Does this mean that block selection method gets locked-in?
You tell the receiver how the txs in the block were selected. However, it assumes priority size and fee per kb.
A block that doesn't use the standard transaction selection algorithm is at a disadvantage.
This could be a good thing, since it would mean more consistency between miners.
I guess if block size is greater than demand for space, then it isn't a big deal, since the default rule is "all known transactions".
Pretty much locked-in by consensus. And the conclusion in bold is important.
IBLT makes the Bitcoin protocol function more closely to how all its users expect it to work. Right now there are several thousand users who expect their transaction(s) to get confirmed in the next block, and thousands of nodes who have a very similar view of those transactions. Usually, miners are good citizens and include many of the pending transactions.
However, a block could be mined where all this consensus is ignored and the new block is full of transactions which the miner has "pulled out of his ass" (real-world business or not) with fees payable to himself, a scenario which makes the existing 1MB limit look like a safety-blanket. Apart from providing PoW security to older blocks, the new block is unhelpful, and many of them together is an attack.
Transactions from the consensus pool are in an IBLT but they are canonically ordered and XOR'd in an offset manner such that a small percentage do not have to be known in advance, but the rest do, because that is the only way to peel them off. This goes way beyond normal data compression because the receivers know most of the contents in advance, hence O(1) block propagation occurs, or at worst O(
logn).
The block propagation delay cost of including all transactions will be low, so the incentive improves for miners to rake in as many fees as possible, getting a high percentage of transactions confirmed within the 10 minute average.
A rogue miner gaming IBLT by withholding a new one for a few seconds, and broadcasting his secret/spam transactions first, could be frustrated by requiring 20% of IBLT transactions to be earlier than the mean age of the new block and the previous one.