Subject: Re: [bitcoin-dev] Inquiry: Transaction Tiering

From: Martin Stolze <[email-masked]>
Date: Wed, 22 Mar 2017 17:48:52 +0000

Hi Tim,
After writing this I figured that it was probably not evident at first
sight as the concept may be quite novel. The physical location of the
"miner" is indeed irrelevant, I am referring to the digital location.
Bitcoins blockchain is a digital location or better digital "space".
As far as I am concerned the authority lies with whoever governs this
particular block space. A "miner" can, or can not, include my
transaction.

To make this more understandable:

Abu Bakr al-Baghdadi can extend his caliphate into Bitcoins block
space and rule sovereign(!) over a given block. If he processes my
transaction my fee goes directly into the coffers of his organization.
The same goes for the Queen of England or the Emperor of China. My
interest is not necessarily aligned with each specific authority, yet
as you point out, I can only not use Bitcoin.
Alternatively, however, I can very well sign my transaction and send
it to an authority of my choosing to be included into the ledger, say
BitFurry. - This is what I describe in option 1.

In order to protect my interest I do need to choose, maybe not today,
but eventually.

I also think that people do care who processes transactions and a lot
of bickering could be spared if we could choose.

If we assume a perfectly competitive market with 3 authorities that
govern the block space equally, the marginal cost of 1/3 of the block
space is the same for each, however, the marginal revenue absent of
block rewards is dependent on fees.
If people are willing to pay only a zero fee to a specific authority
while a fee greater than zero to the others it's clear that one would
be less competitive.

Let us assume the fees are 10% of the revenue and the cost is 95 we
have currently the following situation:

A: Cost=95; Revenue=100; Profit=5
B: Cost=95; Revenue=100; Profit=5
C: Cost=95; Revenue=100; Profit=5

With transaction tiering, the outcome could be different!

A: Cost=95; Revenue=90; Loss=5 // BSA that does not respect user interest.
B: Cost=95; Revenue=105; Profit=10
C: Cost=95; Revenue=105; Profit=10

This could motivate transaction processors to behave in accordance
with user interest, or am I missing something?

Best Regards,
Martin

> From: Tim Ruffing <[email-masked]>
> To: [email-masked]
> Cc:
> Bcc:
> Date: Tue, 21 Mar 2017 16:18:26 +0100
> Subject: Re: [bitcoin-dev] Inquiry: Transaction Tiering
> (I'm not a lawyer...)
>
> I'm not sure if I can make sense of your email.
>
> On Mon, 2017-03-20 at 20:12 +0000, Martin Stolze via bitcoin-dev wrote:
>> As a participant in the economy in general and of Bitcoin in
>> particular, I desire an ability to decide where I transact. The
>> current state of Bitcoin does not allow me to choose my place of
>> business. As a consequence, I try to learn what would be the best way
>> to conduct my business in good faith. [2]
>
> Ignoring the rest, I don't think that the physical location /
> jurisdiction of the miner has any legal implications for law applicable
> to the relationship between sender and receiver of a payment.
>
> This is not particular to Bitcoin. We're both in Germany (I guess).
> Assume we have a contract without specific agreements and I pay you in
> Icelandic kronur via PayPal (in Luxembourg) and my HTTPS requests to
> PayPal went via Australia and the US. Then German law applies to our
> contract, nothing in the middle can change that.
>
> Also ignoring possible security implications, there is just no need for
> a mechanism that enables users to select miners. I claim that almost
> nobody cares who will mine a transaction, because it makes no technical
> difference. If you don't want a specific miner to mine your
> transaction, then don't use Bitcoin.
>
> Tim