Gold collapsing. Bitcoin UP.

[Peter R]

@cypherdoc

On that thread, Maxwell actually goes and finds a paper that namedrops game theory like @Justus Ranvier was talking about on the podcast! This cannot get any more hilarious in my opinion.

The only thing the paper actually proves analytically is that a block size limit is equivalent to setting a tx fee floor, but the stuff Maxwell is actually interested in is just pontification in the conclusion text.

Maxwell has trouble approaching a topic from a scholarly perspective, without interjecting his biases and ideology.

The paper Maxwell cited was "The Economics of Bitcoin Transaction Fees" by Nicolas Houy (an economics PhD). This paper explores the transaction fee market starting with the assumption that the marginal cost to include another transaction in a block is zero. The author proves the interesting result that a fixed fee is economically equivalent to a block size limit. He also explains the (obvious) result that (if the marginal cost to include another TX is zero then) short-term greedy miners will include all transactions that pay a non-zero fee.

Getting back to the topic of bias and ideology, a lot of us may not agree with the assumptions in this paper, but it is still a useful paper because it explains what would happen assuming some simplified model of reality. It doesn't mean that the author is necessarily married to the model--he might in fact think that some of the results are wrong--it was just a simple model that allowed him to analytically solve for some interesting and potentially useful results (e.g., the equivalency between a fixed fee and a block size limit).

Maxwell claims that "economists disagree [that a fee market could exist without a block size limit]," and cites this paper as evidence--but this is simply not true. In fact, Nicolas Houy (the author) wrote a follow-up paper called "The Bitcoin Mining Game" where he analyzed the transaction fee market using orphaning risk and showed that miners should not include transactions that pay fees below the associated orphan risk! In fact, his results are nearly the same as my own. Incidentally, Maxwell never cites this paper by the same economist.

The way to make progress in science and not to become beholden to our own narrative or biases is to not be so emotionally attached to the results. Have an open mind. If the assumptions of the paper are stated, the model is well defined, and the results are logically consistent and interesting, then it's a useful paper in my opinion! If it turns out in the future that some of the assumptions are wrong, or need to be tweaked, this is no big deal. It's how we make incremental progress. Oftentimes Maxwell will state that certain ideas are "dangerous" because he thinks they are wrong but they sounds right (like my transaction fee market paper) and thus the public should be protected from them. This is ridiculous. Let the debates unfold naturally and we'll slowly converge towards the truth.

 

[Inca]

@Peter R

Then you will like this exchange between nullc and several redditors on several fronts on this issue.


He is quite intent upon sticking to the line that marginal costs for transaction inclusion are zero.

 

[Peter R]

"He is quite intent upon sticking to the line that marginal costs for transaction inclusion are zero." -- @Inca

Let's hit him with some empirical evidence suggesting the opposite:

https://www.reddit.com/r/btc/comments/4t6guk/the_marginal_cost_of_adding_another_transaction/

 

[Roger_Murdock]

This paper explores the transaction fee market starting with the assumption that the marginal cost to include another transaction in a block is zero. The author proves the interesting result that a fixed fee is economically equivalent to a block size limit. He also explains the (obvious) result that (if the marginal cost to include another TX is zero then) short-term greedy miners will include all transactions that pay a non-zero fee.

Does anybody actually argue that the marginal cost of including an additional TX is zero? Isn't it blindingly obvious that that can't be the case? I'm not a physicist but wouldn't that violate one of the laws of thermodynamics or something?

 

[Inca]

It seems to me that it doesn't actually matter too much if the marginal cost for transaction inclusion is not zero or not - what matters is the cost per block.

Miners spend money to be paid with a block containing the block reward and transaction fees for the included transactions. Adding a block with no transactions versus a single transaction only it would seem that the marginal cost of adding that transaction is zero.

As the number of transactions rise, so does the risk of orphan block creation. This is less relevant when the block reward is high, but as this diminishes and the number of transaction fees rise then it will begin to increasingly exert an effect.

