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From: Hector Chu <hectorchu@gmail.com>
Date: Wed, 5 Aug 2015 10:18:28 +0100
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To: Benjamin <benjamin.l.cordes@gmail.com>
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Subject: Re: [bitcoin-dev] "A Transaction Fee Market Exists Without a Block
Size Limit"--new research paper suggests
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--001a11c3f026ea28f5051c8ce313
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On 5 August 2015 at 09:33, Benjamin via bitcoin-dev <
bitcoin-dev@lists.linuxfoundation.org> wrote:
> A market means that demand and supply are matched continuously, and
> Bitcoin has no such mechanism.
>
Not all markets need to have highly liquid trading outlets in order to be
thought of as such. Inefficient markets are where there is an imperfect
matching mechanism.
I don't think a fee market exists and that demand or supply are not easily
> definable.
>
Demand and supply are reflected in the market in the following two prices:
- BTC/USD
- Average transaction fee levels * Average transaction volume rate. In
other words, this is the block-by-block, remainder of the block reward
after subtracting the subsidy and priced in BTC.
Actually the first one is the only proxy reflecting the current and future
promise of Bitcoin, while the second only reflects the present. Miners
would be uniquely placed to know how best to vary the block size to
maximize their profit resulting from these two prices. The fact that they
are unable to is limiting their collective profits, reducing competition
between miners and increasing the average tx fee for users.
In that respect a dynamic block size voted on by miners periodically would
go some way to rectify this inefficiency. This needn't have to happen on
the block chain itself; we could have a continuous prediction market for
the block size, and the informed participants (miners) would stand to
profit from the uninformed from trading in such a market. How to get the
block chain to use the block size thus determined is another technical
matter.
--001a11c3f026ea28f5051c8ce313
Content-Type: text/html; charset=UTF-8
Content-Transfer-Encoding: quoted-printable
<div dir=3D"ltr"><div class=3D"gmail_extra"><div class=3D"gmail_quote">On 5=
August 2015 at 09:33, Benjamin via bitcoin-dev <span dir=3D"ltr"><<a hr=
ef=3D"mailto:bitcoin-dev@lists.linuxfoundation.org" target=3D"_blank">bitco=
in-dev@lists.linuxfoundation.org</a>></span> wrote:<br><blockquote class=
=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;border-left:1px #ccc solid;padd=
ing-left:1ex"><div dir=3D"ltr">A market means that demand and supply are ma=
tched continuously, and Bitcoin has no such mechanism.</div></blockquote><d=
iv><br></div><div>Not all markets need to have highly liquid trading outlet=
s in order to be thought of as such. Inefficient markets are where there is=
an imperfect matching mechanism.</div><div><br></div><blockquote class=3D"=
gmail_quote" style=3D"margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-=
left:1ex"><div dir=3D"ltr">I don't think a fee market exists and that d=
emand or supply are not easily definable.</div></blockquote><div><br></div>=
<div>Demand and supply are reflected in the market in the following two pri=
ces:</div><div>- BTC/USD</div><div>- Average transaction fee levels * Avera=
ge transaction volume rate. In other words, this is the block-by-block, rem=
ainder of the block reward after subtracting the subsidy and priced in BTC.=
</div><div><br></div><div>Actually the first one is the only proxy reflecti=
ng the current and future promise of Bitcoin, while the second only reflect=
s the present. Miners would be uniquely placed to know how best to vary the=
block size to maximize their profit resulting from these two prices. The f=
act that they are unable to is limiting their collective profits, reducing =
competition between miners and increasing the average tx fee for users.</di=
v><div><br></div><div>In that respect a dynamic block size voted on by mine=
rs periodically would go some way to rectify this inefficiency. This needn&=
#39;t have to happen on the block chain itself; we could have a continuous =
prediction market for the block size, and the informed participants (miners=
) would stand to profit from the uninformed from trading in such a market. =
How to get the block chain to use the block size thus determined is another=
technical matter.</div></div></div></div>
--001a11c3f026ea28f5051c8ce313--
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