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LegendaryActivity: 1400Merit: 1006 Re: A Scalability Roadmap October 09, 2014, 07:00:52 PM #41 Quote from: jonny1000 on October 09, 2014, 10:10:59 AM Quote from: coindate on October 08, 2014, 07:16:37 PM My Opinion:

Larger blocks means more transactions.

The fee per transaction stays low, but the net fee can grow along with block size.


Coindate, you could well be correct, larger blocks could mean more transactions and therefore if the fees fall then miners can be compensated by higher transaction volumes.


However, let's make some assumptions about how the network may operate in the future:


1. IBLT O(1) block propagation has been successfully implemented, and therefore the marginal costs to miners of including additional transactions is close to zero.


2. Bitcoin mining is competitive such that there are many miners driving down transaction fees to the point where marginal cost is close the marginal revenue


These are both reasonable and desirable assumptions. Now let's consider the implications for transaction fees. I propose this would result in a scenario in which fees are very low and then suddenly sharply increase as we approach the blocksize limit. For example in the following two illustrative charts the supply curve should be very close to the x-axis and then sharply increase at a tipping point, before being very close to the blocksize limit line. In the charts the orange area represents mining revenue.


Healthy supply and demand curve for space in blocks


Scenario in which the blocksize limit has increased too fast


Demand for Bitcoin transactions is unchanged in both scenarios, however in the first chart mining revenue is far higher than in the 2nd chart as the orange boxes demonstrate. This is because despite the fact that volume has increased, the transaction fees are too low because the blocksize limit has increased too fast, resulting in almost zero transaction fees. Therefore it is important to keep in mind that the blocksize needs to be small enough to generate fees that compensate miners when the block reward becomes too small. Reducing the rate of growth in the blocksize when the reward falls may be a good idea for this reason. Somebody must pay for miners, distributed consensus is not free, I hope the cost per transaction is very low, however it needs to be sufficient.

Coindate, you could well be correct, larger blocks could mean more transactions and therefore if the fees fall then miners can be compensated by higher transaction volumes.However, let's make some assumptions about how the network may operate in the future:1. IBLT O(1) block propagation has been successfully implemented, and therefore the marginal costs to miners of including additional transactions is close to zero.2. Bitcoin mining is competitive such that there are many miners driving down transaction fees to the point where marginal cost is close the marginal revenueThese are both reasonable and desirable assumptions. Now let's consider the implications for transaction fees. I propose this would result in a scenario in which fees are very low and then suddenly sharply increase as we approach the blocksize limit. For example in the following two illustrative charts the supply curve should be very close to the x-axis and then sharply increase at a tipping point, before being very close to the blocksize limit line. In the charts the orange area represents mining revenue.Demand for Bitcoin transactions is unchanged in both scenarios, however in the first chart mining revenue is far higher than in the 2nd chart as the orange boxes demonstrate. This is because despite the fact that volume has increased, the transaction fees are too low because the blocksize limit has increased too fast, resulting in almost zero transaction fees. Therefore it is important to keep in mind that the blocksize needs to be small enough to generate fees that compensate miners when the block reward becomes too small. Reducing the rate of growth in the blocksize when the reward falls may be a good idea for this reason. Somebody must pay for miners, distributed consensus is not free, I hope the cost per transaction is very low, however it needs to be sufficient.


Miners will not automatically create the largest possible block they can regardless of their revenue.


The supply curve has no relationship with the maximum block size allowed by the protocol - it's determined by the costs involved with producing larger blocks. Sorry to be blunt, but your supply and demand curves are nonsense.Miners will not automatically create the largest possible block they can regardless of their revenue.The supply curve has no relationship with the maximum block size allowed by the protocol - it's determined by the costs involved with producing larger blocks.

jonny1000


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MemberActivity: 119Merit: 10 Re: A Scalability Roadmap October 09, 2014, 07:36:49 PM #43 Quote from: justusran