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Author Topic: [PPC] Peercoin transaction fee - what incentives?  (Read 2138 times)
gluk64
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November 22, 2013, 12:07:18 AM
 #1

In peercoin transaction fees are not earned by the miner. In the absence of this incentive, what would prevent a miner from including only a few transactions in the new block when the transaction volumes become high?
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masterOfDisaster
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November 22, 2013, 09:54:07 AM
 #2

As Peercoin does not only create PoW (Proof-of-Work) blocks, but PoS (Proof-of-Stake) blocks as well, there is an incentive: to get rewarded for creating a PoS block (roughly 1% of the coins at stake per year).
PoS blocks already outnumber the PoW blocks and that ratio will continue to grow.
So as long as there is a PoS process going on, there is no need for getting transactions fees as incentive.
...providing an incentive might one day become a problem for Bitcoin; if there's only transaction fees as incentive, because the coinbase reward is close to 0, the PoW process might become abandoned...

That is one of the beauties of PPC; PoS mitigates this possible problem!
gluk64
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November 22, 2013, 10:06:46 AM
 #3

Thank you, but you're answering a different question. I see the beauty of PoS, this is exactly why I'm examining PPC as a possible investment.

There is indeed an incentive to create a PoS block and get rewarded (or rather not to loose 1% of your money).

There is however no incentive to include all known transactions in this block! Moreover, there is an incentive NOT to include the transactions, as their volume gets very high. How will PPC cope with this?
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November 22, 2013, 11:10:09 AM
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If there were a consent of a majority of miners not to include transactions this might become a problem. As long as there are enough miners trying to include the transactions, I don't take this as a problem. Basically it's a kind of > 50% attack you are talking about. And especially with PoS it is an economical problem to place a > 50% attack, because successfully executing such an attack renders your coins worthless without having the chance to spend them soon (they need to mature for 520 blocks in case of Peercoin and having them successfully used for creating a PoS block before the can be spent).

You say there is no incentive to include transactions. I say the incentive is to keep the network sane. If you want to successfully exclude transactions you risk the whole concept. If you try to do it successfully, you need to have a big share of the coins. You can do it, but you shoot yourself in the foot. I tried to do some math here. Maybe you find that interesting: https://bitcointalk.org/index.php?topic=326216.msg3526904#msg3526904

Where is the incentive not to include transactions?
Can you please explain the advantage of not including transactions into a block?
...maybe I still miss the point...
gluk64
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November 22, 2013, 11:36:20 AM
 #5

Can you please explain the advantage of not including transactions into a block?

Sure. Visa currently processes 1,2 million transactions every 10 minutes. Assume we approached 10% of this volume. At an assumed average transaction size of 500 bytes, a block would have to be 60 Mb heavy. It requires a lot of computation power to verify every transaction and a lot of network resources to spread the block. So a few miners start to ignore some of the transactions. This will increase the load on the next blocks, creating even more incentive to exclude transactions, and so on. We will start to deal with the Prisoner's dilemma/Tragedy of Commons sort of problem here, with Nash equilibrium inclining miners towards NOT to include transactions.
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November 22, 2013, 12:50:36 PM
 #6

This is a high number and most crypto coin networks will have problems with that high transaction rate.
But I still think the incentive to include all transactions in the peercoin blockchain is to keep the network sane, this particular crypto coin trustworthy. Not including transactions risks the credibility of the network and therefore the value of the coins. No one with a large amount of stakes should be interested in putting the credibility at stake (but rather the coins for stake minting Wink ). And with a little amount of coins you can hardly keep transactions excluded if all other miners include them in their blocks.
Like I tried to calculate in that other post I linked: such an "attack" is not impossible, just not economically clever. This kind of "bad behaviour" is possible but I doubt it can be important.

The incentive for including all transactiions is to keep the trust in the network as that is all which crypto coins rely on (and luckily and in difference to fiat curencies all the need to rely on).
tacotime
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November 22, 2013, 01:20:58 PM
 #7

^^ Doesn't that give PoS miners an incentive to start charging people to make network transactions outside/inside the chain if volume is high?  e.g. Bob, Nancy, and Phil have the majority of stake and collude to only allow transactions through the network if the end user pays a fee to them via their centralized website or the blockchain.

My thoughts have always been that PPC in the long run is a trainwreck waiting to happen, despite the fact that I'm greatly invested in it in the short run because I believe that the difficulty/reward algorithm will quickly make for a massive pump.

Code:
XMR: 44GBHzv6ZyQdJkjqZje6KLZ3xSyN1hBSFAnLP6EAqJtCRVzMzZmeXTC2AHKDS9aEDTRKmo6a6o9r9j86pYfhCWDkKjbtcns
masterOfDisaster
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November 22, 2013, 01:38:15 PM
 #8

And once again this is undermining the trust in the currency and bad for those who own coins - especially bad if they own a lot of coins...
Like i said before: this kind of "attack" (I consider this an attack, because it differs from regular and well-meaning behaviour) is possible, but not clever. Would you like to have transactions processed by paying fees on a different way than the network fees (btw. you can't prevent transactions form having fees in PPC network)?
So if you have to pay additional fees you will most likely switch to another payment option (which would mean selling all your coins).
Bob, Nancy, and Phil might remain the only ones in that network. I doubt their coins will be very valuable then after all others have subsequently sold their coins.
No good idea for Bob, Nancy, and Phil not to behave fair.

