Author: Andrew Cann 2020-03-29 08:11:36
Published on: 2020-03-29T08:11:36+00:00
Bitcoin transactions are limited by the block weight limit, which ensures that miners get paid. However, each individual only has the incentive to pay the market rate for block space based purely on supply and demand. This creates a collective action problem, where each individual has an incentive to pay the minimum they need to get their transaction included in the block while everyone else pays for the transaction's security. Off-chain mechanisms can increase the effective capacity while still ensuring that on-chain fees remain at a level that will ensure the continued healthy operation of the blockchain layer. However, moving things off-chain reduces the transaction fees by reducing demand for block-space, which could cause miner revenue to drop lower than what's required to keep the network secure. The solution to this problem is yet to be found.
Updated on: 2023-06-14T00:31:12.257997+00:00