For miners to maintain profitability in the context of a falling block reward they will need to include transactions; indeed this will be their main source of income. The number of transactions included by miners in a block when the block reward is negligible will be guided at the lower bound by profitability (they need a certain number of transaction fees to cover costs) and the free market between miners will set the upper bound of the block size based upon orphan risk.

If miners are competing freely to mine blocks filled only with transactions in blocks limited by network orphan risk then clearly there is a cost per block to the miner, and, therefore a cost per transaction can be derived. If that is the case then there must be a marginal cost for a transaction though the relationship may be complex and does it even matter?

 

[Roger_Murdock]

Adding a block with no transactions versus a single transaction only it would seem that the marginal cost of adding that transaction is zero.

Well, the marginal cost is certainly going to be tiny, but it's still not going to be zero, is it? Processing and validating that transaction versus not doing so is going to, on average, require some tiny increase in electricity consumed and some tiny additional strain on your hardware? Computation isn't free. And adding that single transaction is still going to make your block slightly larger and thus, I would assume, slightly slower to propagate on average?

 

[Peter R]

Does anybody actually argue that the marginal cost of including an additional TX is zero? Isn't it blindingly obvious that that can't be the case? I'm not a physicist but wouldn't that violate one of the laws of thermodynamics or something?

Yes, Maxwell argues that right here:

"There are zero marginal costs for transaction inclusion, assuming the best known propagation technology or mining centralization."

 

[albin]

In this bout of kettle-logic, doesn't the "even if the costs are not zero" business kill Flexcap too?

Also it seems the rhetoric defense in play in the context of the thread in question is invoking zero by creating the concept of "effectively zero".

 

[Roger_Murdock]

@Peter R

Geez, I'm not even sure I can parse what he's attempting to argue there.

"assuming the best-known propagation technology..."? That just seems irrelevant. Even with improved propagation technology, you're still going to have blocksize-dependent orphaning risk.

"or mining centralization"? I guess if you have a majority of the hash power you could, in theory, not allow your own blocks to be orphaned by always extending them -- but even there you'd have to worry about market-based orphaning risk (e.g., a PoW change) if you're viewed as an attacker.

"Even if the costs are not zero-- for whatever reason-- they can easily be negligible (enough where they wouldn't be limiting given all the demand the species can produce"? Again, I don't get it. If the marginal cost is non-zero, it's going to be limiting, i.e., a rational miner won't include a transaction with a fee that is less than its marginal cost of inclusion.

"and any income that is going to pay for those costs is irrelevant in terms of driving competition to increase difficulty (since it's being diverted to pay those costs), so the result holds even in that case." Huh? What result holds? What is he arguing here?

A little help?

EDIT: It occurs to me that last statement might be related to the argument that hash power spent producing orphaned blocks is "wasted" / doesn't contribute to security, but I'm not sure. If that is the argument he's making here, I've previously explained why I don't find it convincing.

 

[remile]

Maxwell argues like a marxist. With enough effort you'll be able to get him to admit the marginal cost is not actually zero. However no matter how many times he admits this he's never going to stop repeating the original debunked claim.

This behavior is nothing new. It was observed by an early 20th century historian as idiomatic of marxist persuasion:

The more I argued with them, the better I came to know their dialectic. First they counted on the stupidity of their adversary, and then, when there was no other way out, they themselves simply played stupid. If all this didn't help, they pretended not to understand, or, if challenged, they changed the subject in a hurry, quoted platitudes which, if you accepted them, they immediately related to entirely different matters, and then, if again attacked, gave ground and pretended not to know exactly what you were talking about. Whenever you tried to attack one of these apostles, your hand closed on a jelly-like slime which divided up and poured through your fingers, but in the next moment collected again. But if you really struck one of these fellows so telling a blow that, observed by the audience, he couldn't help but agree, and if you believed that this had taken you at least one step forward, your amazement was great the next day. He had not the slightest recollection of the day before, he rattled off his same old nonsense as though nothing at all had happened, and, if indignantly challenged, affected amazement; he couldn't remember a thing, except that he had proved the correctness of his assertions the previous day.

