular sans subsidy) but it's often not the case these days.
>
> -Dave
>
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