I just thought of something. The time it takes to generate a hash if proportional to the number of transactions you're hashing, right? So, it'll take twice as long (on average) to generate a block with 1000 transactions as one with 500. You're not going to waste precious hasing time on small fee transactions, they'll just decrease your hash/s for negligible gain.
Say for example, there are 999 transactions with 0.1 fee to process and one transaction with a 1BTC fee. It's more profitable to just process the one transaction and ignore the rest, because your hash/s will be 1000 times faster!
Now if you have 10 transactions with a 1BTC fee, your best off processing all 10 of them, because there's a small overhead in processing a hash. But, including an 11th transactions for 0.9BTC fee probably won't be worth it. 0.99BTC fee, maybe. It depends on the size of the overhead.
This implies that generators will only process the transactions with the highest fee! I'm still thinking through the implications of this. Ideas anyone?
Topic: What will keep transaction fees up? - page 4. (Read 15432 times)
[If there is a situation where there is a huge pile of transactions backing up, perhaps the ones with fees could get move to the front of the pack, so to say, but the rest would generally be cleared in subsequent blocks.
Such a priority ranking system is in the current release client.
I presume this has been used in the test network, but are there any blocks where that has been necessary in the regular client? I'm not asking somebody to deliberately force enough messages to be processed to do that, but more as a general question, is it something which has been done?
Yes, I realize that it is in the current release.
The maximum block size must be continuously adjusted to keep the transaction prices stable. The only way to change the maximum block size is through a lengthy political process of debate, decree, network fragmentation and majority agreement.
This is a bad idea. The generators will collude to keep the block size small; transactions scarce, gouging the market.
Some may try. Keep in mind that generators have no sustainable monopolies on generation, not even as a group. If the major generators collude to keep block sizes small amongst themselves; say by keeping their own max block sizes at 1 meg, but the regular users' clients all have a max block size limit of 3 megs, then the rising backlog of lower fee transactions will attract new players into generation. Maybe forcing the colluding generators to change, maybe not, but a natural price balance will be maintained. Perhaps the occasional blockchain split fight is neccessary.
It's not a tragedy of the commons because generators will have interest in seeing the network continue to function.
Just like the herders have an interest in having the common pasture continue to grow grass?No, there will be instititutions with a high value to protect. Costs of protection are a 'tax' of sorts, but they are unavoidable. They are not a tragedy of the commons scenario, each is still looking out for his own interests, and his interests benefit others. It's a postitive externality.
I think db has a point. If the block reward isn't profitable, that does look like a tragedy of the commons. It's true that if it happens the least efficient miners will give up, what will decrease the difficulty for the most efficient... but a lower difficulty is bad for the network...
Which is why major institutions will still be willing to contribute clock-cycles at or just below a break even point. Because there are more forms of economic motivation than just profit. I'm really suprised that so many who seem so well educated on economic issues can't wrap their head around this simple concept. If you have something valuable to protect, have you ever paid the rental fee on a safety deposit box? The cost of the box rental is tiny compared to the value of the object within, but that's not a tragedy of the commons! People do it all the time! It's a cost of security, not a resource access issue! The tragedy of the commons parable is a limited resource issue!
The maximum block size must be continuously adjusted to keep the transaction prices stable. The only way to change the maximum block size is through a lengthy political process of debate, decree, network fragmentation and majority agreement.
This is a bad idea. The generators will collude to keep the block size small; transactions scarce, gouging the market.
It's not a tragedy of the commons because generators will have interest in seeing the network continue to function.
Just like the herders have an interest in having the common pasture continue to grow grass?No, there will be instititutions with a high value to protect. Costs of protection are a 'tax' of sorts, but they are unavoidable. They are not a tragedy of the commons scenario, each is still looking out for his own interests, and his interests benefit others. It's a postitive externality.
I think db has a point. If the block reward isn't profitable, that does look like a tragedy of the commons. It's true that if it happens the least efficient miners will give up, what will decrease the difficulty for the most efficient... but a lower difficulty is bad for the network...
[If there is a situation where there is a huge pile of transactions backing up, perhaps the ones with fees could get move to the front of the pack, so to say, but the rest would generally be cleared in subsequent blocks.
Such a priority ranking system is in the current release client.
It's not a tragedy of the commons because generators will have interest in seeing the network continue to function.
Just like the herders have an interest in having the common pasture continue to grow grass?No, there will be instititutions with a high value to protect. Costs of protection are a 'tax' of sorts, but they are unavoidable. They are not a tragedy of the commons scenario, each is still looking out for his own interests, and his interests benefit others. It's a postitive externality.
It's not a tragedy of the commons because generators will have interest in seeing the network continue to function.
Just like the herders have an interest in having the common pasture continue to grow grass?It's not a TOC situation because of the fees, as blocks go unsolved, fees accumulate, increasing incentive to solve. People need not generate at a loss for bitcoin to work. Though maybe with some definition of 'loss' some people will anyway.
Blocks will always be solved. Sometimes way too easily.There are two cases. One is when all transactions fit in the blocks. Then there is a tragedy of the commons. Transaction fees drop towards zero and there is hardly any incentive to generate. This is the case now. Transaction fees are zero and the only reason people generate is coin creation.
The other case is when all transactions don't fit in the blocks. Then transactions will compete to get into the blocks using transaction fees. The maximum block size must be continuously adjusted to keep the transaction prices stable. The only way to change the maximum block size is through a lengthy political process of debate, decree, network fragmentation and majority agreement.
Correct me if I'm wrong here, but it is right now a very rare situation where blocks are even close to the maximum block size? In fact, on average most blocks don't even have transactions included in them at all. In other words, all they are doing at the moment is purely generating coins.
