Post
Topic
Board Bitcoin Discussion
Re: The economics of the block size
by
justusranvier
on 27/10/2014, 04:01:04 UTC
The solution I'm suggesting is for the protocol to charge block generating nodes for the blocks they create, based on how much data is contained in the block, and distribute fees collected to other block generating nodes (proportional to their share of the network hashrate). This would not solve the centralization problem, but it would solve the problem of txs becoming a net cost to the block generating nodes as a whole. For this proposed solution to work, we need to pick a magic number to represent the minimum number of block generating number we believe the network needs to be sufficiently decentralized, and the protocol needs a way to reach consensus on the cost of bandwidth in relation to bitcoin. Multiplying these two numbers together would give us an estimation of the cost of bandwidth for the network per byte of data included in a block.
There's no need for magic numbers, which are wrong by definition.

The blocks miners produce are meaningless unless they reach an economic majority of the network. Therefore miners should be willing to pay relay nodes to ensure this happens.

Other users of the network require timely access to the most recent blocks in order to know the state of the ledger. Therefore users of the network should be willing to pay relay nodes to deliver the blocks to them.

Users want their transactions to reach the miners. Therefore they should be willing to pay relay nodes to deliver them.

Miners want to receive transactions, because the fees embedded within those transactions is a source of revenue for them. Therefore they should be willing to pay relay nodes to deliver those transactions to them.


The only thing needed to make a market for block/transaction relaying work is a mechanism for price discovery and payments.

Price discovery will ensure that relay nodes are sufficiently compensated by an amount that covers their costs, and will also regulate the number of relay nodes to meet the demand of the users, including their demand for decentralization (a user who wants to buy more decentralization does so by connecting to more relay nodes than they would otherwise need).

No magic numbers needed, no central planning needed.

The fact that Bitcoin has a magic number acting as a production quota for transaction processing is a flaw that was supposed to be temporary. Replacing one magic number with a different magic number isn't a long term solution.