Author: Peter Todd 2014-04-23 15:05:55
Published on: 2014-04-23T15:05:55+00:00
In an email thread, Jonathan Levin, a post-graduate economist, discusses his paper on the incentives of mining. He mentions that the marginal cost for miners is not from the private cost of validating the signature and including it in the list of transactions but rather the increased probability that the block will be orphaned as a result of slower propagation. Levin seeks to calculate the change in the curvature of the probability mass function that a block hears about my block in any given second as a function of the block size. He also mentions that there are increasing returns to higher shares of hashing power due to propagation delays, leading to possible centralization incentives. Peter Todd adds that mining on top of a block is the best thing to do because it prevents your block from ending up as an orphan. Mark Friedenbach suggests headers first where the block header and block contents are propagated around the network separately. This would solve the failure modes that headers-first has, but there could still be centralization incentives. They discuss the different scenarios for miners: 1) fees don't matter and miners aren't forced to validate; 2) fees do matter and miners aren't forced to validate; and 3) miners are forced to validate. The economic analysis shouldn't include unenforceable rules like miners must switch to a new block as soon as they receive and process the contents of the previous block.
Updated on: 2023-06-08T20:28:03.205972+00:00