I think a diagram might help a little...

image.png

(diagram contains below text, which should be sufficient to reimagine it for the unsighted)




Given you observe events in the following order:


  1. Tx A

  2. Tx B

  3. Red Block

  4. Tx C

  5. Tx D

  6. Tx E

  7. Tx F


Which block would you most want to attempt to mine at times 1..=7?


Block W

Subsidy: 1

Fee: 10

Txs: A, B

Height N

Prev V


Block X

Subsidy: 1

Fee: 2

Txs: C, D

Height N+1

Prev W


Block Y

Subsidy: 1

Fee: 12

Txs: A, B, C, D

Height N

Prev V


Subsidy: 1

Fee: 1

Txs: E, F

Height N+1

Prev Y


Block Z

Subsidy: 1

Fee: 6

Txs: A, D

Height N

Prev V


Subsidy: 1

Fee: 6

Txs: B, C

Height N+1

Prev Z



I'd argue that Y, Z, W (re-mining it with different coinbase) all beat X. And that most likely, something like Z is most incentive compatible for miners, but supremely bad UX for users "pay more to wait more?? What kind of society is this". Anti-fee sniping exists to decrease likelihood of this circumstance, but is not sufficient in general to solve it.


> The idea that people won't do something because it's "bad for Bitcoin" doesn't fit an adversarial model.  Even in the above examples (which I think wouldn't expect to happen often), I would argue the network still conforms to a Nash Equilibrium without requiring trust.  Although It's mostly speculation without some empirical data.

quote the whitepaper:
The steps to run the network are as follows:
1)  New transactions are broadcast to all nodes.
2)  Each node collects new transactions into a block.
3)  Each node works on finding a difficult proof-of-work for its block.
4)  When a node finds a proof-of-work, it broadcasts the block to all nodes.
5)  Nodes accept the block only if all transactions in it are valid and not already spent.
6)  Nodes express their acceptance of the block by working on creating the next block in the
chain, using the hash of the accepted block as the previous hash.
Nodes always consider the longest chain to be the correct one and will keep working on extending it. If two nodes broadcast different versions of the next block simultaneously, some nodes may receive one or the other first. In that case, they work on the first one they received, but save the other branch in case it becomes longer. The tie will be broken when the next proof- of-work is found and one branch becomes longer; the nodes that were working on the other branch will then switch to the longer one.
 
The idea that bitcoin should work in an adversarial, stepwise selfishly interested model is nice. But I think that it is critical to keep in mind that is an aspiration, and very likely not the reality of the network today, which depends on people caring about other things exogenous to simplified game descriptions (like price increasing or rather not decreasing, long term hardware investments, etc).

If you note the later whitepaper language:

By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.
 
The incentive may help encourage nodes to stay honest. If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.

It is clear that the incentive is there to help encourage honest miners to join at all, and to encourage nodes of hidden phenotype "Greedy" to prefer honest behavior, improving network convergence, but not to make the network functional if all players are phenotype Greedy. Satoshi still expected, in his analysis, an honest majority.




Side Bar:

What Satoshi said doesn't really matter in one sense. The protocol is what it is, not what somebody described it as more than a decade ago.

However, what *is* important about what Satoshi wrote is that it is sort of the "social contract" of what Bitcoin is that we can all sort of minimally agree to. This makes it clear, when we try to describe Bitcoin with differing assumptions than in the whitepaper, what the changes are and why we think the system might support those claims. But if we can't prove the new description sound, such as showing tip mining to be rational in a fully adversarial model, it doesn't mean Bitcoin doesn't work as promised, since all that was promised originally is functioning under an honest majority. Caveat Emptor!

--
@JeremyRubin


On Mon, Oct 17, 2022 at 6:31 PM <email@yancy.lol> wrote:
Hi Jeremy,
 
Thanks for the reply. I do find the semantics of mempool and block org interesting (although there's a lot on the topic I don't know).
 
E.g., suppose:

Block N: Fees = 10, reward = 1

Mempool: Fees = 2
 
Mining block N+1 with the mempool leads to reward 2+1 = 3, reorging
leads to reward of up to 10 + 1 + c, (c < 2, where c is the extra
transactions that fit).
If I'm reading this correctly, Block N was already mined, but the miner who mined block N+1 repacks the transactions from block N because they have more to gain.  Wouldn't such a situation be resolved in the same way as two miners who find a block at a similar time? E.g the network will choose depending on when block N+2 is created.
 
