The Miner’s Advantage With Uncapped Block Size
/u/dpinna submitted a technical paper on the Bitcoin Subreddit to the dev-list which outlines the advantages gained by increasing block sizes. It is well known that block size has been a matter of debate for quite a while, and Bitcoin users on both sides of the argument are very passionate. /u/dpinna’s paper outlines how miner advantages actually scale up with network and mempool properties in the scenario of uncapped block sizes. Taking inspiration from \u\Peter__R ‘s work, /u/dpinna further explains (through evidence and mathematical models) how miners receive more benefit from scaling block size.
“This paper shows how a rational Bitcoin miner should select an optimal block size to mine based on basic properties of mempool transactions. The paper explains this by expanding on the notions of block space supply and mempool demand curves recently described in the literature. The paper quanties the conditions under which a healthy fee market can be expected to exist based on very simple properties of the mempool. Finally, the paper concludes by quantifying a miner’s revenue advantage as a function of the operating hashrate. We consider the conditions for this advantage to be minimized and show how this is deeply related to the value of block reward subsidies.”
The main argument of the paper uses the mathematical model of added profit per unit of hash as a function of miner hashrate. /u/dpinna shows how large block subsidies and lower mempool fees-to-subsidy ratios) provide extra incentive of pooling large hashrates due to increasing marginal profits. /u/dpinna also outlines the advantage large miners have due to the high barrier of entry into high-efficiency mining class. Unlike the average miner, large hashrate players and high-efficiency miners have access to more consistent expected profits and will likely receive a much more predictable amount of revenue than the average miner due to the fact that they are much more likely to mine a block. /u/dippna’s paper argues that as the block subsidies decrease, the high-efficiency mining class will vanish. As that class vanishes, a new marginal profit structure which decreases as a function of hashrate is expected to emerge.
You can read /u/dpinna’s full paper here.
What do you think about Dpinna’s paper and uncapped block size? Let us know in the comments below!
Images via pixabay