Author: Jared Lee Richardson 2017-03-30 16:44:21
Published on: 2017-03-30T16:44:21+00:00
The author proposes a true fee-market where miners can decide to make a block smaller to get people to pay more fees. The size of the block itself should be set based on the amount of fees being paid to miners to make a block. A formula is provided to estimate the "sufficient" value of miner fees needed to maintain economic protection against attackers. This "sufficient" value can be estimated by considering a potential attacker seeking to profit from short-selling Bitcoin after causing a panic crash. If an attacker can earn more profit from shorting Bitcoin than it costs to buy, build/deploy, and perform a 51% attack to shut down the network, then the system is vulnerable. The equation for the profit side of the equation can be worked out as: (bitcoin_price * num_coins_shortable * panic_price_drop_percentage). The equation for the cost side of the equation depends on the total amount of miner hardware that the network is sustainably paying to operate, factoring in all costs of the entire bitcoin mining lifecycle(HW cost, deployment cost, maintenance cost, electricity, amortized facilities cost, business overheads, orphan losses, etc) except chip design, which the attacker may be able to take advantage of for free.The issue of what to do if miners as a large group sought to lower blocksizes to force fee markets higher is also discussed, but no solutions are offered at this time. A system that tried to eliminate the fee markets would be flawed, and fortunately miners have significant reasons to oppose such a system. A block so big that 100% of the transactions will always be mined in the next block will just cause a large section of people to no longer feel the need to pay fees.
Updated on: 2023-06-11T22:42:06.879937+00:00