Author: Gregory Maxwell 2017-11-30 11:40:54
Published on: 2017-11-30T11:40:54+00:00
The context revolves around the discussion of Out of Band (OOB) fees in Bitcoin, which have been a reality for most of its life. The argument is that it is impossible for both miners and users to prefer OOB fees as the system disincentivizes them. However, this analysis is flawed as it assumes a single decision-maker, which is not true in most economic circumstances. Instead, participants make the best decisions for their own interests, resulting in multiple choices. Competent wallet software can automatically draft two transactions, one paying OOB and one paying min fee, at equivalent expected rates. Miners would construct blocks that locally maximized their revenue. The use of MINFEE is not an equilibrium, and no one uses it voluntarily. Another concern is that the idea converts variance in fee willingness into variance in capacity for the network. Rich uncle bill could waste money with uneconomically high fees, effectively knocking out a large number of participants. Honest conformance with the protocol would result in miners processing only the UncleBill transaction or processing all of them at the lower rate, whichever is more profitable. Super-rational behavior might be for a majority of hashpower to collude to permit high fee-rate transactions every other block and only permit low feerate in the others, handicapping the capacity limiting argument. Lastly, the hash power of individual miners is not significant compared to the entire network, which is unfortunate for Bitcoin today.
Updated on: 2023-05-20T04:25:52.853803+00:00