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From: Matt Corallo <lf-lists@mattcorallo.com>
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Cc: bitcoin-dev@lists.linuxfoundation.org,
	Daniele Pinna <daniele.pinna@gmail.com>
Subject: Re: [bitcoin-dev] On the Nature of Miner Advantages in Uncapped
 Block Size Fee Markets
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On 08/30/15 02:49, Peter R wrote:
> Hello Matt,
> 
>> It is not a purely academic scenario that blocks contain *effectively* no
>> information (that was not previously relayed). 
> 
> The results of my paper hold unless the information about the included
> transactions is *identically zero*.  If this information is extremely
> small, then I agree that something other than the orphan cost would
> drive the fee market. I don't think this will ever by the case, however.

You missed one key point - information transmitted across networks is
not slowed down on a per-bit basis, its (largely) slowed down on a
per-packet basis! You have some 1400+ bytes to work with before you
notice the increase in information in relay cost. Of course this only
applies if you are talking about long-haul links (across oceans, between
countries, etc), if you're talking about short links it is a per-byte
cost, but your time is probably negligible for anything but VERY large
blocks.

>> I'm not aware of any
>> public code to do so, but I know several large miners who pre-relay the
>> block(s) they are working on to other nodes *of theirs* around the globe….
> 
> In this paragraph, you are talking about intra-miner communication (you
> refer to other nodes "of theirs").   I agree that this can be very fast
> because there's only one entity involved. 

Very fast is an understatement. My point was that it is literally always
a single packet, and a very small packet, at that.

>> Thus, the orphan risk for including a transaction is related to the
>> validation time … the incentive to not include transactions which have
>> already
>> been relayed around sufficiently is, while not theoretically zero, *as
>> near to zero in practice as you can get*.
> 
> I look forward to hearing your talk about the Relay Network.  Let's
> image there was no block size limit.  Using the Relay Network*as it
> currently operates now*, how big would the block solution announcement be:

I think you missed it, this mail was not about the relay network. Let's
ignore the relay network entirely for now. Several miners have nodes
well distributed all over the globe which peer either directly with
other miners in the area, or just connect to a ton of nodes, probably
hitting other miners. The cost to transmit from their pool server to
their relay server is one packet, always. They pre-relay everything
they're gonna include, so, at max, they might have to pick between a few
pre-relayed blocks (what, like, 2/5 bits?). From there, you assume they
are transmitting to a node in the same DC, or at least very close (say,
local within AWS-US-East/maybe between AWS-US-East and somewhere in
NYC), where transmitting even 100MB is really fast.

