Published on: 2016-01-28T20:16:41+00:00
The ongoing debate around Bitcoin block size has sparked discussions among developers about proposed solutions. One developer, Warren Togami Jr., argues against a proposal like BIP100, which allows miners to vote on the block size, stating that it does not align with the marginal cost of the entire network. Instead, he suggests a flex cap mechanism that allows for block size to grow with actual demand and be based on the actual costs of miners. This mechanism can either ensure supply is based on the actual costs of miners or replace the current constant cap with a centrally planned supply curve. Togami believes the former option would lead to a competitive equilibrium with free market prices.Luzius Meisser proposes an idea where only 10% of the collected fees in a block are paid out to the miner, with the remaining 90% added to the collected fees of the next block. This creates a rolling average of collected fees from current and past blocks. However, Togami argues against mandatory sharing, as miners could take payment out-of-band and confirm transactions with little or no visible fees in the block. Meisser also suggests a flex cap solution where miners can buy additional space for an exponentially increasing fee, with the price subtracted from the collected fees and added to the reward of the next block. The amount spent by miners on additional space allows for the calculation of their marginal costs per transaction. Every 1000 blocks, the basic cap is adjusted based on whether the average fees per KB were above or below the global cost estimate.Togami suggests allowing miners to vote on block size, but warns that this could lead to a cartel among miners charging monopoly prices instead of competitive ones. He argues that the transaction fees under BIP100 would be higher than those under a flex cap mechanism based on total marginal costs of miners. He believes a holistic analysis is necessary to understand the benefits of running a full node, and increasing block sizes can make it more attractive to run a full node depending on the circumstances.In an email exchange between Luzius Meisser and Warren, the two discuss the viability of the Flex Cap approach to block size scaling in Bitcoin. Meisser agrees with the approach but emphasizes that it should not rely on significant block subsidies for long-term sustainability. Warren proposes an alternative variant of the approach, allowing miners to pay with a higher difficulty target instead of deferring subsidy to later blocks. The discussion then shifts to the suboptimality of proposals like BIP100, where the block size is subject to a vote by miners. Warren argues that this type of vote only aligns with the miner's marginal cost, rather than the marginal cost to the entire network. He believes the Flex Cap approach is superior because it has an actual cost associated with it and allows block size to grow with actual demand.The proposal of only paying out 10% of collected fees to the miner who mined the block and adding the remaining 90% to the next block's fees is debated. Concerns are raised about miners taking payment out-of-band and creating rules for transactions included in a block. The ongoing research on the Flex Cap approach could provide a viable solution to aligning miner's supply incentives with global marginal costs. Under this approach, block size can burst higher on a per-block basis if the miner is willing to defer a portion of the current block subsidy to later blocks. The proposed flex cap scheme involves miners buying additional space at an exponentially increasing fee, with the price subtracted from collected fees and added to the reward of the next block. The basic cap is adjusted every 1000 blocks based on average fees per KB compared to the global cost estimate.Another proposal to smooth the payout of fees across blocks is discussed among members of the bitcoin-dev community. The idea suggests paying out only 10% of collected fees in a block to the miner and adding the remaining 90% to the collected fees of the next block, creating a rolling average of fees. This proposal aims to reduce the marginal benefit of including additional transactions in a block, aligning incentives of individual miners with the whole network and reducing the disadvantage of mining with a slow connection. However, concerns are raised about increased orphan risk, reduced rewards, and potential incentive problems such as mining empty blocks to minimize the chance of losing fees from previous blocks. One member suggests smoothing fees between the current and subsequent 5 blocks to reduce the incentive for replacing the current tip and conducting out-of-band payments. The Flex Cap approach is also mentioned as a way to align miner's supply incentives with global marginal costs.The author proposes to smooth the payout of fees across blocks, incentivizing decentralization and supporting the establishment of a fee market. This proposal reduces the marginal benefit of including additional transactions in a block, aligns incentives of miners with the whole network, and reduces the disadvantage of mining with a slow connection. It is a step towards a free fee market where prices approach the marginal costs of transactions.
Updated on: 2023-08-01T17:39:25.726712+00:00