Published on: 2015-09-03T19:17:07+00:00
In an email conversation between Jorge Timón and Greg, they discuss a proposal by BtcDrak to use increased nBits to vote for permanently raising the block size. Jeff had previously made arguments against this proposal, but it appears that his arguments only apply to BtcDrak's proposal and not to Greg's original proposal where the block size is only increased for that specific block. The email ends with a request for everyone to speak specifically in order to catch important details like this.The conversation is about the feasibility of a difficulty penalty scheme in Bitcoin. Jeff Garzik appears to be of the opinion that such a scheme is not workable due to the unpredictability it would introduce to the block size and fee environment, making planning difficult for businesses. Gregory Maxwell disagrees with this assertion, arguing that most of the difficulty-based adjustments have small limits on the difficulty change and wouldn't cause significant changes in interblock times relative to orphaning. He also notes that pay-for-size schemes have been successfully used in some altcoins without adverse effects. The discussion also touches on proposals by BtcDrak and Greg Maxwell for increasing block size, with the former proposing permanent increases through voting while the latter suggests temporary increases only for specific blocks. The debate highlights the importance of predictability and stability in Bitcoin's markets and systems.Jeff Garzik advises against schemes that propose to pay with difficulty or hashpower to change block size. He argues that miners have a straightforward incentive: to deploy new hashpower as soon as possible. Requiring out-of-band collusion or idle hashpower on hand to change block size is both unrealistic and potentially harmful to the block size and fee market. Instead, Garzik suggests researching neutral, forward-looking incentives like pay-to-future-miner.In an email thread dated September 3, 2015, Jeff Garzik expressed concerns about the implementation of pay-with-diff for Bitcoin. He pointed out that users and miners would face difficulty in creating a stable block size and fee environment with this model. This would lead to unpredictability and chaos which are not good for markets and systems. The conclusion was either "not get used" or "volatility." Garzik also explained that paying with difficulty requires some amount of collusion if there is no idle hash power. Any miner paying with a higher difficulty would have to either self-increase their own difficulty at the possible opportunity cost of losing an entire block's income to another miner who doesn't care about changing the block size. The potential loss does not economically compensate for size increase gains in most cases when considering the variability of blocks and the associated fee income. The proposed scheme suggests increasing block size fast with difficulty over a narrow window. While the odds of producing a block are slightly reduced, the block produced if successful is more profitable, but only if there is a good supply of transactions that pay real fees comparable to those already taken. This trade-off exists currently with respect to orphaning risk, and miners still produce large blocks, with producing a larger block meaning greater utility despite the greater chance of not being successful due to orphaning. The risk from orphaning can be traded off for centralization advantage or by miners bypassing validation, issues which at least so far, we have no reason to believe exist for size-mediated schemes. Mining is not a race, and increasing difficulty does not put a miner at an expected return disadvantage compared to others as long as the income increases proportionally. Pay-for-size schemes have been successfully used in some altcoins without the effects that were suggested.The discussion focuses on the challenges of implementing pay-with-diff, which would require miners to adjust their hashing difficulty in order to change the block size. One issue is the need for collusion among miners, unless there is idle hashpower available, which is unlikely. The potential loss does not economically compensate for size increase gains in most cases, when considering the variability of blocks and associated fee income. In addition, businesses will face challenges in planning due to the unpredictability and volatility of the block size and fee environment. The conclusion is that pay-with-diff will either not be used or lead to radical short-term changes in block size and fees, making it difficult for all players to reason and plan.In a discussion amongst Bitcoin developers, the topic of paying with difficulty for increasing block size was brought up. It was noted that paying with a higher difficulty requires either idle hashpower or risking losing an entire block's income to another miner who doesn't care about changing the block size. The potential loss does not economically compensate for the gains in block size increase. The discussion continued on to say that miners have more to lose by paying with difficulty than they gain unless there is collusion amongst the entire network with ~90% certainty. In such a case, the network can collectively agree to increase the block period until the globally desired block size is reached. However, pay-with-difficulty will either not get used or lead to radical short-term block size and fee volatility.
Updated on: 2023-08-01T15:58:36.230519+00:00