If there is a situation where there is a huge pile of transactions backing up, perhaps the ones with fees could get move to the front of the pack, so to say, but the rest would generally be cleared in subsequent blocks.
There certainly isn't anything stopping you from modifying your source code on Bitcoins and only accepting transactions with fees for at least blocks you are able to mine and create. Essentially, if you are going through the effort to generate a block, you ought to be paid for any transactions in that block, at least if you think that way. If enough people don't want to process transactions without getting paid, those without a fee simply won't get processed. It really is that simple.
For myself, I'd love to see this as a option in the User Interface itself where you could set the rules up in some way for how you would personally want to process transactions, and make it more of a market-based approach. There is room for multiple rules regarding how transactions are processed.
In a future with a successful Bitcoin, most generation would likely be performed at a net loss by persons or institutions with the most interest in Bitcoins security.
No! Thats a tragedy of the commons situation. It just doesn't work. If Bitcoin will have to rely on that it's doomed.It's not a tragedy of the commons because generators will have interest in seeing the network continue to function.
It's not a TOC situation because of the fees, as blocks go unsolved, fees accumulate, increasing incentive to solve. People need not generate at a loss for bitcoin to work. Though maybe with some definition of 'loss' some people will anyway.
Blocks will always be solved. Sometimes way too easily.There are two cases. One is when all transactions fit in the blocks. Then there is a tragedy of the commons. Transaction fees drop towards zero and there is hardly any incentive to generate. This is the case now. Transaction fees are zero and the only reason people generate is coin creation.
The other case is when all transactions don't fit in the blocks. Then transactions will compete to get into the blocks using transaction fees. The maximum block size must be continuously adjusted to keep the transaction prices stable. The only way to change the maximum block size is through a lengthy political process of debate, decree, network fragmentation and majority agreement.
In a future with a successful Bitcoin, most generation would likely be performed at a net loss by persons or institutions with the most interest in Bitcoins security.
No! Thats a tragedy of the commons situation. It just doesn't work. If Bitcoin will have to rely on that it's doomed.Hmm, I can't think my way out of this problem.
It's not a TOC situation because of the fees, as blocks go unsolved, fees accumulate, increasing incentive to solve. People need not generate at a loss for bitcoin to work. Though maybe with some definition of 'loss' some people will anyway.
In a future with a successful Bitcoin, most generation would likely be performed at a net loss by persons or institutions with the most interest in Bitcoins security.
No! Thats a tragedy of the commons situation. It just doesn't work. If Bitcoin will have to rely on that it's doomed.Hmm, I can't think my way out of this problem.
In a future with a successful Bitcoin, most generation would likely be performed at a net loss by persons or institutions with the most interest in Bitcoins security.
No! Thats a tragedy of the commons situation. It just doesn't work. If Bitcoin will have to rely on that it's doomed.
Something I realized that is slightly related is that in the future the time between blocks will become more regular. Currently the reward is the same no matter how long it has been since the last block. When fees make up most of the reward they will increase linearly and as the pot builds more and more generators will come online. Of course some will not bother turning off after a block is found, but those with high electricity costs or with something else to compute will switch on and off.
The cost of hashing does not increase from including another transaction in a block. A generator will always benefit from including a transaction no matter how small the fee. So the fees will approach zero (as, indeed, they are now) making block creation very unrewarding which will reduce the computing power providing Bitcoin its security to almost nothing.
Am I missing something?
Am I missing something?
Yes, the transaction fees and block reward are the 'seen' incentives for generation, but you are overlooking the 'unseen' incentives. If you were one of the very early generators of the system, and in another 2 years when the block reward steps down to 25 bitcoin each, how would you respond to the concern that difficulty (and therefore blockchain resistance to a brute force attack) would drop? If you had 10K coins (not unrealistic for some) and the market value were, say $5 apiece, would you sell all that you had knowing that the market value may crash and you might not get half of the net worth out of them, or would you buy and/or run a generator of your own even at a loss? If you have 50 bitcoins at $5 apiece, you probably wouldn't run a generator (unless you were one of these guys that has to heat their high latitude apartment with electric anyway, and therefore the cost of running a CPU/GPU at full tilt is negligible) but if you had a $50K net worth in Bitcoins you would have a strong personal incentive to protect that net worth. In a future with a successful Bitcoin, most generation would likely be performed at a net loss by persons or institutions with the most interest in Bitcoins security. After all, you might not think twice about $50 in your wallet on the nightstand with that one-night-stand, but what would you do if you had $10K in cash? Would you deposit that into a savings account at a bank with a $50K safe? If you do, you are contributing to the cost of that safe, even though your share may be so small as to ignore; but the bank still invests into it's own security at it's own loss.
Most transaction are free, but you can make it go faster by paying transaction fees.
Very nice explanation, Theymos. Can you comment on "max block size" in the future? Is it likely to stay the same for all time? If not how will it be increased?
satoshi has already commented on that subject.
Very nice explanation, Theymos. Can you comment on "max block size" in the future? Is it likely to stay the same for all time? If not how will it be increased?
It's a backward-incompatible change. Everyone needs to change at once or we'll have network fragmentation.
Probably the increase will work like this: after it is determined with great certainty that the network actually can handle bigger blocks, Satoshi will set the larger size limit to take effect at some block number. If an overwhelming number of people accept this change, the generators will also have to change if they want their coins to remain valuable.
It might also work in reverse, where almost all generators decide to reduce (or raise) the max block size. If clients want to have any real protection from double-spending, they also need to switch.
The limit needs to increase at some point if Bitcoin is to become mainstream. 1MB is not an awful lot of transactions, so not increasing it would raise fees to unreasonable levels.
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