Topic: Necessary protocol improvement; dissent on future mining configuration - page 2. (Read 6359 times)

Haha... you want something from people who know game theory, but by game theory rules, they shouldn't play your game. Say, my theory is correct on both accounts. I now need another person applying game theory to review my statement, but then I'm getting the money. So, being proper in game theory, he won't do it. (Okay, maybe you'll find reasonable game theory experts, ahaha~)

My try on an answer: remember the thread I linked in the beginning of this thread? There's a lot of discussion about the topic there. It's a little chaotic at first, but I think the main dynamics are analyzed there. Sorry about it not being very formal, but this way more people can read it. Here's a summary of the conclusion I came to, and use as an assumption in the thread we're in now:

• The fee system as it stands is dominated by transaction demand over hard-coded transaction supply, unless a miner cartel can force prices for speedy transactions. But that is an external factor, it depends on too many things outside Bitcoin to be included in a game theory analysis. The point is: we cannot rely on the cartel, as nobody supplied a reason why it is likely to appear. (Also, the cartel is a danger in itself, but that's beside the point here.)
• No block limit and no enforced transaction prices: just write a formal version of the thread linked in this thread's first post. frankly, prices converge to verification cost, which is close to zero. That's it, plus again the cartel thing again, which encounters the same problem as in the other model.

I don't really want to unfold this here, that's why I try to keep that discussion in the other thread. I know that's annoying to those who don't agree on that yet, but it's better if the discussion isn't stopped at that point until everyone is convinced.

(Sorry @double post, not editing more in case people subscribed by mail. This frequent editing is a bad habit of mine.)

Your argument relies on this statement, but I have not seen it proven. I did not manage to construct a substantial link between fees and the cost to attack the network on the current code. The problem is that your argument needs further assumptions on how much Bitcoins are moved, and how many rich people exist who would find doing an attack worthwhile. A simple block size limit or partially enforced transaction fee is linked to the quotient "BTC value in attacker's hand / difficulty" in a very nontrivial way.


Edit: I don't see your attacks against the Web of Trust problematic in a real-world situation. Let me take them on one-by-one.

• Node identity spoofing is the same as Bitcoin target address spoofing. If this is possible, Bitcoin is already broken.
• 'scorched earth' only works as long as the Web of Trust is small and holds only few connections. Otherwise, the risk falls exponentially with the number of connections. Say the chance of a node following the single, world-wide long-planned attack is P < 0.5, and N are connected. Well, do Bernoulli, or Gauß approximation, whatever, it's exponential. Fails hard if the attacker has less than half the network.
• We can keep a certain amount of "proof of work" up, to construct a starting point limiting the amount of enemy nodes. Then use any reasonable probability for a node planning to turn evil in the future, and from what I know about math, it'll turn out we're fine as long as the remaining amount of miners or connections aren't absurdly small. And connections are VERY cheap.

I see no problem. Your attacks can apparently be thwarted neatly.

If I was a miner, I would be planing to make my own rules... The question is if the other miners will accept my blocks or not.  It comes down to at some point the miners adjusting their rules for maximum profit, while not getting rejected by the rest of the network.

What we need is a proper game theory analysis of Bitcoin fees, the rules that miners can set, and the risk of getting your block rejected.

If Bitcoin becomes the dominant monetary system, then very very low fees might still be very safe.  We just don't know yet.

Edit:
I put 10 BTC down for a game theory analysis of the Bitcoin fee system as it stands v.s. a system where there is no 'fixed' block limit.  Only what the other miners choose to accept.  Must be peer reviewed.

It's true that if users voluntarily paid 1/100 of the typical fees paid in todays systems, we'd have no problem. If they didn't and we lost this gift of bitcoin, it would be truly a tragedy of the commons.

I don't think it's too late to make changes. If the "change" is clearly awesome and infallible, then I don't see anyone currently mining objecting to the change.

The problem with putting some protocol based restriction on fees is that there is no way to algorithmically determine the value of a bitcoin and the restriction must be a function of value.

If yield from fees is too high, we'll have a ridiculous number of miners and it will cost too much. Too low, we have a weak network. But how much many miners is the right amount? This is the kind of equilibrium which can only be achieved by market forces. Any protocol change will need to introduce market forces which balance the number of miners.

We need more debate on this.

But not very flexible. The required fee level will likely vary greatly over time in response to many unpredictable events.

Hmmm... I see, inclusion costs are independent of difficulty and will converge to zero with time. I confess that I didn't really read all of the relevant threads.

This is indeed a mathematical/game theory problem. There are too many free variables that need to be tied together. This is a deep problem.

I'll put more thought into this before posting again.

