Topic: Proposal: a fee driven dynamic maxblocksize (Read 828 times)

It's not like a solution of this kind is likely to be implemented any time soon, so you can relax. It would start to make any sense after the next block reward halving somewhere in 2017. By the time, we will probably have payment channels and layer 2 Bitcoin payment protocols that will let us enjoy free and instant payments.

https://twitter.com/jgarzik/status/595606257936957440

It's not about dice. There are so many use cases with bitcoin and micro transcations that's gets cut off by this idea. If I want to send $2 or $3 to pay back a friend for a cup of coffee, that is considered spam? Musicians like myself who want to sell a mp3 for 50 cents using a paywall is now spam. We are dealing with a free market and if you try to make it all bout the miners bottom line instead of the users, you will not have users. Usability is partly what gives bitcoin it's value, take that away and you take away the value.

Great idea, go spam your useless dice transactions on some other shitcoin's blockchain.

Sounds like a VISA/MASTERCARD/WESTERN UNION mentality, the user should not be the one burdened by the block size limit. Increase the blocksize, DO NOT INCREASE USER FEES. I should not have to pay more if I want to be sure my transaction gets confirmed. If it's going to cost me 0.01 to send a transaction, myself as well as the free market will migrate to another coin for transactions.

Why would any mines want to do this? What's in it for miners?

You few extra thoughts:
1) note an interesting property of this model: a hash power majority needs to give up all their fee rewards to artificially increase the MBS. On the contrary, a hash power majority can, at no cost, artificially decrease the MBS by inserting a low fee transaction into their blocks.
2) If the value of bitcoin increases, the value of fees will increase and put pressure on the users to go off chain and will push toward smaller blocks, like a sort of feedback loop.

Dear reader, please accept my apologies if you're fed up with this very popular topic.

The maximum blocksize (MBS) limit is the most controversial and challenging problem the Bitcoin community is facing today. Yet one of the most fascinating.

When a transaction is broadcasted to the network, the fee attached to it can be seen as an expression of the transaction's value and as a contribution to the network security.

I believe the scarce resources of the highly redundant and decentralized Bitcoin ledger should not be used by low value transactions that do not contribute to the network security: this cannot not be sustainable in the long term, neither for decentralization, neither for miner retribution.

This message suggests a way to push low value transactions towards off chain solutions while at the same time adjusting the MBS to accept new high value transactions: a fee driven dynamic MBS.

The main proposal is the following:

MBS[n+1] = f(fee*[n])

Where:
[n]: is the chain ranging from block number 2016n+1 to 2016(n+1) And

fee*[n]= Median[n](Min (fees inside a block))

Dishonest pools/miners could be tempted to add fake transactions (to themselves) with huge fees in order to artificially increase the MBS :
1) technically they would need to collude and obtain 50% of the hashrate in order the reach the median.
2) They would have to fill their blocks only with those fake transactions (else the formula will pick up the transaction with the minimum fee in their blocks to estimate fee*[n]) : depriving themselves from any transaction fees. Furthermore they would need to do this as long as they want to keep this artificial MBS (else the MBS would adjust back at [n+1]), which would not be sustainable for them, especially after the next block halving.
3) This strategy would be noticeable: miners would leave the pools behaving this way hence these pools would end up losing money and hashing power and gaining nothing.

And what about this f function ? I first though it would make sense making it somewhat linear, then playing around with WolframAlpha, a square root made me feel more comfortable. It could look like something:
1) Fees ranging from 0 to 0.001 btc. Here the MBS is expressed in MB
http://imgur.com/GBfNCAv
2) Fees ranging from 0 to 0.01 btc. Again MBS in MB.
http://imgur.com/SgCY7p2

We now have a system with a MBS that adjusts to fees, pushes low value transactions towards off-chain solutions, limites the usage of the scarce resources to what is really valuable and provides a long term solution to the miner subsidy halving issue (known has the tragedy of the commons).

However in the long term, we also need to take into consideration:
1) Software optimizations, hardware & bandwidth enhancements
2) Significant increase of bitcoin value that could act as a too strong force decreasing the fees expressed in btc and hence decreasing MBS drastically and crippling activity.
3) Arrival of layer 2 protocols that will likely bring more high value transactions on the blockchain.

The idea here could be to double the MBS every 4 years, similarly as bitcoin production is decreased every 4 years.

This doubling every 4 years would give a roadmap to bitcoin companies and to the public, while saving us time to test, tune and hopefully avoid any other hardforks in the future. At some point in the long run, a hard limit can always be enforced via a softfork.

So the MBS formula could end up like this.

MBS[n+1]=2^{p-1} x f(fee*[n])

Where {p} is similar to the reward periods defined as the chains ranging from blocks number 210000p+1 to 210000(p+1)
And where f is a somewhat slow growing function to be defined, square root or whatever
And [n] and fee*[n] defined earlier.