Assume instead your reward is 8, leaving 3+c on the table.
Mining block N+1 with the mempool leads to reward 2+8 = 10, reorging leads to 10 + 8 + c?  Wouldn't that leave 8+c?
 
If you assume all other miners are tip miners, and there are two
conflicting tips, they should pick the one with the more profit for
them, which is the new one you made as a non-tip miner since you
"shared" some fee.
I'm curious how the "fee sharing" would be organized.  To see if I understand, You're asking what would happen if one of the two miners incentives (bribes in this case) the next miner (block N+1) to choose one of the competing tip miners?
 
You aren't particularly more likely to remine block N or N+1, before
someone builds on it, as opposed to deeper reorgs (which require
larger incentive).
Agree.
 
However, as many have pointed out, perhaps not following the simple
"honest tip mining" strategy is bad for bitcoin, so maybe we should
expect it not to happen often?
The idea that people won't do something because it's "bad for Bitcoin" doesn't fit an adversarial model.  Even in the above examples (which I think wouldn't expect to happen often), I would argue the network still conforms to a Nash Equilibrium without requiring trust.  Although It's mostly speculation without some empirical data.
 
Cheers,
-Yancy
 
On 2022-10-17 21:10, Jeremy Rubin wrote:
Building on the most work chain is perhaps not rational in many normal
circumstances that can come up today under the stated reference
strategy:

1) Take highest paying transactions that fit
2) Mine on tips

E.g., suppose:

Block N: Fees = 10, reward = 1

Mempool: Fees = 2

Mining block N+1 with the mempool leads to reward 2+1 = 3, reorging
leads to reward of up to 10 + 1 + c, (c < 2, where c is the extra
transactions that fit). Assume instead your reward is 8, leaving 3+c
on the table.

If you assume all other miners are tip miners, and there are two
conflicting tips, they should pick the one with the more profit for
them, which is the new one you made as a non-tip miner since you
"shared" some fee.

You aren't particularly more likely to remine block N or N+1, before
someone builds on it, as opposed to deeper reorgs (which require
larger incentive).

However, as many have pointed out, perhaps not following the simple
"honest tip mining" strategy is bad for bitcoin, so maybe we should
expect it not to happen often? Or other strategies to emerge around
selecting transactions so that the next M blocks have a similar fee
profile, as opposed to picking greedily for the next block.

--
@JeremyRubin [1]

On Sun, Oct 16, 2022 at 3:03 PM <email@yancy.lol> wrote:

The proof-of-work also solves the problem of determining
representation in majority decision
making. If the majority were based on one-IP-address-one-vote, it
could be subverted by anyone
able to allocate many IPs. Proof-of-work is essentially
one-CPU-one-vote. The majority
decision is represented by the longest chain, which has the
greatest
proof-of-work effort invested
in it. If a majority of CPU power is controlled by honest nodes,
the
honest chain will grow the
fastest and outpace any competing chains. To modify a past block,
an
attacker would have to
redo the proof-of-work of the block and all blocks after it and
then
catch up with and surpass the
work of the honest nodes. We will show later that the probability
of a
slower attacker catching up
diminishes exponentially as subsequent blocks are added.

It's interesting that Nash Equilibrium isn't mentioned here.  Since
each miner has the option to either contribute to the longest chain
or not, even if the miners know what strategy the other miners will
use, they still wouldn't change their decision to contribute to the
majority.

For example, if I run a shop that takes rain checks, but I sell an
item to a higher bidder who didn't have a hold on the item, that
is
not honest, but it may be selfish profit maximizing.

It would be honest if the store policy said ahead of time they are
allowed to sell rain checks for more in such an occurrence.
Although this is a good example of the difference between honest and
rational.  I think this means it's not a Nash Equilibrium if we
needed to rely on the store owner to be honest.

Satoshi said an honest majority is required for the chain to be
extended. Honest is not really defined though. Honesty, in my
definition, is that you follow a pre specified rule, rational or
not.

My take is that "rational" is probably a better word than honest.
In terms of a Nash Equilibrium, each participant is simply trying to
maximize their outcome and honesty doesn't matter (only that
participants are rational).

It seems a lot of the RBF controversy is that Protocol developers
have
aspired to make the honest behavior also be the rational behavior.
This is maybe a good idea because, in theory, if the honest
behavior
is rational then we can make a weaker assumption of selfishness
maximizing a parameter.

