Author: Anthony Towns 2015-08-07 02:16:50
Published on: 2015-08-07T02:16:50+00:00
In August 2015, Wes Green proposed a game theory-based solution to Bitcoin's block size issue. Green suggested allowing miners to double the block size at any time but penalizing them by taking a percentage increase in the rewards from both fees and normal rewards. The remaining amount would be rewarded to the next miner that found a block. Green’s proposal left algorithm programming up to the miner. According to one response to Green’s proposal, the equilibrium for the game would be to keep the same block size. The response explained that if there were a significant backlog of fee-paying transactions, where the fee per MB was roughly stable, miners could either receive 25 + f BTC or increase the block size by 1+p MB and earn (25+f+pf) * (1-p). The response also suggested that having more reasonable scaling parameters, a and c, would make it easier to produce a fee market for Bitcoin transactions. The average cost per byte of a transaction would be just “a(B-c).” To provide real numbers for the system, the response made some assumptions on fee levels. For example, with 1MB blocks, free transactions and no fees would be expected. With 8MB blocks and people paying 0.1 mBTC/kB in fees, 0.8 BTC in fees per block would be okay. The response concluded that miners would want to choose a and c such that the market for block space cleared at a price determined by their costs. If they set a too high or c too low, then they may be unable to accept transactions offering $x/byte and lose out. At the moment, the response suggested that both problems exist as c is too low, meaning some transactions get dropped, and a is too high, meaning fees are too low to pay for the effort of bigger blocks.
Updated on: 2023-05-19T21:21:27.988346+00:00