Quote from: Meni Rosenfeld on November 03, 2014, 09:07:55 AM

Quote from: Crowex on November 02, 2014, 03:35:49 PM

The tragedy of the commons relates to unregulated use of common resources.

I dont think this is any way relevant. Mining resources are not under common ownership and there is no common right to use these resources. They are generally owned by private entities trying to make a commercial profit and you have no right to make them mine your transaction. Miners can choose what transactions they mine so the use of this resource is regulated by the miners.

The common resource here is abstract. It is the willingness of users to pay tx fees. By accepting low-fee txs, a miner consumes this resource (that is, makes users less willing to pay tx fees) for his own benefit, at the expense of the total benefit of all miners. And, since Bitcoin needs miners, this is a problem for all Bitcoin users.

Nobody suggested that the mining devices themselves are a common good.

The demand curve for a product or service shows the relationship between the price of a product and the willingness and ability of consumers to pay.
In traditional economics willingness to pay for a product is not an abstract resource it is a variable in the demand calculation.

As I pointed out, if a certain percentage of miners offer lower fees (such as the charity miners) then this will mean that consumers will have the choice of how fast their transaction is likely to be processed. The fees charged by commercial miners will probably reflect the amount of discounted transaction mining available. Although all of this discounted mining will have to be paid for one way or another.

A miner consuming a willingness to pay resource for his own benefit makes no sense to me.

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Quote from: Crowex on November 02, 2014, 03:35:49 PM

Miners will simply set prices at what it is worth for them to mine and make a reasonable profit. With no block size limit they will be able to set the fee at which they can turn a profit at a lower level.

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economic theory says that in a competitive market, supply, demand, and price will find an equilibrium where the price is equal to the marginal cost to suppliers plus some net income (because suppliers can always choose to do something more profitable with their time or money)

(Gavins blog)

Quoting this theory blindly is failing to acknowledge some specific characteristics of Bitcoin mining. Most importantly, that we want to keep mining costs artificially high. Absent any limiting mechanism, sure, the market will reach an equilibrium... An equilibrium where tx fees are low, total hashrate is low, and the network is vulnerable to hashrate attacks.

In a healthy network with a high hashrate, the main cost of a tx is amortized, and the marginal cost is negligible. Hence, having the price equal to the marginal cost (as in the quote) is a disaster.

Thought of another way: Mining has a positive externality which is difficult to monetize, due to "race to the bottom" effects. Left to the market's own devices, no mining will be done. Hence we need some way to coordinate players into providing this externality.

I didnt quote blindly. I read it and thought it was relevant to the point I was making. The point I was making was regarding particular economic arguments that used the tragedy of the commons as their premise. I was not making any argument as to whether the equilibrium reached by free market economics would secure a network.

We do not necessarily want to keep mining costs artificially high. What we actually want is to have a network that is secure against hash rate attacks. These are different things.
For example if the network reaches an equilibrium where it is secure then we dont need to manipulate mining costs in any way. Transaction costs might, in the future sustain this. We dont know.

As my other post mentioned there are different hash rate attacks to consider and some might be done to try and profit but some might be done for political reasons with no regard to cost.
Guarding against an attack with no regard to cost is more difficult.

Anyway, I dont want to seem too argumentative because I agree with most of what you have to say. I just dont agree with the economic argument based on the tragedy of the commons.

The subject of mechanisms to manipulate the market in order to provide security is quite a big subject that I havent really got time to offer a considered opinion on. I did spend some time trying to build a mathematical model of the different variables in a decentralised network and how they affected each other. I might try and finish this project and post it to see if anyone would be interested in building a simulation (maybe as an open source project) that might be an interesting way of envisioning future effects of applying these mechanisms.