Re: [bitcoin-dev] "A Transaction Fee Market Exists Without a Block Size Limit"--new research paper suggests

[Hector Chu <hectorchu@gmail.com>]

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On 5 August 2015 at 10:57, Adam Back <adam@cypherspace.org> wrote:

> You may find the flexcap idea summarised in outline by Greg Maxwell
> and Mark Friedenbach a month or so back interesting in showing that
> one can achieve such effects without handing over a free vote to
> miners and hence avoid many (though probably not all) of the
> side-effects inherent in giving miners control.
>

The market I am thinking of would be open to all, not just miners. But
miners would probably be best placed to profit from such a market, as it is
their business to know about the revenue/costs tradeoff.

About side-effects, I think we can make argument that there are limits
> because other than in an extremis sense, miners are not necessarily in
> alignment with security, nor maximising user utility and value
> delivered.
>

If the block size was increasing at every settlement date (the dates on
which, every 3 months say, the block size would be adjusted to the level
indicated by the market) and users were getting concerned about
centralization, the natural tendency would be for:
a) The block size prediction market would tend to go back down.
b) BTC/USD would tend to go down, reducing miner profit and indicating to
them that the block size is too high.
c) Transaction rate would decrease as some users stop using Bitcoin, also
decreasing miner profit.

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