Quote from: Gavin Andresen on February 01, 2014, 10:11:26 PM

How do transaction fees work in Ethereum?

One of the non-obvious reasons Bitcoin works is transaction fees are based on the size (in bytes) of the transaction. And since there are no loops executing a transaction, CPU usage is bound by transaction size.

If CPU usage to verify a transaction is NOT related to the transaction size, then you open yourself up to denial-of-service attacks. Like:

Create an Ethereum transaction with a (huge!) fee that will pay for 60 seconds of CPU execution time.
... but craft it so execution takes 61 seconds (or, heck, make it an infinite loop, maybe you'll tickle a bug in the execution termination code).

Now broadcast it. It will be rejected for insufficient fee, but only after peers have wasted 60 seconds of CPU time. And if the transaction is rejected, the attacker won't pay the fee.

Then tweak it slightly and broadcast it again, maybe from a different IP address if you got banned for bad behavior.

I haven't thought deeply about whether or not there is a way to punish the attacker; my first thought would be to publish the attacker's transaction and take the fee but ignore any other effects of the transaction, but you'd have to be careful to design THAT mechanism so it couldn't be abused.

You're (very understandably

) coming at this from too much of a Bitcoin perspective, where scripts are attached to transactions and transaction outputs and transactions can either pass or fail. That's not how Ethereum works. In Ethereum, you have entities called contracts, where contracts have their own balances, and are activated every time you send a transaction (think: money with an optional message attached) to them. The contract has 16 computational steps for free to give it wiggle room to determine whether a transaction is even worth processing; after this, every computational step that the contract takes costs it 1x BASEFEE (or more for specialized data access or crypto ops). If the contract goes bankrupt halfway through the computational process, it just stops halfway through. Here is the critical part: unlike is the case with Bitcoin, here the transaction does not "fail". The transaction still succeeds; the contract just ends up sitting there out of gas halfway through some long calculation instead of doing anything interesting. If you send a second transaction to the same contract immediately after, it will halt right after the 16 step grace period (or maybe more if the second transaction is sending some non-negligible amount of ether to refill it).

Quote from: coinrevo on February 02, 2014, 08:12:27 AM

That was a bit mean from me. I appreciated the work more, before someone put in the idea of corporate control. that is not opensource/anarchism. anyway, if everyone plays fair, its a free market.

cryptocurrencies have as much to do with economics as it has to do with cryptography/computer security/etc. One problem is one can't pick up sound economic thinking from a textbook, as modern economics is mostly nonsensical drivel. And it does not help to understand how in the future human societies will be organized based on principles of cryptocurrencies.

this thread is a good example. it discusses various technical questions, but does not touch at all on the questions of contracts, and why we even would want smart contracts/DAC's and what they are good for. say for example all contracts with the government, which can be changed more or less arbitrarily by those in power, starting with control of money supply. so the question is how this new arising form of social organization fits in with the existing civilization, which is build on nation states + a rather strangely constructed institution named United Nations + other institutions like Worldbank, IMF, SWIFT, G8, etc.

Okay, time for me to put my armchair econo-socio-politico-philosopher hat on.

We're not trying to be a corporate controller. You may notice that unlike Freicoin, Devcoin and the like, the Ethereum organization is NOT collecting any kind of tax or issuance share forever; there is only a small one-time fundraise/premine at the start. This essentially sets in stone what I have come to realize is an important principle in business and social organization: small organizations, like startups, usually have to be dictatorial and have one or a few dominant players pushing a coherent vision with appropriate incentivization to help the process along. In the long term, however, structures that aim to be basic institutions of society (currency being one of the most important) should be controlled by no one. I feel like this compromise approach well represents the feelings of the Bitcoin community. The problem we have today is that organizations either try to either start decentralized, and often unfortunately fail, or start centralized, and then get drunk with power (or get co-opted by entities that are already drunk with power) and never bother actually implementing the decentralization step.

We do spend a lot of time thinking about exactly how these new decentralized structures can help either augment or replace existing systems, and how they fit into the categories of standard economics. At this point, we are still very much in the speculative fiction stage, but perhaps you might find these interesting:

http://bitcoinmagazine.com/9435/markets-institutions-currencies-new-method-social-incentivization/
http://blog.ethereum.org/2013/12/31/bootstrapping-a-decentralized-autonomous-corporation-part-i/
http://blog.ethereum.org/2013/12/31/bootstrapping-an-autonomous-decentralized-corporation-part-2-interacting-with-the-world/
http://blog.ethereum.org/2013/12/31/bootstrapping-a-decentralized-autonomous-corporation-part-3-identity-corp/
http://bitcoinmagazine.com/6528/what-proof-of-stake-is-and-why-it-matters/
http://bitcoinmagazine.com/8640/an-exploration-of-intrinsic-value-what-it-is-why-bitcoin-doesnt-have-it-and-why-bitcoin-does-have-it/
http://blog.ethereum.org/2014/02/01/on-transaction-fees-market-based-solutions/

What I like about the Ethereum community so far is precisely the level of interest in economic issues and willingness to look for solutions with a fresh eye that I'm seeing. We are all committed Bitcoiners, and believe in the principle of decentralization; however, at the same time we understand well why centralized systems have come to exist and the positive role they have often served in pushing humanity forward even while committing those evils of which we are all very aware. Thus, the emphasis is precisely on figuring out what the benefits are that centralization brings, and seeing if we can come up with incentive structures that provide most of the benefits without most of the drawbacks. A good analogy here is data structures in computer science. We have arrays, where a 1000-item array takes 1 step to modify or access a value but 500 steps to insert or delete, and we have linked lists, where a 1000-item list takes 500 steps to access a value but only 1 step to insert or delete. However, more recently we invented the concept of trees, where you can have a 1000-item tree where inserting, modifying, accessing and deleting all take no more than 10 steps - a compromise that gives us nearly the best of both worlds. Those are the kinds of cleverly rigged and elegant solutions to problems that we are trying to seek.