3. Without a block size limit, orphan risk is guaranteed to be large compared to miner's revenue
You state this as fact, yet it is pure speculation. You seem to think it follows as a logical consequence of #1 but it doesn't. For a given set of network conditions (i.e., propagation impedances), the orphan risk depends on the size of the block. The size of the block depends on the fees offered by the transactions in mempool. So the block size--and thus the orphan risk--will only be high if the miner's mempool contains a large amount of high fee-paying transactions. In other words, the orphan risk at a given point in time will depend on demand. Since you don't know what demand will be, your statement that "orphan risk is guaranteed to be large compared to miner's revenue" is clearly false.
It is a logical consequence from 1 in itself, but also the other idea about wallets lowering fees to just over the expected marginal orphan rate cost. Each of these two things on their own are enough to cause the problem.
Looking at 1 alone, as we have discussed before, the proportion of orphan risk costs relative to miner revenue depends on how miners marginal orphan rate cost curve adjusts as more transactions are added. If it is a straight line, as in the marginal orphan risk cost per byte does not get larger as the blocksize increases, then the problem is likely to be bad. If the marginal orphan risk cost per byte gets larger as the blocksize increases, then miners can make more profit. However, whatever the shape of the curve, it is highly likely that orphan risk cost will be significant relative to fee revenue.
Anyway, this is all based on the assumption of a high level of competition. I look at this problem from the angle of ensuring the network is resilient. You seem to say my argument is not a logical consequence of #1, which may be true for some shapes of the marginal cost curve that I have not seen. However, we need to ensure the network is resilient for all feasible shapes of the cost curve.
What do I think network orphan rates would be in 2020 without a block size limit? My hunch is around 1 - 2% as they've been for the last 7.5 years, but they could be more or they could be less. The point is that no one knows (furthermore, optimistic mining serves as a counterbalance to reduce network orphan rates should they begin to increase above a few percent).
No idea. I am optimistic, I think they will fall from current levels as technology improves. Even with no blocksize limit, by 2020 as the block reward may still be significant, we should be fine.
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If orphan risk cost is 50% of miner revenue, then half the 'solved' blocks are being orphaned, no? Or do you have some other definition of 'orphan risk cost'?
Can you explain how orphan risk could be 50% of miner revenue and the orphan rate not also be very high?
The point is whenever I raise this point, large blockers tend to respond by looking at the problem from one angle. They say, the orphan rate will be low or they say revenue will be high. To understand my point you need to look at both things at the same time and think of the dynamics which drive them and the ratio between them.
It is actually possible (admittedly in an extreme convoluted example) to have a 1.2% orphan rate and a 50% ratio between orphan risk costs and revenue.
For example:
- No blocksize limit
- No block reward
- 50 block period
- 49x 1MB blocks with 0% orphan risk (as miners are worried about orphan risk)
- 1x 500MB blocks with 62% orphan risk
- 500MB block has 200x the fees of a typical 1MB block
- Let the typical revenue in a 1MB block be $100
Results in 50 block period:
- Orphan rate = 49/50 * 0% + 1/50 * 62%* = 1.24%
- Total mining revenue = 49* $100 + 200 * $100 = $24,900
- Total orphan risk cost = 0% * 49 * $100 + 62% * 200 * $100 = $12,400
- Orphan risk cost / mining revenue = $12,400/$24,900 = 50%
* Perhaps this figure would need to be higher.
The point is the dynamic is complicated, and it is possible to have a low orphan rate and the ratio of orphan risk / fee revenue to be high.
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es, but a single 'miner' is often geographically distributed itself - not in the same location.
Ok. So what? The point is it increases centralization pressure by geography
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You are correct - I no not understand your point. Why do you think that the point where marginal orphaning risk is equal to marginal additional fee has anything to do with the point where absolute orphan risk cost is equal to absolute income?
I have drawn these curves out. The shape of the marginal orphan risk cost curve determines the proportion of orphan risk cost relative to fee revenue. For almost any shape of curve the proportion is high.
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But any change is ok as long as it is a soft fork?
No. Technically softforks can be pushed on the networks by miners. If they make a bad change that is a potential problem, but hopefully they have the right incentives not to do that. A softfork can be powerful as it can potentially block all transactions. However, from the point of view of an existing node, only a hardfork can steal funds or increase the 21M cap. Luckily by design miners cannot impose a HF on us.
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Anyone who disagrees with a hard fork merely need to not upgrade their software and they are utterly unaffected by it as far as the integrity of their chosen ledger is concerned.
That is exactly what the c85% of the node operators who are small blockers have done. What are you complaining about then?
Apart from "immoral tactics", despite the fact both sides have engaged in almost exactly the same tactics.