 

[cypherdoc]

 

[cypherdoc]

my greatest hope is materializing:

Forex Expert: Bitcoin Should Be Taken More Seriously

This is his first mention about Bitcoin, and he appears so convinced of its future domination now that he will give regular attention to it.

https://news.bitcoin.com/forex-expert-bitcoin-serious/

 

[cypherdoc]

 

[cypherdoc]

you gotta understand; i have personal knowledge/experience of how /u/nullc lies:

 

[jonny1000]

in the short-term, demand out-strips supply for block spac

I do not think of it like this at all. In my view we have a market where to price adjusts to ensure the market clears. There is no concept of demand being greater than supply or supply being greater than demand with a floating price. This is not how markets work.

In short, guessing that demand for blockspace (and BTC) will continue or increase in the future due to lightening payment channels irresponsibly assumes way too much and is sorta arrogant as fuck

I am certainly not guessing demand for blockspace will increase due to payment channels. For the record I am skeptical of side chains but I think the LN is a very intelligent idea, which may become successful in many years time. I certainly would not assume LN will be successful, I agree that would be irresponsible. My point was as follows:

1. If LN fails then its insignificant and is likely to have no impact on demand
2. If LN succeeds its impact on demand could be approximately proportional to its success.

All I was doing was arguing against the point, which was that a successful lighting would reduce demand. I simply do not understand that point and it seems illogical to me.

Please do not use phrases like "arrogant as fuck", I think its unnecessary and counterproductive. Perhaps this is meant as an insult against me. Please try to stop insulting people. As I said, I am not assuming LN will be successful, so if you did mean it as an insult against me, you are simply wrong.

I concede segwit may increase capacity to some degree for some user groups

Why only for certain groups? If some people upgrade to SegWit, then this creates more spare space for others that do not upgrade. Did you consider this? Also did you consider that a few large exchanges take up a lot of the space, these exchanges pay the most fees and have the most incentives to upgrade to SegWit. If just 3 or 4 exchanges upgrade this would increase capacity for everyone else.

Then it is not only SegWit:

• Schnorr signatures
• Aggregated signatures
• HF to 2MB of non witness data, once the campaign to HF without consensus becomes insignificant

Combined the impact of these is a massive c10x capacity improvement. After that more will follow and everyone wants to increase capacity. I personally favor BIP100 and a dynamic market driven limit.

RBF brakes the coolest part of bitcoin and goes against long-standing legal doctrine that pervades much of the world by allowing people to cut in line and thereby making settlement time unpredictable and uncertain.

RBF is entirely voluntary. If you do not like it, do not use it, it then has no impact on you whatsoever. It feels to me that there is an ideological (almost religious) opposition to RBF. I do not understand it, but if you have a problem with it, DO NOT USE RBF. Why do you have a problem if consenting adults use RBF between each other in the privacy of their own homes?

Lightning contributes to the breakage as well since onchain settlements are delayed; many transactions will require credit or insurance to mitigate the risk of a transaction not being final or recorded on-chain in time for whatever.

How does LN delay onchain settlement?

If these potential features of LN like "credit or insurance" become too prevalent or inconvenient, then LN will not succeed. What is your problem with people trying? If they fail then they will fail, that is what competition, innovation and experimentation are all about.

If your actual problem with LN, is you believe people are deliberately using it as a false excuse not to increase the blocksize so they can profit personally, then this false belief is your real problem. Why bother going further and complain about additional potential LN problems?

BTC is open source and the current developers are not the only talented and competent folks out there that can work on cryptocurrency.

