Published on: 2017-12-02T03:55:22+00:00
A proposal has been made on the Bitcoin-dev mailing list to maximize total transaction fees and hash power. The proposal suggests using a marginal pricing system without a block size limit. Each transaction would have a transaction weight based on the fee paid and time waiting in the pool. A higher fee would increase the likelihood of a transaction being included in the current block. The dynamic block size limit would be regulated by profit motive, and all fees would be fair.William Morriss proposed the idea of Marginal Pricing in a Bitcoin Improvement Proposal (BIP) to address challenges in the current transaction market. The proposal aims to reduce pending transaction time, individual transaction fees, and increase total transaction fees. It suggests miners implicitly choose the market sat/byte rate with the cheapest-fee transaction included in their block, refunding excess fees. The block size limit would be removed to allow for a dynamic limit regulated by profit motive. However, there are challenges in implementing this proposal, including the need for validators to agree on the maximum block size and the risk of miners cheating by including extra transactions.The current fee system used in Bitcoin, Generalized first-price auction, may not be maximizing miners' fees. A two-part pricing scheme with a fixed fee per transaction and variable fee per byte could deter spamming and capture revenue from users with higher willingness to pay. While Vickrey–Clarke–Groves auction elicits truthful bids from bidders, it may not maximize miners' fees as much as other systems. The choice of fee design will not impact miners' fees unless the outcomes of the auction change. Switching to a marginal price bidding system could supersede the block size limit and change the outcome of the auction.An email thread on the Bitcoin-dev mailing list discussed a proposal to redesign Bitcoin's fee market. The proposal suggested changing the fee structure but not removing the block size limit. Out-of-band payments were a concern, but it was argued that miners would not have incentives to mine only out-of-band transactions. Bitcoin is neutral on how miners are paid, and on-chain fee payment has benefits such as preserving anonymity. There is no evidence of centralization pressure with marginal fees.The discussion also touched on the topic of Out of Band (OOB) fees in Bitcoin. The system disincentivizes both miners and users from preferring OOB fees. Competent wallet software can draft transactions paying OOB and min fee at equivalent rates. Miners would construct blocks that maximize their revenue. The use of MINFEE is not an equilibrium. Variance in fee willingness could result in variance in network capacity. However, rich uncle bill wasting money with high fees would handicap the network. Super-rational behavior could lead to collusion among miners to permit high fee-rate transactions every other block.The conversation among members of the bitcoin-dev mailing list discussed a proposal to change the fee structure in order to reduce the cost of running a node. Concerns were raised about miners spamming the network for free, which could increase the cost of running a node. A previous article proposed redesigning Bitcoin's fee market, but it broke down due to concerns about out-of-band payments. The author argues that the system disincentivizes out-of-band tx fees, and there is no more centralization pressure with marginal fees than before.The email thread also addressed the possibility of using alternative auction systems in Bitcoin. Currently, Bitcoin uses a Generalized first-price auction, but alternative approaches such as Generalized second-price or Vickrey-Clarke-Groves auctions were considered. However, the choice of fee design will not impact miners' fees unless the outcomes of the auction change. Changing the bidding system to the marginal price would allow for a superseding of the block size limit and change the outcome of the auction.The proposal aims to maximize total transaction fees, reduce pending transaction time, and lower individual transaction fees. It suggests accepting zero fees natively in the protocol and instead accepting actual fees out-of-band or via OP_TRUE outputs. Miners would implicitly choose the market sat/byte rate with the cheapest-fee transaction included in their block, and excess transaction fees would be refunded to the inputs. This dynamic block size limit regulated by profit motive would maximize transaction fees for every block.Overall, the discussion revolves around proposals to redesign Bitcoin's fee market, maximize total transaction fees, reduce pending transaction time, and lower individual transaction fees. Various approaches, such as marginal pricing and alternative auction systems, have been considered. Challenges such as validators agreeing on maximum block size and miners cheating by including extra transactions need to be addressed.The proposal in this context is to remove the block size limit in order to address the downsides associated with a fixed block size. These downsides include unpredictable transaction settlement time, variable transaction fees depending on network congestion, and frequent overpay. By eliminating the block size limit, miners would be able to choose the market sat/byte rate with the cheapest-fee transaction included in their block.
Updated on: 2023-08-01T22:11:38.305271+00:00