Topic: Funding network security in the future - page 3. (Read 13334 times)

The common resource here is abstract. It is the willingness of users to pay tx fees. By accepting low-fee txs, a miner consumes this resource (that is, makes users less willing to pay tx fees) for his own benefit, at the expense of the total benefit of all miners. And, since Bitcoin needs miners, this is a problem for all Bitcoin users.

Nobody suggested that the mining devices themselves are a common good.

Quoting this theory blindly is failing to acknowledge some specific characteristics of Bitcoin mining. Most importantly, that we want to keep mining costs artificially high. Absent any limiting mechanism, sure, the market will reach an equilibrium... An equilibrium where tx fees are low, total hashrate is low, and the network is vulnerable to hashrate attacks.

In a healthy network with a high hashrate, the main cost of a tx is amortized, and the marginal cost is negligible. Hence, having the price equal to the marginal cost (as in the quote) is a disaster.

Thought of another way: Mining has a positive externality which is difficult to monetize, due to "race to the bottom" effects. Left to the market's own devices, no mining will be done. Hence we need some way to coordinate players into providing this externality.


Additional layers are an issue to consider, but even so I believe value sent is a better proxy than all transactions being equal.

Regarding your other point:
1. I hope you realize that my suggestion makes things easier for the person paying medical care. The quantity sent is lower for him, so he is expected to pay less fees.
2. I'm talking about value in the economic sense, not in the emotional, personal sense. Someone who is rich and is sending large amounts is generally willing to pay higher fees. The willingness is an advantage, and should be used to fund the network.
3. If the moving of money between wallets is "pointless", I see no harm in a policy that discourages it. If it's not pointless (security concerns etc.), then the sender is willing to pay for it, and we should use that.

This kind of dynamic rules can have very unstable, unpredictable behavior. They should be approached with great care.


This is true, and I believe research such as the Red Balloons paper is a step towards resolving this issue.

Anyway, I expect the cost of verifying to be much lower than of hashing, so finding a way to fund that should be easier.

There is no known physical limit on computation. (There are some erroneous limits occasionally quoted, based on the physical limits of erasing information; but in truth, it is not known that computation requires erasing information proportionally).

And even if there is:
1. We're decades away from being anywhere near it
2. I'm not sure why the rest of your scenario would follow.


AFAICT, this paper discusses the methodological errors in those research papers that dismissed the free rider problem, and itself did not find evidence against the free rider problem.

Anyway, in the real world the free rider problem obviously exists.

Exactly. I think the proper analyses is to look at hashing vs cost. In the beginning, it was essentially linear. For the last couple and probably the next 10 or so years at least, it will be exponential as better ASICs offer exponential speedups over CPUs. Eventually, as their capacity saturates, the curve will be linear again, based on number of devices (rather than capacity per device) and as you say on electricity.

A linear situation is much more amenable to the volunteer. If bitcoin becomes important enough, for example, Apple and the rest will throw ASIC miners and EC verifiers into their products, and the network security will be funded by its usefulness in maintaining society all together.

A bit too romantic, maybe, but I'm an optimist

Yes, I did misunderstand.  I though you were advocating for a network imposed limit, but I see better now what you are thinking. You are describing 100% thermodynamic efficiency, right?  It think that is theoretically impossible to attain, but it is widely expected that as the rate of efficiency improvement in SHA256 hashing slows down, mining costs will come to be dominated by operational expenditures (electricity). Currently  capital expenditures (buying more efficient ASIC's) are still the major factor.

The importance of cheap electricity will become ever more important as hashing tech matures.

Hm I think maybe you misunderstood my point (did you read the whole post?). I'm talking about ASICs achieving the limit set by the universe on hashes per second. No enforcing necessary, physics takes care of that. So I have not actually "proposed" anything complexifying. Simply wondering how the economics change when ASICs hit such a limit (assuming the limit exists - hello physicists?) and become "cheap as cpus", motivating EC verification to achieve a similar limit, also become "cheap as cpus", and finally have both integrated into modern (being X decades into the future) personal devices. Sure, anyone can buy more devices, but the idea is that speedup in a given device may saturate, so the advantage is only linear (rather than exponential) in cost. By that point tx fees may be tiny, or even nil, but it will be relatively cheap for an average user to participate, just like in bittorrent. So indeed, as Gavin keeps saying, the market may figure out how to pay for security, in this case by saturating ASIC capacity and making it feasible for the average user to once again play.

It is in users' self interest to validate.  If you don't want to run your own full node, there are plenty of companies that will do the validation for you and charge you a fee.  One reason to have a block-size limit is to make sure it always stays reasonable for a hobbyist, with a relatively modest expenditure or resources, to perform full validation at home.  So I would say no, the network is not doomed in the absence of financial support for nodes.


