A Systematic Approach to Cryptocurrency Fees
This paper is devoted to the study of transaction fees in massively replicated open blockchain systems. In such systems, like Bitcoin, a snapshot of current state required for the validation of transactions is being held in the memory, which eventually be
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Ergo Platform, Sestroretsk, Russia IOHK Research, Sestroretsk, Russia {alex.chepurnoy,dmitry.meshkov}@iohk.io Helmholtz Institute Jena, Froebelstieg 3, 07743 Jena, Germany [email protected] 2
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Abstract. This paper is devoted to the study of transaction fees in massively replicated open blockchain systems. In such systems, like Bitcoin, a snapshot of current state required for the validation of transactions is being held in the memory, which eventually becomes a scarce resource. Uncontrolled state growth can lead to security issues. We propose a modification of a transaction fee scheme based on how much additional space will be needed for the objects created as a result of transaction processing and for how long will they live in the state. We also work out the way to combine fees charged for different resources spent (bandwidth, random-access state memory, processor cycles) in a composite fee and demonstrate consistency of the approach by analyzing the statistics from Ethereum network. We show a possible implementation for state-related fee in a form of regular payments to miners.
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Introduction
Bitcoin [16] was introduced in 2008 by Satoshi Nakamoto as a purely peer-to-peer version of electronic cash with a ledger written into blockchain data structure securely replicated by each network node. Security of the cryptocurrency relies on its mining process. If majority of miners are honest, then Bitcoin meets its security goals as formal analysis [10] shows. For the work done a miner is claiming a reward which consists of two parts. First, some constant number of bitcoins are created out of thin air according to a predefined and hard-coded token emission schedule. Second, a miner claims fees for all the transactions included into the block. As shown in [7], constant block rewards are an important part of the Bitcoin protocol. Once a predetermined number of coins will enter the circulation and miners will be rewarded by transaction fees only, their rational behavior could be different from the default mining strategy. It is still an open question whether Bitcoin will meet its security goals in such circumstances, but at least number of orphaned blocks will increase making Bitcoin less friendly for regular users. c International Financial Cryptography Association 2019 A. Zohar et al. (Eds.): FC 2018 Workshops, LNCS 10958, pp. 19–30, 2019. https://doi.org/10.1007/978-3-662-58820-8_2
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A. Chepurnoy et al.
A transaction fee, which is set by a user during transaction creation, is useful to limit miners resource usage and prevent spam. In most cases a user pays a fee proportional to transaction size, limiting miners network utilization. A rational miner does not include all the valid transactions into blocks as, due to the increased chances of orphaning a block, the cost of adding transactions to a block could not be ignored [3,18]. As shown in [18], even in the absence of block size limit Bitcoin fee market is healthy and the miner’s surplus is maximized at a finite size of a block. Thus miners are incentivize
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