Author: Peter R 2015-08-07 18:36:32
Published on: 2015-08-07T18:36:32+00:00
The article discusses the logic behind transaction fees in Bitcoin network, and how to decide what fee to put on a transaction. The author suggests that if you are willing to wait for the rare occurrence of six blocks being found in ten minutes, you can submit your transaction with a low fee and it will get confirmed as all the higher-fee transactions would have been confirmed in the first five blocks. However, the minimum fee density for inclusion in a block is greater when demand for space within a block is elevated, which happens when the network has not found a block for a while. Lower-fee paying transactions will have to wait for the network lulls where several blocks were found quickly in a row. The paper "feemarket.pdf" shows that this condition will always be satisfied as long as the block space supply curve is a monotonically-increasing function of the block size. This curve will satisfy this condition provided the propagation time for block solutions grows faster than log Q where Q is the size of the block. Assuming that block solutions are propagated across physical channels, and that the quantity of pure information communicated per solution is proportional to the amount of information contained within the block, then the communication time will always grow asymptotically like O(Q) as per the Shannon-Hartely theorem, and the fee market will be healthy.
Updated on: 2023-06-10T18:26:09.134876+00:00