Quote from: creighto on June 02, 2011, 12:18:31 AM

I contest your numbers are accurate, as I think that users that want to get their transactions processed will pay more than otherwise, but I'm not willing to do the math to see what that would be.

You're making a wild-ass guess there.

Without making a wild-ass guess, assuming that 5/6 of the average hashrate over the previous difficulty computation period drops out in the next period:

The number of blocks a miner can expect to solve in a given time period is independent of the current network hashrate (being a function strictly of the difficulty and the miner's hashrate: if difficulty means that 2.8*10^15 hashes are required to solve a block, and you're hashing at 100 megahashes/sec, then you'll average 1/7777.78 blocks solved per hour). Therefore the expected reward from coin generation is unchanged regardless of the network's hashrate. The number of transactions that can reasonably be expected to be included per block would increase by a factor of roughly six (probably less as some transactions may have inputs from within the previous hour). So if the transaction fees before were averaging n% of the generation reward, they would be 6xn% of the generation reward now, where x is the increase in average transaction fees added by users to get their transactions processed faster.

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Even if transaction fees double, the increase in topline for a miner is roughly 12%: if it was 100 mBTC/hr before, then it's 112 mBTC/hr now. The only miners who can be reasonably expected to start mining are thus those whose reckoning of the cost of mining (however they may reckon that cost) is between 100 and 112 mBTC/hr (if their reckoning is a greater cost than 112 mBTC/hr, they're not going to start; if their reckoning is below 100 mBTC/hr, they're already mining). How much mining capacity falls into that camp, I don't know, but it's probably not prudent to assume that it's enough to make things much better.

There's bound to be a delay in the transaction fees increasing: many users don't pay a huge amount of attention to the forums or to the blockchain. They won't find out that transaction processing is slow until they've tried to send coins and found that it's not getting confirmed. At that point, it's too late to adjust the fee and probably not worth sending the coins again with a bigger fee.

Whether any benefit accrues to any individual user in terms of processing speed in this situation from upping the transaction fee they're willing to pay is also questionable. An individual user deciding he's willing to pay 1 BTC to move 1 bitcent is unlikely to increase the network hashrate in the short term (catching a 1 BTC tx fee is great for the miner who solves that particular block, but what miner is going to decide to start mining because of that fee, given that the odds of solving the block aren't that great (and in the case of deciding to join a pool, one's share of that isn't going to be significant)). If even such a dramatic increase in tx fee by a given user is unlikely to noticeably increase the speed at which the transaction gets included in the chain, is there really any incentive for any user to increase the fee? If you have something that needs to be done by somebody for the common good but that something is to the detriment of the one who does it, don't be surprised if that needed thing doesn't get done (unless some means is developed for the community to reward those who "took one for the team", but there's no real guarantee of such a means developing in this context).