You can never have 100% safe networks. But if you need to invest a lot of money just to undermine e.g. PPC, you have obviously no direct financial incentive for doing so.
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November 22, 2013, 01:42:04 PM
 #9

So if you have to pay additional fees you will most likely switch to another payment option (which would mean selling all your coins).
Bob, Nancy, and Phil might remain the only ones in that network. I doubt their coins will be very valuable then after all others have subsequently sold their coins.
No good idea for Bob, Nancy, and Phil not to behave fair.

Yes, but all it takes is adding an extra output to one of their addresses for each transaction in the blockchain.  And if they start charging a few fractions of a cent and the coin is worth something (like a dollar as it is now), it's just going to make for a chain with "regular" transaction fees and destroyed transaction fees.

So, you would have a direct financial incentive to do so, and no one would be able to stop you.  This is the same thing that goes on with arbitrary banking fees worldwide, and the end user is powerless to stop the bank because they need to transact money.  If you're sneaky enough about this you can do it under the guise of something like, "the PeerCoin network improvement fee that goes towards research, innovation, and development of the PeerCoin cryptocurrency."

Code:
XMR: 44GBHzv6ZyQdJkjqZje6KLZ3xSyN1hBSFAnLP6EAqJtCRVzMzZmeXTC2AHKDS9aEDTRKmo6a6o9r9j86pYfhCWDkKjbtcns
gluk64
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November 22, 2013, 02:20:35 PM
 #10

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So, you would have a direct financial incentive to do so, and no one would be able to stop you.  This is the same thing that goes on with arbitrary banking fees worldwide, and the end user is powerless to stop the bank because they need to transact money.  If you're sneaky enough about this you can do it under the guise of something like, "the PeerCoin network improvement fee that goes towards research, innovation, and development of the PeerCoin cryptocurrency."

Exactly. But even if you don't indulge in such schemes, including a transaction in your block at high volumes will cost you (high) personal expenses, while the beneficiary will be general public. Some people will inevitably cheat in these conditions, trying to parasite on the rest of the network. It will inevitably lead us to the Tragedy of the Commons problem.

A cryptocurrency architecture that relies on altruism while cheating can be beneficial to some extent, is far inferior to an architecture, where no egoistic behavior can ever gain you any benefit. I would not bet any significant fortune on the PPC because of this reason unless this aspect is fixed, and so would many other investors probably. Therefore I see not future for the PPC so far...
masterOfDisaster
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November 22, 2013, 07:07:34 PM
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Yes, but all it takes is adding an extra output to one of their addresses for each transaction in the blockchain.  And if they start charging a few fractions of a cent and the coin is worth something (like a dollar as it is now), it's just going to make for a chain with "regular" transaction fees and destroyed transaction fees.

That sounds like you have to adjust the code of the mining software. If no majority agrees on that version, this will not create a problem. The fair users stick to their version. Although you will most likely create a hard fork and can gather all cheaters in the new block chain. Congratulations!

So, you would have a direct financial incentive to do so, and no one would be able to stop you.  This is the same thing that goes on with arbitrary banking fees worldwide, and the end user is powerless to stop the bank because they need to transact money.  If you're sneaky enough about this you can do it under the guise of something like, "the PeerCoin network improvement fee that goes towards research, innovation, and development of the PeerCoin cryptocurrency."

In a world with open source software and some intelligent people this is not likely to happen. People will discuss this as we do right now.

masterOfDisaster
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November 22, 2013, 07:12:43 PM
 #12

Exactly. But even if you don't indulge in such schemes, including a transaction in your block at high volumes will cost you (high) personal expenses, while the beneficiary will be general public. Some people will inevitably cheat in these conditions, trying to parasite on the rest of the network. It will inevitably lead us to the Tragedy of the Commons problem.

A cryptocurrency architecture that relies on altruism while cheating can be beneficial to some extent, is far inferior to an architecture, where no egoistic behavior can ever gain you any benefit. I would not bet any significant fortune on the PPC because of this reason unless this aspect is fixed, and so would many other investors probably. Therefore I see not future for the PPC so far...

It is no altruism not to cheat. The benefit of not cheating is keeping the value of the coins. You can for sure try to undermine Peercoin (as you can undermine every single crypto coin) this way. But undermining it to gain profit doesn't work this way. You ruin the trust and hence the value if you act like this. There is no benefit in excluding transactions from the block chain. The architecture doesn't rely on altruism but on maintaining the value of the coin!
Sunny King
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November 22, 2013, 10:34:25 PM
 #13

This is an old topic. I can summarize the major points known about this argument:

Q) Will minters stop processing transactions and cause a degradation of service on transaction processing.

  • Transaction processing is cheap at reasonable volume. There is very little incentive to do this.
  • I don't view block chain system as the most suitable medium for high volume transaction processing, so transaction fees in PPC serve an important mechanism to control volume on the block chain. This is why transaction fees are currently fixed at 0.01 per KB.
  • There were proposals that distribute partial transaction fees to minters but I am not in favor of them at the moment.
  • If this truly becomes a problem, the default minting algorithm could possibly be revised to include an adversarial strategy to deter such behavior, for example delaying building on top of a 'cheating' block.
  • Demanding fees from users wouldn't be very different from bitcoin, as it's construed as a legitimate action from minters. Only difference is in PPC you would need to ask users to add additional outputs in order to collect the fees yourself, causing bloating. I doubt such strategy would work well for minters though, again PPC is meant to be highly decentralized and not sacrificing decentralization for high volume transaction processing.
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