Author: Luzius Meisser 2016-01-26 17:42:25
Published on: 2016-01-26T17:42:25+00:00
The author proposes to smooth the payout of fees across blocks, incentivizing decentralization and supporting the establishment of a fee market. Currently, an individual miner receives the full amount of fees collected in a block, leading to a classic externality where the marginal benefit of including an additional transaction into a block is much higher for the miner than the global marginal cost incurred by that transaction. By only paying out a fraction of collected fees and adding the remaining amount to the next block's fees, the payout to the miner becomes a rolling average of collected fees from current and past blocks. This aligns the incentives of individual miners with those of the whole network, reducing the marginal benefit of including an additional transaction into a block by an order of magnitude. This proposal also reduces the disadvantage of mining with a slow connection and is a step towards a free fee market. In an ideal market, prices form where supply and demand meet, with fees asymptotically approaching the marginal costs of a transaction. Currently, supply is capped and only demand can adjust. By smoothing fees, the marginal benefit of including an additional transaction is better aligned with the global marginal cost incurred by that transaction. This is essential if miners ever consider deciding on supply. Additionally, this proposal reduces the incentive to form mining pools as solo-mining yields a very volatile income stream due to the random nature of mining, leading to the formation of pools. Fee smoothing reduces that volatility and pressure.However, touching anything related to fee distribution is a political minefield, and this proposal probably requires a hard fork. Its technical feasibility was only superficially verified. The author plans to specify/implement the idea more formally if it is received well.
Updated on: 2023-06-11T03:21:58.602648+00:00