Author: Peter R 2015-08-30 20:08:58
Published on: 2015-08-30T20:08:58+00:00
In a recent email exchange, Peter discusses the idea that miners with a larger percentage of the hash rate have a profitability advantage. This can be seen as a centralizing factor due to the economies of scale. However, this is outside the scope of the result that an individual miner's profit per block is always maximized at a finite block size Q* if Shannon Entropy about each transaction is communicated during the block solution announcement. This is important as it explains how a minimum fee density exists and shows how miners cannot create spam blocks for "no cost." The possibility of a miner's marginal profit per unit of hash decreasing with increasing hashrate in some parametric regime is also discussed. This contradicts the assumption that an optimal hashrate exists beyond which the revenue per unit of hash v' h. The theorem implies that the marginal profit curve is a monotonically increasing function of miner hashrate. This idea disproves any and all conclusions made by Peter's work and suggests that centralization pressures will always be present.
Updated on: 2023-06-10T18:11:26.485644+00:00