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From: Peter R <peter_r@gmx.com>
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Subject: [bitcoin-dev] "A Transaction Fee Market Exists Without a Block Size
Limit"--new research paper suggests
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Dear Bitcoin-Dev Mailing list,
I=92d like to share a research paper I=92ve recently completed titled =93A=
Transaction Fee Market Exists Without a Block Size Limit.=94 In =
addition to presenting some useful charts such as the cost to produce =
large spam blocks, I think the paper convincingly demonstrates that, due =
to the orphaning cost, a block size limit is not necessary to ensure a =
functioning fee market. =20
The paper does not argue that a block size limit is unnecessary in =
general, and in fact brings up questions related to mining cartels and =
the size of the UTXO set. =20
It can be downloaded in PDF format here:
https://dl.dropboxusercontent.com/u/43331625/feemarket.pdf
Or viewed with a web-browser here:
=
https://www.scribd.com/doc/273443462/A-Transaction-Fee-Market-Exists-Witho=
ut-a-Block-Size-Limit
Abstract. This paper shows how a rational Bitcoin miner should select =
transactions from his node=92s mempool, when creating a new block, in =
order to maximize his profit in the absence of a block size limit. To =
show this, the paper introduces the block space supply curve and the =
mempool demand curve. The former describes the cost for a miner to =
supply block space by accounting for orphaning risk. The latter =
represents the fees offered by the transactions in mempool, and is =
expressed versus the minimum block size required to claim a given =
portion of the fees. The paper explains how the supply and demand =
curves from classical economics are related to the derivatives of these =
two curves, and proves that producing the quantity of block space =
indicated by their intersection point maximizes the miner=92s profit. =
The paper then shows that an unhealthy fee market=97where miners are =
incentivized to produce arbitrarily large blocks=97cannot exist since it =
requires communicating information at an arbitrarily fast rate. The =
paper concludes by considering the conditions under which a rational =
miner would produce big, small or empty blocks, and by estimating the =
cost of a spam attack. =20
Best regards,
Peter=
--Apple-Mail=_9E306D4B-96CA-4CDF-92DE-3A900188C49D
Content-Transfer-Encoding: quoted-printable
Content-Type: text/html;
charset=windows-1252
<html><body style=3D"word-wrap: break-word; -webkit-nbsp-mode: space; =
-webkit-line-break: after-white-space; "><div>Dear Bitcoin-Dev Mailing =
list,</div><div><br></div><div>I=92d like to share a research paper I=92ve=
recently completed titled =93A Transaction Fee Market Exists Without a =
Block Size Limit.=94 In addition to presenting some useful charts =
such as the cost to produce large spam blocks, I think the paper =
convincingly demonstrates that, due to the orphaning cost, a block size =
limit is not necessary to ensure a functioning fee market. =
</div><div><br></div><div>The paper does not argue that a block =
size limit is unnecessary in general, and in fact brings up questions =
related to mining cartels and the size of the UTXO set. =
</div><div><br></div><div>It can be downloaded in PDF format =
here:</div><div><br></div><div><a =
href=3D"https://dl.dropboxusercontent.com/u/43331625/feemarket.pdf">https:=
//dl.dropboxusercontent.com/u/43331625/feemarket.pdf</a></div><div><br></d=
iv><div>Or viewed with a web-browser here:</div><div><br></div><div><a =
href=3D"https://www.scribd.com/doc/273443462/A-Transaction-Fee-Market-Exis=
ts-Without-a-Block-Size-Limit">https://www.scribd.com/doc/273443462/A-Tran=
saction-Fee-Market-Exists-Without-a-Block-Size-Limit</a></div><div><br></d=
iv><div><b>Abstract. </b>This paper shows how a rational Bitcoin =
miner should select transactions from his node=92s mempool, when =
creating a new block, in order to maximize his profit in the absence of =
a block size limit. To show this, the paper introduces the block space =
supply curve and the mempool demand curve. The former describes =
the cost for a miner to supply block space by accounting for orphaning =
risk. The latter represents the fees offered by the transactions =
in mempool, and is expressed versus the minimum block size required to =
claim a given portion of the fees. The paper explains how the =
supply and demand curves from classical economics are related to the =
derivatives of these two curves, and proves that producing the quantity =
of block space indicated by their intersection point maximizes the =
miner=92s profit. The paper then shows that an unhealthy fee =
market=97where miners are incentivized to produce arbitrarily large =
blocks=97cannot exist since it requires communicating information at an =
arbitrarily fast rate. The paper concludes by considering the =
conditions under which a rational miner would produce big, small or =
empty blocks, and by estimating the cost of a spam attack. =
</div><div><br></div><div>Best =
regards,</div><div>Peter</div></body></html>=
--Apple-Mail=_9E306D4B-96CA-4CDF-92DE-3A900188C49D--
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