Author: Eric Voskuil 2017-11-30 12:03:30
Published on: 2017-11-30T12:03:30+00:00
The email thread from Bitcoin-dev on November 29, 2017 discussed the proposal by Ron Lavi, Or Sattath, and Aviv Zohar to redesign Bitcoin's fee market. The proposal suggested changing the fee structure but not removing the block size limit. Marginal pricing, which is equivalent to the "Monopolistic Price Mechanism," was also discussed in this article. However, the prior proposal broke down due to Peter Todd's concern about out-of-band payments, which could allow miners to circumvent the system. Mark Friedenbach argued that out-of-band payments are penalized since end-users could bid higher instead of paying OOB. On the other hand, Peter Todd argued that a miner could mine only out-of-band transactions, which would have no on-chain fees and therefore be disregarded by other miners. Despite these concerns, the author believes the OOB scenario is imaginary since it would be more profitable for a miner to mine fairly or cheaper for the end-user to pay the fee in-band. Bitcoin is neutral on how miners are paid, but on-chain fee payment has several benefits, such as preserving anonymity and serving as a convenience for anonymous fee estimation. There is no centralization pressure that arises from side fees. The author doesn't think there is any more centralization pressure with marginal fees than before. What prevents miners from colluding to move tx fees OOB is the value of the on-band pending tx fees. The hashpower of individual miners is not impressive compared to the entire network, so individual miners could not offer a service to speed up confirmation that would be superior to simply doing a RBP. OOB fees are perhaps a symptom of the current setup where there is no penalty for arbitrarily favoring individual transactions with lower fees.
Updated on: 2023-06-12T22:23:35.092636+00:00