Date: Fri, 03 Jul 2020 12:38:37 +0000
To: Itay Tsabary <sitay@campus.technion.ac.il>
From: ZmnSCPxj <ZmnSCPxj@protonmail.com>
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Cc: Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>,
 Matan Yehieli <matany@campus.technion.ac.il>
Subject: Re: [bitcoin-dev] MAD-HTLC
Precedence: list

Good morning Ittay,

> Hi all,
>
> Itay from MAD-HTLC here. I feel like some details got lost along the way =
so please let me get these sorted out.
>
> 1. Myopic and non-myopic miners:
> When we use the term=C2=A0myopic=C2=A0we mean a miner that optimizes tran=
saction selection for the next block with respect only to the next block. T=
he term=C2=A0non-myopic=C2=A0refers to a miner that optimizes transaction s=
election for the next block with respect to several future blocks. To accom=
modate for the stochastic=C2=A0nature of block creation these optimizations=
 are of the=C2=A0expected revenue.=C2=A0However,=C2=A0neither of these mean=
 that these miners choose to act in a way that reduces their expected reven=
ue -- specifically, if from a=C2=A0non-myopic's miner perspective including=
 Alice's immediate transaction is better off than waiting for Bob's future =
transaction, then this is what they do.
>
> Consequently, saying that "being myopic" dominates "being non-myopic" is =
incorrect -- myopic is=C2=A0included=C2=A0in being non-myopic, thus cannot =
be better than it.

The term "dominates" here is a technical term in game theory.

A strategy dominates over another strategy if, in a mixed environment, the =
first strategy always wins more points than the second strategy, no matter =
what proportion they may initially start in the mixed environment.

For example, in an environment of prisoner dilemma games, a tit-for-tat str=
ategy dominates over the always-betray strategy, which dominates over alway=
s-cooperate strategy.

The above is the use of the term "dominate", and not that somehow one strat=
egy "contains" the other.
Always-betray does not contain always-cooperate.

It is immaterial that the non-myopic "contains" myopic strategy as a sub-st=
rategy.
Sometimes, overriding a sub-strategy can lead to worse outcomes and you are=
 better off sticking to the sub-strategy rather than an extended strategy t=
hat sometimes overrides the sub-strategy

(notice how mixed teams of computer+human are no longer dominant in chess, =
because computer chess AIs are now so sophisticated that on average, the hu=
man overriding the computer strategy often leads to worse outcomes than jus=
t following the computer; yet about a decade ago such mixed computer+human =
teams were dominant over pure-computer and pure-human teams; yet you could =
say the same, that the computer+human "includes" the pure-computer strategy=
, but nowadays does ***not*** dominate it).

Or: worse is better.


What matters is, if you make them compete in an environment, myopic strateg=
ies will consistently beat non-myopic strategies because the myopic miners =
will impose costs on the non-myopic miners.


>
> So, the next issue to address is estimation of how much of the hash rate =
is actually non-myopic. Currently that answer is simple -- probably 0. Bitc=
oin Core (97% of the blocks) doesn't offer these optimizations, and most li=
kely other clients do not have these as well. But, we showed this is rather=
 trivial to implement (150 LoC in Bitcoin Core), and theoretically can be i=
ncluded in Core's next version AFAIK. Moreover, any miner can simply apply =
our patch independently, achieving the same effect.
>
> Please note more elaborate optimizations are in miners' best interest, es=
pecially as mining incentives transition from block minting to fees -- the =
latter are becoming the main income source, and I believe less sophisticate=
d miners will miss out substantially. You can check out Phil Daian's paper =
about front-running in Ethereum for example:=C2=A0https://arxiv.org/abs/190=
4.05234

Yes, but again: myopic strategies dominate over non-myopic strategies, thus=
 implementing non-myopic strategies is pointless, since they will lose reve=
nue in an environment where even a single miner is myopic.

It is immaterial that it takes only 150 LoC to implement non-myopia: if it =
earns less money in an environment where even a minority of blocks are crea=
ted by myopic miners (much less 97%), nobody will use the non-myopic strate=
gy and they will remain at negligible near-0% hashrate.

As they say, "you can't get to there from here".


> As common in game-theory papers, our analysis does assume=C2=A0Common Kno=
wledge=C2=A0-- all participants know all other participants, their availabl=
e strategies and utilities=C2=A0(Tejaswi et al.'s paper makes the same assu=
mption). As commented before, true, this is not always the case -- nodes mi=
ght have different mempools, and some might not have applied the optimizati=
on patch and act myopically. Such miners are therefore "resisting" the atta=
ck -- as stated, by including Alice's transaction they ruin other miners' p=
otential profit from Bob's high fee transaction.

The only additional assumption you are missing is that miners care about *t=
hemselves* and not about *all miners*.

Non-myopia may earn more money for *all* miners if *all* miners use it, but=
 if a *single* miner starts using myopic strategies in a non-myopic environ=
ment, they will earn more funds than their non-myopic competitors and thus =
dominate, shifting the percentages until almost all miners are using myopic=
 strategies.
That they require less processing ("keep it simple, sir") is just gravy on =
top.


The only way for non-myopic miners to win is to form a cartel, and a miner =
cartel with >50% hashpower would be the end of Bitcoin anyway.


Regards,
ZmnSCPxj