What is the game theory behind the fixed block size and the fee market? \ stacker news ~bitcoin

What is the game theory behind the fixed block size and the fee market?

2276 sats \ 27 comments \ @xmr_btc_furry 12 May 2023 bitcoin freebie

I'm always hearing about the fee market and game theory but I have come to realize that I'm not really sure what it is and the exact incentives.

why would for example the Bitcoin incentives be better than Monero when it comes to block size being fixes and the fee market

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280 sats \ 3 replies \ @Chep 12 May 2023

Fee market game theory is you will pay more to secure your tx in the next block. If you are in a rush. Otherwise you might pay less because you don't care that your tx gets confirmed in ~10 minutes. For the blocksize I'm not sure the game theory but I appreciate that core devs had the foresight to tell big blockers if we increase the block size running a node will become increasingly hard

17 sats \ 2 replies \ @SpaceHodler 12 May 2023

Yeah, and running a node needs to be easy if we want the network to remain decentralized. The blockchain is growing in a more-or-less linear fashion, so the more-than-linear (exponential at least for now, as per Moore's law, but we don't know for how long) growth of storage technology should allow for nodes to become increasingly more decentralized. Not sure about Monero, but had the blocksize wars been won by the large blockers camp (led by Gavin Andresen), the blockchain would grow exponentially and we might get stuck in a centralization spiral.

The fees will go up, but the base chain wasn't meant to scale, that's what LN and other L2 and L3 solutions are for. In the trilemma, decentralization and security cannot be compromised on, so it's scalability that is sacrificed.

0 sats \ 0 replies \ @xmr_btc_furry OP 12 May 2023

yeah the L3 solutions seems great. things like FediMint are awesome although I know there is some discussion if it is L2 or L3.

0 sats \ 0 replies \ @Chep 12 May 2023

I bought an old server with 3terrabytes of space on ebay for this exact reason. Hoping to have it last for the next 10 years🤝

111 sats \ 7 replies \ @scottathan 12 May 2023

Unrelated, but I love seeing Monero people on here, as it's kind of the only true contemporary to Bitcoin, since everything else fails all decentralization tests

60 sats \ 6 replies \ @xmr_btc_furry OP 12 May 2023

yeah, I don't get the hate of a lot of people on Monero I have tried to debunk it and at least for me it feels solid.

I would totally see a world where they just compete as free moneys

0 sats \ 5 replies \ @SpaceHodler 12 May 2023

Same here! But maybe more like: Bitcoin to store wealth in, Monero for payments, with atomic swaps between them.

0 sats \ 4 replies \ @scottathan 12 May 2023

But Lightning is also super useful for payments, and can get you significant levels of privacy.

I suspect the specialization between the two might be something sort of like that, but likely won't be nearly that cut and dry.

0 sats \ 1 reply \ @l0k18 13 May 2023

LN can be more private than monero, or zcash. The use case simply hasn't been supported well yet by existing wallets and deployments. LN uses one shot onion messages which are inherently private, and using hidden services, on both payer and payee. Partly the protocol still needs more work in this direction.

Payjoin batching also can improve privacy by breaking chain analysis assumptions. And then there's bulk channel opening via coinjoins... In times like now, atomic swap into monero via lightning for paying privately makes sense, but wouldn't, if the LN privacy was sorted out properly for such a use case.

23 sats \ 0 replies \ @xmr_btc_furry OP 13 May 2023

That is interesting, I wonder how big are the transaction overall when you do thing privately with Bitcoin, compared to Monero

0 sats \ 1 reply \ @xmr_btc_furry OP 12 May 2023

I do think that until we solve the privacy for receivers on lightning it's not going to compete. Lets hope BOLT12 comes out storming and gets battle tested successfully

0 sats \ 0 replies \ @l0k18 13 May 2023

In theory a LN node on only a tor hidden service giving invoices over a hidden service would be private. Especially if payments are routed with AMP. It's just the lead time of these new features being widely available on peers to be able to do it yet. It needs more infrastructure support before it could be trusted and some sims to attempt to unmask the endpoint's IP address to ensure there isn't any leak.

Mainly it's just someone tailoring a deployment to this use case, perhaps writing a controller that automates it for you and enough people making these hidden endpoints to hide among. So it will take time to happen.

108 sats \ 3 replies \ @iLeitaoMD 12 May 2023

There is no direct relation in game theory, but fixed block size makes bitcoin more secure because decentralization. The base monetary layer of the world must survive all kinds of attacks. There are trade offs, the base isn't made for general use, but for integrity of the system. On the other hand, monero is less decentralize and therefore less secure, losing network effect, it will become obsolet.

