Topic: Tokenization of the Blockchain Space (Market for transaction fees/block space) (Read 142 times)

You're mistaken.  Firstly, most Bitcoin software consistently presents the recommended transaction fee unless it's offline without internet access.  But, let's set that aside.  There's no fixed "vbyte cost".  When the mempool is empty, vbytes hold no value.  They only become valuable if the total unconfirmed transactions exceed the candidate block's storage capacity.  Even then, it fluctuates depending on competition.

Bitcoin is free market money.  Free market decides EVERYTHING.  

As additional form of income, many pool already offer their service though. For example, paid acceleration service and including non-standard TX (such as Mara Slipstream and Luxor OrdinalHub which let you create Ordinal TX with size more than 100 vKB).

This could be interesting not as a replacement for the existing mechanism, but as an addition to it. However, participation in the token market should not be mandatory.

Here's how I see it. If a miner wants to attract additional funding, they sell space in future blocks. There could be demand for this. For example, if I know I'm planning transactions on May 1st, I might be interested in buying space in a block today at current prices, assuming it will be mined on May 1st. It's like buying a futures contract for inclusion in a block.

These futures contracts don't necessarily have to be bought and sold with bitcoins. If a miner needs funding in dollars, and I need to fix the fee size in dollars, we can make a deal in dollars.

The first block mined by the miner on the expiration day of such futures contracts must necessarily include transactions created by the holders of the futures contracts.

If on the expiration day the miner does not mine any blocks, they are obliged to return the money to the holders of the futures contracts with a small premium.

If a futures contract holder does not sign a transaction before the start of the day when the futures contract expires, the right to a place in the block is lost. However, a holder who changes their mind can sell it on the open market.

In my opinion, it would be pretty cool.

1. Average people usually just use fee suggestion shown by wallet software they use.
2. Advance user can use website such as https://jochen-hoenicke.de/queue/ to get idea how much fee rate they should use.
3. Even in early days, there are some software which let you decide TX fee.

You still are over complicating a simple process.

Bitcoin does not need another mempool, and you're creating problems out of thin air which you expect this to solve, but it will rather create more problems.

I highly doubt Bitcoin will ever be associated with 'tokens.'

We already have fee that does exactly this. People are competing in the "fee market" and are "buying" the "bytes" inside each block by paying a fee in each of their transactions. It is all happening in a perfectly natural way (if we ignore the spam attacks), there is no need for another market that smells like centralization that could also inflate the fees as market manipulators can easily "pump and dump" the said "token"!

1. What this solves/changes somewhat is:

It shows how the market for transaction costs is. Currently this is hidden from the bitcoin software and the user has no idea what to put into the transaction fee, so this seemse to be a serious short coming in bitcoin, it always was.

I send 1/100.000.000 of a bitcoin in the past and it charged me 0.0005 transaction costs, in 2011 or something. I might be the only one to ever have send 0.00000001 bitcoin over the internet to test micro transactions !

Back then it wasn't even possible to set the transaction fee, possible a hidden "feature" of bitcoin, anyway back to the topic and a somewhat worked out example:

2. Market place in action:

MinerA "sells" 10 million tokens for block X (not really sold, just an offer to sell).
MinerB "sells" 10 million tokens for block X could be at price-1 for miner A, price doesn't really matter in this example.
MinerC "sells" 10 million tokens for block X at varies price points.

Now they all race to solve the block.

Only the miner that wins gets to actually "sell" the tokens. Let's say it's MinerA, MinerA gets the btc of all the tokens.
MinerB gets nothing.
MinerC gets nothing.

All tokens are now return to the system.

Not that difficult really.

It's basically an order book, where the same item is being sold multiple times, but only the winner of the mining block actually gets to keep the BTC as it's recorded on the block itself.

Concerning the tokens, quite simple to implement, just another mempool.

Only reason of concern is if each individual token would be sold, which seems interesting, 10.000.000 packets per 10 minutes.

10.000 packets per minute.

166 packets per second.

Asumming 100 bytes per packet would be: 16600 bytes per second. Peanuts for todays network, though some of that will have to be copied to other systems.

So I do think this idea is feasible among miners/bitcoin clients that want this functionality.

Coolest of all it could be optional: either opt in to receiving market data or go blind.

When blind... it will be as if an order was placed anyway...

This is definetly doable !

I don't have time to work it all out, this posting is just as an inspiration for other folks to work this out further, I am pretty sure this will eventually come.

What it also allows is:

3. Assurance that a transaction can be deposited on a block, or at least better assurance, especially if all miners bought from, assuming there is no hidden miner.

It's basically like selling futures/options/etc, but with some twists modified for blockchain/mining.

And finally the biggest problem it solves:

4. A fair transaction cost price for users.

Last time I observed transaction costs, they were all over the place, seems like people don't know what they are doing.

I ask some people if they know what a bit or byte is, or what a kilobyte is, none of them really knew...

So the current bitcoin transaction cost system is alien to many people.

At least with an automated market exchange system people can buy transaction space against a "market order", whatever the current transaction price is according to the order book.

If decided to be too complex, an alternative to creating more fair transaction costs would be:

Some kind of moving average and some kind of minimum/maximum values, especially a maximum value if it's exceeded by the user then the excess is depositted back to the user.

