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The game theory of end-game bitcoin is interesting and doesn't get enough attention. I haven't seen a good response to this paper: https://www.cs.princeton.edu

The game theory of end-game bitcoin is interesting and doesn't get enough attention. I haven't seen a good response to this paper: https://www.cs.princeton.edu/~smattw/CKWN-CCS16.pdf https://www.cs.princeton.edu/~smattw/CKWN-CCS16.pdf

dwaltrip 6y ago
I was curious, here's what the abstract says: > Bitcoin provides two incentives for miners: block rewards and transaction fees. The former accounts for the vast majority of miner revenues at the beginning of the system, but it is expected to transition to the latter as the block rewards dwindle. There has been an implicit belief that whether miners are paid by block rewards or transaction fees does not affect the security of the block chain. > We show that this is not the case. Our key insight is that with only transaction fees, the variance of the block reward is very high due to the exponentially distributed block arrival time, and it becomes attractive to fork a “wealthy” block to “steal” the rewards therein. We show that this results in an equilibrium with undesirable properties for Bitcoin’s security and performance, and even non-equilibria in some circumstances.
tromp 6y ago
This was recently discussed on bitcointalk [1]. Some quotes from that thread: > Because when you have mined a full block and there is a backlog, the difference in income between mining the next block (all full of pending transactions) and going backwards and remining the prior block to take its fees is small (and comes at a cost of decreased chance of eventually being in the longest chain). This is particularly true because new transactions that are arriving cannot be included in the prior block if it is remined. > A supply cap requires a block reward dwindling to insignificance (long before it reaches 0). So the significant mining reward must come from large fees. Mining stability requires a steady backlog of fee paying transactions, which in turn requires a highly constrained block size. [1] https://bitcointalk.org/index.php?topic=5306354.0 https://bitcointalk.org/index.php?topic=5306354.0

dwaltrip 6y ago

I was curious, here's what the abstract says: > Bitcoin provides two incentives for miners: block rewards and transaction fees. The former accounts for the vast majority of miner revenues at the beginning of the system, but it is expected to transition to the latter as the block rewards dwindle. There has been an implicit belief that whether miners are paid by block rewards or transaction fees does not affect the security of the block chain. > We show that this is not the case. Our key insight is that with only transaction fees, the variance of the block reward is very high due to the exponentially distributed block arrival time, and it becomes attractive to fork a “wealthy” block to “steal” the rewards therein. We show that this results in an equilibrium with undesirable properties for Bitcoin’s security and performance, and even non-equilibria in some circumstances.

tromp 6y ago

This was recently discussed on bitcointalk [1]. Some quotes from that thread: > Because when you have mined a full block and there is a backlog, the difference in income between mining the next block (all full of pending transactions) and going backwards and remining the prior block to take its fees is small (and comes at a cost of decreased chance of eventually being in the longest chain). This is particularly true because new transactions that are arriving cannot be included in the prior block if it is remined. > A supply cap requires a block reward dwindling to insignificance (long before it reaches 0). So the significant mining reward must come from large fees. Mining stability requires a steady backlog of fee paying transactions, which in turn requires a highly constrained block size. [1] https://bitcointalk.org/index.php?topic=5306354.0 https://bitcointalk.org/index.php?topic=5306354.0