Quote from: Peter R on August 07, 2014, 01:03:26 AM

Quote from: wachtwoord on August 07, 2014, 12:48:59 AM

Anyway, please tell me I'm wrong. I love being wrong

. Please explain to me why anyone would pay a transaction fee above 1 Satoshi when the block subsidy has run out and the block size is not limited.

Because of the orphan cost. Each kB added to your block increases its propagation time and thus the probability that it will be orphaned.

For example, is it profitable to include another 500 kB of TXs (and keep the extra 0.1 BTC of fees)? The answer is "yes" only if the probability that your block isn't orphaned doesn't increase by more than 0.1/25 = 0.4%. Imagine that be including the extra 500 kB, the chance that your block is orphaned increases by 1%. This means that you'd lose 0.25 BTC on average by including the 500 kB of TXs. Since those extra TXs only give you 0.1 BTC of fees, the answer is that you shouldn't include them.

As internet speeds increase, the "orphan cost" goes down and it then becomes economical to accept a larger number of transactions.

EDIT: I see JR beat my by 25 seconds

Are these figures factual? I assumed the orphan chance to increase but only by a very small amount, small enough to completely ignore it. Does adding 500KB to a block really increase the orphan chances by 0.4%? I thought it would be many orders of magnitude less.