The amount of "dust" in the block chain is getting large and it is growing all the time. Currently 11% of unspent tx outputs (UTXO) are of 1Satoshi (0.00000001BTC), 32% is less than 0.0001BTC and 60% is less than 0.001BTC. (Thanks to Jan for digging out these numbers!)

This means that a huge part of the block chain is used for essentially nothing - e.g. the sum of the 11% is worth roughly 2 US cents !

The main source for these 1 Satoshi payouts is Sahtoshi Dice. And nothing wrong with that, however, we should work on ensuring that too many too small payments will not kill the size of the blockchain in the end - further, they are essentially too small to be included in other transaction as the added fee will often make it more expensive to remove them. Hence, there is no incentive to get rid of them.

I have an idea for a possible mitigation of this problem - introduction of demurrage - not as in it normal meaning as a percentage over time (see: http://en.wikipedia.org/wiki/Demurrage_(currency) btw, this has also been tried in freicoin), but as a mean to recycle pennies over time. The proposal is simple - UTXOs age out if not re-transacted - the smaller the coin the faster the aging:
1-99 Satoshi: lives for 210 blocks
100-9999 Satoshi: lives for 2100 blocks
10000-999999 Satoshi: lives for 21000 blocks
1000000-99999999 Satoshi: lives for 210000 blocks

Only amounts above 1BTC lives forever - (or we could even impose aging on those too..)

The aged coins are simply included in the block mining reward, creating another incentive for miners. Further, if we include all coins in this recycle scheme coins will never be lost forever.

This scheme will impose some lifetimes also on e.g. colored coins (hence you need to use a certain amount to borrow space on the blockchain for the time needed, or simply transact them).

If you like this I would be happy to write it into a BIP.

Thoughts ?

I don't think you will get a change like that into Bitcoin at this point.  I would stay away from the "D" word.  It is only going to draw emotional responses.  I don't see a problem with ultra tiny transactions being scrubbed over time but it will be a hard fork and the odds of that happening on anything other than critical fixes is roughly 0%.  It may be useful to use in a new coins.  I would make it a lot less complicated than your mult-tiered system though.  Anything below X becomes can be expired and included in the next block after it is Y blocks old.

Maybe a better system would to have limited the number of digits.  Requiring increasing digits to require a super majority of miners approval.   Start with something like 3 digits and let it expand up to 10 digits based on need*.  Everything internally would be stored as 10 digit "satoshi" integer values.  


*21 million BTC @ 10 digit precision stored as an integer would be max value of  210,000,000,000,000,000 which is less than the max value of 64bit unsigned int  (18,446,744,073,709,600,000). .  If the total number of coins was made to be 18 million instead of 21M one could get 12 bits of precision in the same 64bit unsigned int  18,000,000,000,000,000,000

I'm not certain, but I thought that, in order to increase anonymity, the current client intentionally attempts to use up enough outputs to require change.  This way it is difficult to tell when looking at a transaction which is the change and which is the payment.


This won't help.  You'll still have a small output associated with the existing address instead of at the change address.  The outputs associated with an address aren't all combined into a single output.  They are all separate.  You'd have to create a transaction that sends all the outputs associated with that address to get them combined into a single output.

This risk in doing that is that honest nodes lacking the unimportant tree won't be able to unimportant txs.  This can allow an attacker to flood the network with bogus transactions which honest but uninformed nodes will still forward.  One countermeasure could be to require a proof of work on unimportant transactions.  Nodes lacking both trees couldn't validate the tx but could validate the proof of work.  Thus there is now a cost for attackers in attempting to flood the network.

A side note:  even if all nodes kept all tx (as they do now) pruning out the spam along with spent tx into a separate table, db, index may improve performance.  Essentially the ultraprune method but include "low probability" outputs in the spent set.

So a node receives a tx.  It does a high speed lookup in its active but unspent tx set (which may be cachable in memory).  If there is a match it validates, adds to the memory pool, and forwards.   If there is no match it looks in the spent & improbable set.  Most transactions are performed quickly.  The occasion bulk spent of low value outputs may require a second slower lookup but it is offset by the gains in performance on the majority of transactions.

As long as the protocol supports a method for node to identify their capabilities and allows a node to find a "full set" node to relay to it really isn't a problem.   

Currently they can't which likely would mean a lot of confusion.  i.e. I create a valid tx, submit it, and it is rejected by all my peers.  The tx never goes anywhere.  My nodes keeps trying to send it forever and the recipient never even knows it exists.

This cannot be done because it is in violation of the common contract we are all involved in that we call the bitcoin protocol. We have to live with a design that allows these to accumulate.

I have never understood why we could not just take the top 200k blocks and replace them with a "key frame" of sorts and go from there. A very public checksum of this keyframe can be built into clients to prevent revisionism.

If a single satashi is never used again then it never adds to the size of the blockchain again right? Even if you combine the 11% of outputs that add up to 2 cents you will still have all of those outputs in the chain, they will just be spend.

The contract is the bitcoin protocol, you sign when you send money. Any transaction that involves taking away other people's money no matter how small will be rejected by clients due to not meeting the agreed upon contract the clients enforce.

Since it is unlikely you will ever get 51%+ members of the communal contract to agree to this and start doing it at the same time it is very unlikely the blockchain will ever include removal of funds from an address without a signature from its private key.

Yes, I was referrring only to the transaction auditing rules. The transport mechanism can be switched out without issue.

I agree that the way transactions are crafted can change to reduce dust production, clients can even refuse to relay dust.

But the dust that already exists can never be moved without the private keys for them, not without violating the transaction auditing rules we have all agreed to.

I do love the idea of POW validated UTXO set, that however would remain "dusty".

The spending clients should prefer to aggregate inputs to address this.

I think that that only miner, merchants and web wallet services will be storing the chain soon.