e.g. 1MB block 0% haircut, 10MB block 10% haircut, 1000MB block 95% haircut. Some polynomial could determine the formulae.
Diminishing fees doesn't work in the long run, as fees can be paid out of band. An alternative that has been proposed is adjusting the difficulty, though this only allows small adjustments.
) which has a penalty formula that does not include the transaction fees solve this problem?