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From: Matt Corallo <bitcoin-list@bluematt.me>
To: bitcoin-development <bitcoin-development@lists.sourceforge.net>
Date: Wed, 24 Apr 2013 17:09:32 -0400
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Subject: [Bitcoin-development] [RFC] Fees/Minimum Priorities based on
 Mempool and Memory-Limited Mempool
Precedence: list

I hacked together a new min fee/prio calculator and memory-limited
mempool a while back and figured Id post the code here to get some
comments.  Its more of a discussion-starter than a strict proposal and
has a few obvious holes (hence posting here instead of pull-requesting).

It works as such (note that all constants are really place-holders, so
please recommend reasonable constants):

1) Watches when transactions enter mempool and calculates minimum
fee/priority based on a fairly dumb algorithm... It finds the highest
FEE_POLICY_TOP_N_TX (10) fee/prio transactions in mempool that have been
in mempool at least FEE_POLICY_DETERMINATION_BLOCKS (6) blocks and
averages together their fee/prio then multiplies by FEE_POLICY_FACTOR
(1.1).

2) It limits mempool size to a default of 10*MAX_BLOCK_SIZE (bringing it
down to 9*MAX_BLOCK_SIZE each time it has to throw out transaction).
When transactions are throw out, it keeps 2/9 of the mempool size in
highest-prio transactions and 7/9 of the mempool in highest-fee
transactions.  

3) Any transactions which have a fee lower than the lowest-fee
transaction thrown out of the mempool and a priority lower than the
lowest-priority transaction thrown out of the mempool will not be
accepted into the mempool at all.  

Obvious bugs:
1) It doesnt yet do anything for minimum fee/prio when it hasnt seen at
least FEE_POLICY_TOP_N_TX (10) transactions sitting in mempool for at
least FEE_POLICY_DETERMINATION_BLOCKS (6) blocks (ie hasnt been running
for 6 blocks or blocks are being filled completely).  The likely way to
address this is to look at previous blocks and find the lowest fee/prio
transactions included in them.

2) It will relay all transactions until the mempool has filled up (or if
the mempool never fills).  Something should be done initially to limit
DoS potential.

Code is at
https://github.com/TheBlueMatt/bitcoin/commits/fees

Matt