There already is, but it's sort of a sliding scale.  Free transactions can only be so large individually, and take up so much of the blockspace in total.  Beyond that there is a hardcoded fee schedule, the more transactions in a given block, the higher the transaction fee included must be in order to qualify to be added to that block.  This fee schedule is enforced by the network because if a block's size is over any of those 'soft' limits, there must be at least one transaction within it that pays at least the minimum for that tier, or it's rejected as an invalid block.  So even without the hard blocksize limit, there are mechanisms in play to strongly encourage senders to add a transaction fee if they desire their transaction to be processed quickly.  It is this mechanism that has delayed free transactions in the past, not the hard blocksize limit.  We have never come anywhere near the blocksize limit.
There could be, but I doubt that either of us can come up with one.  If someone does come up with one that is significantly better than the proof-of-work system of Bitcoin, a better cryptocurrency will come into being.
The whole point of the proof-of-work system is that any direct attack on the system is expensive relative to the expected gain, so that crime doesn't pay.  Perhaps this still leaves Bitcoin open to an attack intended to outright destroy it by some malicious entity with vast resources, but even though I can acknowledge that such an attack is possible; it's far from cetain that it would be successful.  There are simply too many unknowns.  In the same vein, China could have long ago destroyed the American monetary system by the simple act of dumping US currency reserves and US treasury bonds upon the market, for they have more of both than the whole of the US public does.  This would probably cause massive inflation of the US FRN, if the US government does nothing, but this is not a certainty either; and would be expensive for the Chinese economy as well.

Attacks upon a WoT system are more subtle, and potentially much less costly.  One is simply the act of 'node identity spoofing', faking the identity of a trusted node.  Another is the 'scorched earth' event, wherein a node develops honest trust, and then turns bad once the opprotunity is presented.  You can make both of these attacks difficult technically, but you cannot make them impossible, nor particularly expensive since I do not need any great resources for either attack.  Other attacks requiring coordination are possible as well.  This does not include the basic network attacks upon the hosting servers themselves, the security of which is importan in a web of trust.  Bitcoin's collective security is not dependent upon the level of security of any given node.

I suppose we can address that issue when it comes up.  If Bitcoin is still the cryptocurrency of the Internet in 2130, feel free to bring it up again.

If you want a default fee, better hard-code it into the protocol, that's at least reliable.

But this thread still has the open question: isn't there a much better solution, that can work on the very small power required to check transactions?

Could you please explain the problem instead of... writing that kind of message? Also, please estimate damage -- the current solution also subdues to attacks, the question is how likely and expensive the attack is. If fees are not held up by volunteers, it will be of the order of confirming all transactions. That sounds small to me, one might call it "broken by design", so if the WoT system breaks under less problematic conditions, the trade-off might be worth it.

Sure, db is right, voluntary micro-donations can make quite something on a big network. But those could be used for a different good purpose, so we better make sure the enormous waste of processing power is necessary. Also, there might still exist an even bigger supercomputer, and Bitcoin gets vulnerable again. We have no viable model of how much fees people pay voluntarily.

I see how we need large-scale mining now, for fair initial BTC distribution. But in the future? There exists no other solution than trying to be the world's #1? A very bold claim, and a destructive one if it is false.

Not quite. The power will be determined by the default fee settings in peoples payment applications. (Provided those fees are small enough it's not worth the effort to change the setting.) The default fees will be set by the application developers to a level they feel reasonable; likely something that makes Bitcoin big enough to withstand attacks but not big enough to be very wasteful.

I'm not ready to bet on it yet, but think it seems promising.

db:
this will give some arbitrary network size and power.

Want to make a bet of the kind "the biggest supercomputer in the world in 10 years will be Bitcoin and not run on cloud clusters that might suddenly have orders changed" as your statement? That is very risky. Many computation clouds are coming up, the net is growing huge.

asdf:
aren't inclusion costs independent of difficulty? Are you saying, Moore's Law will stop AND people won't build dedicated hardware AND pooled mining won't dump the problem into oblivion AND processing power will not be spread to bigger parts of the population?

You call the issue of a disturbingly low difficulty equilibrium "resolved" when the global cost of a transaction approximates a single verification? Sorry, are you serious, or have I misunderstood something about the verification cost scaling? Also, the discussion at hand would fit better in the other thread.

It's too late to do that kind of changes. We'll just have to go along and hope it will be possible to raise enough donations. How much enough is no one knows.

If Bitcoin grows to the size of Paypal there will be about a million dollars worth moved with each block. If users can be convinced to pay just a 0.1% fee on average (and they have to pay some fee, however small) that's more than ten times the current block reward. The current block reward has already made Bitcoin the world's biggest computing project.

Hopefully most people won't care if they pay 0.1% or 0.0001% when they buy a pair of shoes. Particularly if 0.1% labels you a Good Guy and 0.0001% takes an active effort and makes you a Freeriding Bastard.

There will be no block size limit in the future. It's only there to stop spammers at the moment and will be lifted when the network it bigger.

Did you read Gavins post (#4) in the thread you linked? I believe he resolved the issue.

Transactions aren't free for a miner to include. If people pay no fees, they probably won't get included at all. If miners charge too much, they leave a gap in the market for cheaper fees, new miners will enter the market and accept those slightly-less-profitable-transactions bringing fees back down. This will crowd out less efficient miners.

"whole system will optimize itself to be wonderfully efficient." - Gavin

I can't prove it but if all nodes help out + hero nodes and bank super nodes etc  I don't think botnets or anyone  can compete when bitcoin becomes an established currency.

I do agree this is the same as building the worlds biggest supercomputer  and wasting lots of resources.

Maybe there is a way to utilize the collective majority in a different way than proof of work.

The problem is proving this new methods safety vs the very plausible "you can't cheat on the crypto exam" concept we have now