I'm curious, can RBF can be described by a Nash Equilibrium?  If
yes, then it also shouldn't matter if participants are honest?

Overall, it might be nice to more tightly document what bitcoins
assumptions are in practice and what those assumptions do in terms
of
properties of Bitcoin, as well as pathways to weakening the
assumptions without compromising the behaviors users expect the
network to have.  An "extended white paper" if you will.

White paper 1.1 :D

A last reflection is that Bitcoin is specified with an honest
majority
assumption, but also has a rational dishonest minority assumption
over
both endogenous (rewards) and exogenous (electricity) costs.
Satoshi
did not suggest, at least as I read it, that Bitcoin works with an
rational majority assumption. (If anyone thinks these three are
similar properties you can make some trivial counterexamples)

My take is the opposite unless I'm missing something.  Participants
are always incentivized to choose the rational solution (Not to
waste electricity on a minority chain).

Cheers,
-Yancy

On 2022-10-16 19:35, Jeremy Rubin via bitcoin-dev wrote:

The Bitcoin white paper says:

The proof-of-work also solves the problem of determining
representation in majority decision
making. If the majority were based on one-IP-address-one-vote, it
could be subverted by anyone
able to allocate many IPs. Proof-of-work is essentially
one-CPU-one-vote. The majority
decision is represented by the longest chain, which has the
greatest
proof-of-work effort invested
in it. If a majority of CPU power is controlled by honest nodes,
the
honest chain will grow the
fastest and outpace any competing chains. To modify a past block,
an
attacker would have to
redo the proof-of-work of the block and all blocks after it and
then
catch up with and surpass the
work of the honest nodes. We will show later that the probability
of a
slower attacker catching up
diminishes exponentially as subsequent blocks are added.

This, Satoshi (who doesn't really matter anyways I guess?) claimed
that for Bitcoin to function properly you need a majority honest
nodes.

There are multiple behaviors one can describe as honest, and
economically rational or optimizing is not necessarily rational.

For example, if I run a shop that takes rain checks, but I sell an
item to a higher bidder who didn't have a hold on the item, that
is
not honest, but it may be selfish profit maximizing.

Satoshi said an honest majority is required for the chain to be
extended. Honest is not really defined though. Honesty, in my
definition, is that you follow a pre specified rule, rational or
not.

It seems a lot of the RBF controversy is that Protocol developers
have
aspired to make the honest behavior also be the rational behavior.
This is maybe a good idea because, in theory, if the honest
behavior
is rational then we can make a weaker assumption of selfishness
maximizing a parameter.

However, Satoshi did not particularly bound what aspects of
honesty
are important for the network, because there isn't a spec defining
exactly what is honest or not. And also as soon as people are
honest,
you can rely on that assumption for good effect.

And sometimes, defining an honest behavior can be creating a
higher
utility system because most people are "law abiding citizens" who
might not be short term rational. For example, one might expect
that
miners would be interested in making sure lightning closes are
"accurate" because increasing the utility of lightning is good for
Bitcoin, even if it is irrational.

It seems that the NoRBF crowd want to rely on an honest majority
assumption where the honest behavior is not doing replacement if
not
requested. This is really not much different than trying to close
lightning channels "the right way".

However, where it may be different, is that even in the presence
of
honest majority, the safety of 0conf isn't assured given the
potential
of race conditions in the mempool. Therefore it's not clear to me
that
0conf working well is something you can drive from the Honest
Majority
Assumption (where honest includes first seen).

Overall, it might be nice to more tightly document what bitcoins
assumptions are in practice and what those assumptions do in terms
of
properties of Bitcoin, as well as pathways to weakening the
assumptions without compromising the behaviors users expect the
network to have.  An "extended white paper" if you will.

It's somewhat clear to me that we shouldn't weaken assumptions
that
only seem local to one subsystem of Bitcoin if they end up
destabilizing another system. In particular, things that decrease
"transaction utility" for end users decrease the demand for
transactions which hurts the fee market's longer term viability,
even
if we feel good about making an honest policy assumption into a
self
interested policy assumption.

A last reflection is that Bitcoin is specified with an honest
majority
assumption, but also has a rational dishonest minority assumption
over
both endogenous (rewards) and exogenous (electricity) costs.
Satoshi
did not suggest, at least as I read it, that Bitcoin works with an
rational majority assumption. (If anyone thinks these three are
similar properties you can make some trivial counterexamples)

Cheers,

Jeremy
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