No one has seriously considered it because the concept is a non-starter.  Even if you could devise some way to enforce the rule on a per-device basis, there is no known and accepted way to stop a single entity from controlling multiple devices.  People would figure out a way to control multiple hashing devices, and in such case your idea would introduce only added complexity and possible attack vectors and, I think, nothing positive.

Most of the conversation seems to have been about ensuring sufficient transaction fees are paid to miners. But what about the verifiers? Currently, all tx validation is done by volunteers. I think Satoshi initially intended for validators to double as miners, but in a world where the two are largely mutually distinct, how do we support the verifiers? And if we can't, isn't the network doomed anyway?

Related to this is something I have not seen considered: the upper limit on hash speed per device.

A naiive calculation would go like this. Take the universe's maximum bit-operations/second (assuming it exists) as the speed of light in nanometers/second, or 3x10^17 (ie. 300 peta(nm/s)). Suppose a SHA256 takes 1000 bit operations. So we can say ASICs will top out at 0.3 PH/S or 300 TH/S (from what I can tell, they are currently around 1-10 TH/s, so this would be order of 10-100 times speed up). I know very little about hardware, but given the incentives and the acceleration of knowledge, this may not be unreasonable within say the next 20 years, to pull a number out of my ass. All this assuming of course there is an upper bound set by the cosmos on computations per second, which may or may not be reasonable, depending on your approach to modern physics. Of course my estimate of SHA256 bit ops may be wildly off and obviously depends on the size of the input, but it doesn't matter - what does matter is ASIC manufacturers reach the limit in the next couple (maybe even five?!) decades. Suppose its a graphene based breakthrough, if you're hung up on transistors and the end of Moore's Law.

(As an aside, note that it takes ~40ms to get from New York to Hong Kong at the speed of light. So unless we break that barrier, high performance large scale distributed systems are kind of screwed anyways. In other words, the speed of light is too slow for our needs ).

Supposing ASICs do reach this limit (and will probably be the first devices in our corner of the cosmos to do so), then some point afterward we will be seemingly back to the kind of thing Satoshi originally envisioned. A 300TH/s ASIC cheap as a modern CPU today. One 300 TH/s ASIC, 1 vote. Of course there is still the centralization incentive, so let's assume we have solved that by transitioning to something like Hashimoto or another such hashing scheme that requires the entire blockchain to be available to the miner. The next step, driven by market demand of regular people mining again, will then be ASIC EC verification. Give it a couple decades or so to also become "cheap as a cpu".

Now we're in a situation again where full nodes validate and mine, just like the good ole days, supporting the system for the same reasons bittorrent is supported - it's useful, it provides for us, it sticks it to the man, whatever.

And they lived happily ever after?

The word artificial is tricky.  It can mean insincere, false and fake in one set of more negative meanings.  It can also mean made by people, as with an artificial lake.  That is not a negative concept;  I love artificial light when I trying to read at night.  In this instance we seem to be talking about how to avoid a race to the bottom at the expense of network security, with the race to the bottom being a 'natural' economic concept.  Thus, avoiding such a 'natural' outcome would entail the use of some 'artificial' constraints.



There could be a cartel of miners that wasn't regulated, licensed, or funded by governments.

Bitcoin has no monopoly on blockchain technology.  Competing chains have and will continue to place competitive pressure on the Bitcoin system.  Keeping that in mind, I see no problem with Bitcoin miners organizing to decide what security level they want to provide, and how much that security will cost.  Offer too little security and people might prefer to use some other system they perceive as safer.  Charge to much and people will use a cheaper system.  I think a group of people, analyzing risks and making active judgements, will do a better job striking a good security balance than some fixed algorithm.  That group of people would be some form of miner association, or cartel, or decentralized company, or whatever you want to call it.  It could have many possible forms.  If you are worried about this group abusing their power, let me recall my first point, that Bitcoin does not have a monopoly on this technology.  Miners do have the network effect, as described by Metcalfe's law, working in their favor.  A mining cartel would be able to extract some additional profit thanks to the barrier cost of forking bitcoin, or switching to an alt coin.  But if the Bitcoin miners are too far off the optimum mix, alternatives will fill the gap.

A cartel would also be able to solve the free rider problem, as it would stop a race to bottom.  Minimum fees would be established so that network security would remain adequately funded.  

I view this thread as discussion on the merits of whether proof-of-work alone is going to give us the network we want, or if we need some additional parameters to have PoW function as desired.  The follow is a short list of some pro’s and con’s for PoW that I could think of.  I am interested to know if there is agreement on these.  Also, the lists are not complete, so please add!


