A Market For Bitcoin Transaction Fees?
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Most participants in the ongoing Bitcoin block size debates have a point of agreement; that a shortage of block space should have an effect on transaction fees. Arguments aside, then, let's see what has actually been happening. Are fees going through the roof? Are miners going to be celebrating a potential offset to the block reward halving that looms in July 2016? The results seem a little surprising!
Behold Mighty Exahash, Hammer Of The Blocks!
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"Exahash" sounds like it could well have been the hammer of the Norse Gods of old as it defeated all in battle. In the Bitcoin world of early 2016, however, a mining network that achieves one exahash per second will soon become part of the new folklore. It will, as others before it, quantitatively destroy all earlier incarnations of itself.
Common wisdom that this ever-increasing hash rate makes the Bitcoin network continually stronger, but what does that strength mean? What is it stronger than? What guarantees does it offer? The answer, as so often, is perhaps less clear-cut than we might first imagine!
Blockchain, What Art Thou?
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As we approach 2016 there seem to be endless discussions about "blockchain". It's a term that is ever-more frequently cited in even mainstream journalism, while in the fintech space alone there are a slew of would-be suppliers and would-be users claiming that "blockchain" will revolutionize any number of applications. This now-common usage suggests it must be something precisely defined and well understood, but this seems to be more a matter of mantra than comprehension.
The echo chambers of the Internet reverberate to many opinions, but attempts to find a precise meaning seem to find a dismaying lack of agreement. To be anything more than marketing hyperbole we really need the answers some questions. What is it? What isn't it? What might it be? Can it be something that will allow us to build new and enduring systems? In short, what is the essence of blockchain?
Bitcoin Traffic Bulletin (Redux)
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In November 2014 I wrote an article, "Bitcoin Traffic Bulletin" that sought to look at what happens if the Bitcoin network started to get congested. Since then there has been considerable debate about the Bitcoin block size and there are now many proposals to increase block capacity.
The original asked questions about what it would mean to reach, say, 50% block capacity but events have moved on and we're at nearer to 60% at the time of writing. It's probably a good time to review things once more!
Waiting For Blocks (Revised)
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Bitcoin blocks take 10 minutes to find don't they? Well, actually no they don't. Sometimes they can be found really quickly, but other times they can take a very long time. Just to make things confusing, the gaps between blocks can change depending on whether the hashing network is stable, expanding or contracting. What if we need 6 blocks (to get 6 confirmations)?
So what should we expect? What happens during hashing growth phases, and what would happen if the network were to lose large amounts of hashing capacity?
The Myth Of The Megabyte Bitcoin Block
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It's well described how Bitcoin has a one Megabyte block limit; it's defined in the Bitcoin Core source code. The knowledge of that 1 Mbyte limit has even served in some of my analysis such as "The Future Of Bitcoin Transaction Fees?", "Bitcoin Traffic Bulletin" and "7 Transactions Per Second? Really?". Turns out that I was wrong; in practice this limit is actually quite a lot smaller!
Pool Wars?
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An intriguiging paper, "The Miner's Dilemma" was published a few days ago by Ittay Eyal. It describes an attack by which an open mining pool may be attacked using block withholding. Given that most Bitcoin mining is managed by open mining pools then it seems like it ought to raise a few eyebrows (perhaps more than it has already). Just how does this attack work though, who wins, who loses and by how much?
The Future Of Bitcoin Transaction Fees?
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Bitcoin is often touted as having substantially lower fees associated with using it than most other financial systems, but fees and costs are very different things. The reality of things in the Bitcoin ecosystem is rarely simple, and this one is no exception. What then are the actual numbers, where are they heading and what are the consequences?