Correct, that is why anyone can be a developer and anyone can create their own compatible implementation like BTCD to compete in an open permissionless environment. Nobody disagrees with this, please stop misrepresenting the views of others to create division.

e.g., you did just admit your projection on block space demand was based on your common sense, not anything objective

No I did not. I was not projecting demand. I was saying that if one particular feature became successful, then its reasonable to assume, all else being equal, that it has a positive impact on demand.

the long-term survival of BTC, core, and its supporting companies is far from guaranteed.

Agreed. What a boring world it would be is this was guaranteed.

Decentralization as a goal is great, but its a value judgment. Not everyone shares in that value in the same way/to the same degree

To me the important thing is to be intelligent and strategic, by focusing on where Bitcoin has a sustainable comparative advantage.

 

[Peter R]

Geez, I'm not even sure I can parse what he's attempting to argue there.

I've had lots of interactions with Greg, so perhaps I can help.

"assuming the best-known propagation technology..."? That just seems irrelevant. Even with improved propagation technology, you're still going to have blocksize-dependent orphaning risk.

If you press him on this, he might give an example where all the miners agree to mine a "practice blockchain" first. The "real" blockchain is identical to the practice blockchain, except lagging by 6 blocks. To propagate a block under such a scenario, the miner need only propagate the block header. If indeed that miner included the transactions from the practice blockchain verbatim, then everyone can verify this fact from the Merkle root in the block header alone. Ignoring re-orgs deeper than 6 blocks, this would be true 0(1) block propagation and blocksize-dependent orphaning risk would be identically zero.

[I'll save my rebuttal for after you've had time to digest this argument]

"or mining centralization"? I guess if you have a majority of the hash power you could, in theory, not allow your own blocks to be orphaned by always extending them -- but even there you'd have to worry about market-based orphaning risk (e.g., a PoW change) if you're viewed as an attacker.

Right. If you have a majority of hash power, then you could ensure that your blocks are never orphaned. Basically, you can show that all else being equal, two mining pools can each increase their revenue by merging to become one mining pool (they can also increase their revenues by optimistic mining off of the block headers instead of merging).

From a very narrow game-theory view, one could conclude that a single centralized miner is the Nash equilibrium [I completely disagree for many reasons including the market-based orphaning risk that you mentioned].

"Even if the costs are not zero-- for whatever reason-- they can easily be negligible (enough where they wouldn't be limiting given all the demand the species can produce"? Again, I don't get it. If the marginal cost is non-zero, it's going to be limiting, i.e., a rational miner won't include a transaction with a fee that is less than its marginal cost of inclusion.

I think by "negligible" he means the cost would be so small that whatever "natural limit" we would hit would be so huge that Bitcoin would lose its decentralization. AFAIK, he's never tried to quantify this.

"and any income that is going to pay for those costs is irrelevant in terms of driving competition to increase difficulty (since it's being diverted to pay those costs), so the result holds even in that case." Huh? What result holds? What is he arguing here?

This is an argument that @jonny1000 also makes as well. The idea is that the fees collected in order to offset for orphaning risk do not contribute to hashing power. Before working on subchains, this was my biggest worry, but I think I've shown that it is not true if we allow for more efficient block propagation techniques such as weak blocks [see Section 5 of this paper].

 

[jonny1000]

Let's hit him with some empirical evidence suggesting the opposite:

Peter, I am not sure what Greg's precise view on this topic is, but I think its safe to say its reasonably likely to be similar to mine. I have explained this many times and you keep repeating the same misrepresentation again and again!

I think a better word than "zero" marginal cost of adding an extra transaction to a candidate block is "Insignificant" marginal cost. Let me try to describe my view again:

1. Historically, the marginal cost has not been insignificant.

2. In my view, in the future, the marginal cost is likely to be insignificant. The reasons for this are technological. For example, faster Internet connections, weak blocks, compact blocks, IBLT ect ect

3. If I am wrong and the technological developments are not sufficient, then the marginal cost is likely to remain significant. Therefore we need an economically relevant block-size limit, in order to mitigate against the centralization pressure from these significant marginal costs.