PoW - Advantages

•A very fair method for initial distribution
•No risk that critical signing keys will be stolen since the system is not based on such keys
•Easy for any person in the world to verify that a particular transaction has been vouched for by a massive, and calculable, quantity of electricity and computational power.
•Absolute certainty that the work done was committed to a single version of history
•Some built-in degree of global geographic distribution since the cheapest power is globally distributed.  Why?  The cheapest power is going to be interruptible, surplus power, and there is a finite quantity at every generation station.
•Some degree of local distribution do to heat buildup, possible uses for waste heat, and the square-cube law
•Can be physically trackable to the extent that a visitable number of major data centers, together, perform a majority of the hashing.  This can be a benefit once world at large accepts Bitcoin as a ‘good thing’ to be supported and encouraged.  In the Bitcoin-at-war scenario, which is currently still a possibility, identifiable physical locations are a weakness.


PoW - Disadvantages

•Expensive (yet this is inextricably tied to the cost to attack, which is a benefit.  Paradoxical!)
•Potential for a government to carry out a massive ASIC mega-farm attack (economically and politically unlikely, but absolutely possible.  1% chance?)
•SHA256 almost certainly will be broken at some point.  Not really a problem as long as a viable transition process happens first.

Meni

Thanks for this interesting comment.  I guess you are correct that the amortised cost of hashing blocks has nothing to do with the data size.  However as you say, knowing the value for the user is difficult.  I am not sure of the value of bitcoins sent is a good proxy, because of additional layers like colored coins and who is to say that a transaction for one person buying medical care has less value to the other than a millionaire pointlessly moving money between wallets?  Why not assume all transactions are equal?  The number of transactions may be the best proxy.

Therefore I would alter my “transaction fee targeting”, mentioned https://bitcointalksearch.org/topic/m.9208935 to be the following:

I propose the following rule to determine the number of transactions in a block limit, once the block reward is low
The number of transactions in a block limit would increase (or decrease), by X%, if total transaction fees in the last N blocks is Y Bitcoin or more (or less).  

For example, if in the last 100,000 blocks, the average transaction fee per block is greater than 1 BTC, then the system increases the maximum number of transactions allowed in a block.

Advantages of this methodology include:
•   The system ensures sufficient fees are paid to secure the network in a direct way, with minimal changes to the protocol
•   If 1 BTC per block was chosen, this would represent c0.25% of the market capitalization being spent on security a year
•   This algorithm would be relatively simple
•   The transaction per block limit is determined algorithmically from historic blockchain data and therefore there will be a high level of agreement and little scope for attack
•   It would be difficult and expensive to manipulate this data, especially if mining is competitive and decentralized
•   The limit would relate well to demand for Bitcoin usage and real demand based on transaction fees, not just volume

The tragedy of the commons relates to unregulated use of common resources.

I don’t think this is any way relevant. Mining resources are not under common ownership and there is no common right to use these resources. They are generally owned by private entities trying to make a commercial profit and you have no right to make them mine your transaction. Miners can choose what transactions they mine so the use of this resource is regulated by the miners.

Miners will simply set prices at what it is worth for them to mine and make a reasonable profit. With no block size limit they will be able to set the fee at which they can turn a profit at a lower level. (Gavin’s blog)

Maybe a small percentage of mining will be paid for by community organisations or charity (but this still has to be paid for somehow) and people who are willing to wait longer can move coins for free but if you want a quicker service you pay a fee. So maybe these community miners will mine huge blocks (and be at a disadvantage due to block propagation) but they will be mining everybody’s transactions. So the choice is a free transaction that is only mined by 5% of miners or the higher fee you pay the more miners try to mine it. You get a better service if you pay.

 There are valid arguments for block size limits, such as, spamming and blockchain growth but I don’t think tragedy of the commons is one of them.

 The real danger is tragedy of the anticommons.
(wikipedia)

As suggested previously a large wallet might team with a large (say 30%) mining pool and charge their wallet users fixed transaction fees and pay the miners out of band. The mining pool is contracted to refuse to mine anyone else’s transactions. Another competing wallet buys a large portion of the remaining hash power (say 25%) and now nobody has access to all of the hashing power for their transactions.

I couldn't resist peeking at the literature; the first hit on a google search for "experimental economics free rider" turns up this 1984 paper:

It's fine if miners will be funded out-of-band. But I think it will be difficult to do this while keeping the market decentralized and competitive.

My suggestion for keeping tx fees artificially high is to place a hardcoded cap on the total amount of coins transferred in each block.

I think tragedy of the commons is inevitable if no cap of any sort is placed on blocks. Hence my cap suggestion above.

Agreed.