> (1) if a miner published a 10 MB block where 100% of the transactions
> are known by the other nodes?  
> 
> (2) if a miner published a 10 MB block where 90% of the transactions are
> known by the other nodes?  
> 
> (3) if a miner published a 100 MB spam block where 0% of the
> transactions are known by the other nodes?
> 
> Best regards,
> Peter
> 
> 
>>
>> Matt
>>
>> On 08/29/15 23:17, Peter R wrote:
>>> Hello Matt and Daniele,
>>>
>>>> this seems to ignore the effects of transaction validation caches and
>>>> *block
>>>> compression protocols. *
>>>
>>> The effect of block compression protocols is included.  This is what I
>>> call the "coding gain" and use the Greek letter "gamma" to represent.
>>>
>>> As long as the block solution announcements contain information (i.e.,
>>> Shannon Entropy) about the transactions included in a block, then the
>>> fee market will be "healthy" according to the definitions given in the
>>> linked paper (see below).  This is the case right now, this is the case
>>> with your relay network, and this would be the case using any
>>> implementation of IBLTs that I can imagine, so long as miners can still
>>> construct blocks according to their own volition.  The "healthy fee
>>> market" result follows from the Shannon-Hartley theorem; the SH-theorem
>>> describes the maximum rate at which information (Shannon Entropy) can be
>>> transmitted over a physical communication channel.   
>>>
>>> https://dl.dropboxusercontent.com/u/43331625/feemarket.pdf
>>>
>>> I've exchanged emails with Greg Maxwell about (what IMO is) an academic
>>> scenario where the block solutions announcements contain *no information
>>> at all* about the transactions included in the blocks.  Although the fee
>>> market would not be healthy in such a scenario, it is my feeling that
>>> this also requires miners to relinquish their ability to construct
>>> blocks according to their own volition (i.e., the system would already
>>> be centralized).  I look forward to a white paper demonstrating
>>> otherwise!
>>>
>>> Best regards,
>>> Peter
>>>
>>>
>>>
>>> On 2015-08-29, at 2:07 PM, Matt Corallo via bitcoin-dev
>>> <bitcoin-dev@lists.linuxfoundation.org
>>> <mailto:bitcoin-dev@lists.linuxfoundation.org>
>>> <mailto:bitcoin-dev@lists.linuxfoundation.org>> wrote:
>>>
>>>> I believe it was pointed out previously in the discussion of the Peter R
>>>> paper, but I'll repeat it here so that its visible - this seems to
>>>> ignore the effects of transaction validation caches and block
>>>> compression protocols. Many large miners already have their own network
>>>> to relay blocks around the globe with only a few bytes on the wire at
>>>> block-time, and there is also the bitcoinrelaynetwork.org
>>>> <http://bitcoinrelaynetwork.org>
>>>> <http://bitcoinrelaynetwork.org> network, which
>>>> does the same for smaller miners, albeit with slightly less efficiency.
>>>> Also, transaction validation time upon receiving a block can be rather
>>>> easily made negligible (ie the only validation time you should have is
>>>> the DB modify-utxo-set time). Thus, the increased orphan risk for
>>>> including a transaction can be reduced to a very, very tiny amount,
>>>> making the optimal blocksize, essentially, including everything that
>>>> you're confident is in the mempool of other reasonably large miners.
>>>>
>>>> Matt
>>>>
>>>> On 08/29/15 16:43, Daniele Pinna via bitcoin-dev wrote:
>>>>> I'd like to submit this paper to the dev-list which analyzes how miner
>>>>> advantages scale with network and mempool properties in a scenario of
>>>>> uncapped block sizes. The work proceeds, in a sense, from where Peter
>>>>> R's work left off correcting a mistake and addressing the critiques
>>>>> made
>>>>> by the community to his work.
>>>>>
>>>>> The main result of the work is a detailed analysis of mining advantages
>>>>> (defined as the added profit per unit of hash) as a function of miner
>>>>> hashrate. In it, I show how large block subsidies (or better, low
>>>>> mempool fees-to-subsidy ratios) incentivize the pooling of large
>>>>> hashrates due to the steady increasing of marginal profits as hashrates
>>>>> grow.
>>>>>
>>>>> The paper also shows that part of the large advantage the large miners
>>>>> have today is due to there being a barrier to entry into a
>>>>> high-efficiency mining class which has access to expected profits an
>>>>> order of magnitude larger than everyone else. As block subsidies
>>>>> decrease, this high-efficiency class is expected to vanish leading to a
>>>>> marginal profit structure which decreases as a function of hashrate.
>>>>>
>>>>> This work has vacuumed my entire life for the past two weeks leading me
>>>>> to lag behind on a lot of work. I apologize for typos which I may not
>>>>> have seen. I stand by for any comments the community may have and look
>>>>> forward to reigniting consideration of a block size scaling proposal
>>>>> (BIP101) which, due to the XT fork drama, I believe has been placed
>>>>> hastily and undeservedly on the chopping block.
>>>>>
>>>>> https://www.scribd.com/doc/276849939/On-the-Nature-of-Miner-Advantages-in-Uncapped-Block-Size-Fee-Markets
>>>>>
>>>>>
>>>>> Regards,
>>>>> Daniele
>>>>>
>>>>>
>>>>> _______________________________________________
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>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>
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