Please can you stop claiming the following:

1. Incorrectly claiming we say the marginal cost has been insignificant in the past

2. Incorrectly claiming we say the future marginal cost will definitely be insignificant and then mention some specific technology as to why I am wrong.

3. Incorrectly claiming there is no centralization pressure, because the marginal costs are too low due to some specific technology.

tldr: You cannot have it both ways, either the marginal costs are insignificant or not. Either way we need an economically relevant blocksize limit, the reason for this is to drive a fee market or reduce centralization, respectively.

To repeat again:

1. IF the marginal cost is insignificant, we need a limit to drive a fee market
2. IF the marginal cost is significant, we need a limit to mitigate against centralization threats

This is an argument that @jonny1000 also makes as well. The idea is that the fees collected in order to offset for orphaning risk do not contribute to hashing power.

I have never said I agree with this argument Greg makes. In my view the important point here is if this marginal orphan risk cost is uniform, since it appears likely not to be the case, I can see how a cost curve can exists where some miners make profits and reallocate this revenue to pay for security. I think Greg is only correct in the sense that the most marginal miner, with respect to this orphan risk cost, will not make any additional profits to reallocate to hashing.

To illustrate further why I think Greg is wrong here, he could make a similar argument with respect to current mining. He could say the difficulty adjusts such that miners profits are zero and then they have no profits to invest to drive up the difficulty (except within a two week period). The reason he is wrong here, in my view, is because each miner has different costs. Only the most marginal miner has zero profits. There is a mining cost curve and miners lower down on the curve, may try to invest and driven up difficulty.

 

[Impulse]

Does anybody actually argue that the marginal cost of including an additional TX is zero? Isn't it blindingly obvious that that can't be the case? I'm not a physicist but wouldn't that violate one of the laws of thermodynamics or something?

I've seen @jonny1000 make this argument many times before, so maybe you can ask him about it. Doesn't make any sense to me, there is always a cost even if it is very small.

Also, by this logic, if the marginal cost is literally zero, shouldn't the same be true for nodes? And therefore, shouldn't an increase to the block size also have no impact for them? I don't see how you can make the argument one way but not the other.

 

[Jihan]

@jonny1000 Let's make one point clear: in the July of 2015, the majority of miners had indeed reached a consensus in Beijing to support 8MB. After this meeting, the 20MB limit was changed to 8MB. So don't fall in a confirmation bias. The fact was real, which was claimed by the letter signed by most important Bitcoin enterprises in August 2015. Sadly, Mike Hearn's bad leadership, such as racist expressions made XT lose the support from lots of miners.

 

[jonny1000]

@jonny1000 Let's make one point clear: in the July of 2015, the majority of miners had indeed reached a consensus in Beijing to support 8MB. After this meeting, the 20MB limit was changed to 8MB. So don't fall in a confirmation bias. The fact was real, which was claimed by the letter signed by most important Bitcoin enterprises in August 2015.

My point was about miners not agreeing with BIP101 and the 8GB, not 8MB. I supported 8MB and I mentioned this to Gavin, both in person and by email. Gavin even told me there would be an 8MB proposal, I was then shocked and disappointed when the 8GB idea was put forward. Had XT only included an 8MB proposal, I think we would be in a totally different position today.

Sadly, Mike Hearn's bad leadership, such as racist expressions made XT lose the support from lots of miners.

What racist expressions? I have always thought Mike was a nice guy, I just did not agree with him on capacity increases and HFs. I hope he didn't say anything too bad.

I have read some large blockers (probably a very small minority) criticize the "Chinese" miners for following Core, by saying that there is a "Chinese culture of looking for a leader and not questioning authority". I have always thought this type of comment is stupid and xenophobic. Is that what you mean? I do not recall Mike saying this.