Like going to the bakery and handing 500 dollar for "system transaction costs", while it only costs 15 cents, bakery should not keep 499.85 cents, that be ridicilous...

You forgot a very important part, of what benefit will this be to the Bitcoin network? Your suggestion overcomplicates a very simple system as many crypto projects tend to do.

There are also so many flaws in this, starting with the idea of each miner selling vbytes on their candidate block, only one miner gets to actually confirm a block each ~10 minutes, the other miners do not have anything to sell, and users already pay for the space, hence the phrase; sats/vbyte. That's all the tokenization we need.

The idea:

Every byte or "vbyte" on the block is "tokenized". Meaning it can be sold and bought on a build-in "market" exchange in the bitcoin client.

All miners are obligated to sell these tokens on the market place and honor these tokens on their blockchain are they to receive their value.
All users of bitcoin that want to send transactions must first purchase these tokens on the market place, this can be automated by "market" order.

There would be a "order book" and some nice charts so people can see what a transaction will cost.

The bitcoin software should be changed in two ways anyway:

1. Total transaction cost estimation.
2. Most likely price for as "vbyte".

How this could be implemented is as follows:

The bitcoin system has a limited ammount of tokens available, which float in something which resembles a mempool, but in this case a "token pool".

For example 60 minutes could be chosen to "tokenize". With a blocksize of 10 megabyte per 10 minutes, that could mean roughly 60 million tokens are available.

Each miner can specify how many tokens and at what price it wants to sell these tokens for.

Each token has a unique number ranging from 1 to 10 million or 1 to 60 million.

Each token has a unique value with it/attached to it, the price that was payed for it.

This is the ammount of BTC that will be rewarded once the token is mined.

To mine the token the block of the blockchain must honor the token.

The bitcoin system checks if the token number on the blockchain matches the token that was sold and bought and so forth.

This is all virtual/in memory, no trace will remain of it.

Those other miners that agree with it, will accept the block as valid, those that disagree will not accept the block as valid.

Once the block has been accepted as valid, the associated tokens are re-injected into the token pool and are up for grabs/sale and so forth.


Whenever the bitcoin system signals that "tokens" have been injected into the tokenpool, miners can start "selling" them for a certain price, per token id.

Which ever miner offers the lowest price wins that particular token id, and the system will show that particular token id now has an "asking price" of that ammount.

Same happens on the buy side...

Clients can start bidding on the buy price of token ids. "Bid price". Which ever client offers the highest "bid price" is associated with that token id.

Once the ask price and the bid price match each other the "token" is sold/transacted: meaning:

The client now "owns" this token and has a privilege/option to utilize the token for the next 60 minutes, but does not have too.

Perhaps a special order book must be created/invented where a token can have different prices.

Each miner maintains certain price per token.

The client can select which miner or miners it wants to buy tokens from/reserve space on their block in case it ends up on the blockchain.

The bitcoin system should also shown when they last mined a blocked and how many blocks they have mined in the last week or so to give some indications if these miners are reliable/serious or not. (Could also be hours, months/years etc).

A client system can now purchase blockchain space on multiple miners, ensuring that it has a good chance to be mined on one of their blocks, perhaps a different price points.

Which ever miner wins the block cashes in on the offer price per token that was set by this miner.

The client transaction is payed for, the other tokens that are now worth/not relevant are returned to the client, this is a local accounting tick so the bitcoin client has return the funds.

An advanced client could calculate a "maximum transaction cost", simply taken the miner which asks the most, so that the client has some idea what the transaction cost will be in the worst case scenerio.

An average could also be calculated to give some sense of market sentiment/average prices, perhaps even a minimum...

(Interrupted by phone call)

Anyway... I must go now, take care ! =D

(Also some nice charts how it all fluctuates ! )

* Update * Now I have a little bit more time and I want to also add an important idea which can further solve some problems:

The idea is that each token has a number and the tokens are therefore ordered.

The miner is required to select token number 0, 1, ,2 ,3 ,4 first if they were sold, 5 was not sold, 6 was sold and so forth.

This orders the transaction bytes, and also other transactions.

This can solve a number of problems like:

Front running.

Furthermore it also makes the lowest token numbers most valuable and can give the buyer even more garantuee that it's tokens will be used to store data on the blockchain first.

It may also prevent "MEV" "maximum extracted value" however it is replaced with a "proper" market place for blockchain space tokens and might net them even more profit.

With this bitcoin is no longer "blind" when it comes to transaction costs .

It might also help a little bit with "bribery"... especially if the tokens are ordered over a longer period of time...

Transaction with the lowest token must be prioritized or the block will be deemed invalid/not acceptable.

So re-ordering blocks by winning the race is no longer possible for the next 60 minutes or so...

Certain tokens must be injected into the block.

So this dictates which tokens must be used, miners are no longer free to choose at random or what serves their best interest which is some form of money/extracted value.

This would bolster/harden bitcoin against manipulation by miners.

This is a big win for bitcoin and all other crypto systems that work out and implement this idea.

And it gives more trust/believe in this better designed system... instead of blind/random... now there is a proper market with certain garantuees.