54 sats \ 2 replies \ @xmr_btc_furry OP 12 May 2023

I run both Monero and Bitcoin nodes and they both seem equally easy to run. is there an available statistic about Monero vs Bitcoin decentralization.

I'm aware that dev in Monero do have some more power that on Bitcoin

54 sats \ 0 replies \ @ursuscamp 12 May 2023

There are so many facets to decentralization, I don't see how you can really measure it. I think there are aspects of Bitcoin which are more decentralized than Monero, and vice versa.

May the best money win.

0 sats \ 0 replies \ @SpaceHodler 12 May 2023

I like the arguments that Monero's ASCI resistance leads to mining decentralization. They argue ASIC resistant algorithms discourage mining farms, because they will only spawn those when:

everyone who can mine on their home PC already is mining (because it doesn't require additional equipment or real estate)
the leftover profitability justifies setting up a farm

But I guess energy prices play into this too and it may still be profitable to set up a farm where energy is cheap.

254 sats \ 6 replies \ @033daf6a55 12 May 2023

bitcoin price management) such a drop helps lower the price and greatly reduce its purchasing power) especially the equipment. now even the equipment supplier can not hold or oprank the price to make the equipment more expensive) Soon the whole planet will be playing bitcoin

54 sats \ 5 replies \ @xmr_btc_furry OP 12 May 2023

sorry but I don't get what the equipment price has to do with the blockchain

55 sats \ 4 replies \ @scottathan 12 May 2023

The idea is that if nodes become too expensive for the average person to run then consolidation of consensus power into the hands of a fewer number of rich participants becomes likely. This hurts the decentralization and security of the network.

0 sats \ 3 replies \ @xmr_btc_furry OP 12 May 2023

okey okey I got you. That is why I find the Monero approach with RandomX very interesting specially with P2Pool.

On the other hand the idea of industrial miners make a lot of sense and having those around the world creating new sources of energy sounds awesome!

0 sats \ 2 replies \ @scottathan 12 May 2023

Yeah, RandomX is super cool, although I wouldn't be surprised if someone figured out a way to build specialized hardware for it eventually.

I'm not very familiar with P2Pool. Is that anything like StratumV2?

0 sats \ 0 replies \ @033daf6a55 12 May 2023

If necessary, bitcoin will swallow this ability instantly! As it happened with the NFT BRC-20token. So it's just a matter of time. just need to understand that all blockchains are copies. just a testing ground and a test of the necessity of the technology. for example the master node technology, doesn't make sense.... i think i was able to explain the essence of the structure subtly enough.

0 sats \ 0 replies \ @xmr_btc_furry OP 12 May 2023

sorry but I don't know enough to give you an educated answer

10 sats \ 0 replies \ @Jon_Hodl 13 May 2023

I'll chime in here with my two sats.

The game theory of on-chain payments is "if you want your payment confirmed in the next block, you have to outbid all of the other transactions in the mempool" but on-chain transactions are not the only way to send bitcoin so the game theory is more about on-chain payments competing with alternative scaling solutions.

IMHO, the most important game theoretical aspect of on-chain payments is that fee spikes incentivize the innovation, investment, and development in alternative scaling methods.

There is no on-chain incentive to lower fees. The only way that the fee rate goes is up. Every sender is bidding up the price with each and every tx they send.

All of the other scaling solutions put downward pressure on the cost of sending payments by taking transactions out of the mempool. Every transaction sent on lightning is a transaction NOT sent on-chain.

There is even game theory within other scaling methods like lightning. For example: lightning routing fees are a bidding war between routing nodes to bid lower than the cost of other routing nodes so fees trend downward over time. I wrote an entire article on the game theory of the lightning network (https://www.whatisbitcoin.com/lightning-network/game-theory-lightning-network)

The higher on-chain fees go, the greater the need/want for investment in other scaling technologies because those new methods are now cost effective whereas they weren't with 1sat/vbyte txs.

0 sats \ 0 replies \ @l0k18 13 May 2023

Big blocks would reduce the number of people who can afford to run and maintain nodes, and thus increase the number who are trusting others to keep the database correct, and thus reducing decentralisation, the resistance of the network to monopoly.

0 sats \ 1 reply \ @022fbc9cef 12 May 2023

The question is what would happen to/on Monero if it was really used as much as Bitcoin? With tens of thousands of txs per hour? Would it be as decentralized, could people still run nodes?

It is already quite hard to run a Monero full node due to the fact that the cryptography is hard and it requires a lot of computation power (so Pi4 is already kind of too slow). What if the blocks were huge?

If you can only run a node in a data center, they can turn you off.

0 sats \ 0 replies \ @xmr_btc_furry OP 12 May 2023

the scaling on full node is an interesting point. wonder if it's the same on prunned nodes