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Author Topic: Q: how does fee motivate miners to process transaction more quickly  (Read 1286 times)
udibr
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April 25, 2011, 03:30:53 PM
 #1

Question:
The motivation of a minner is to create a valid block with as much transactions as possible. Otherwise, someone else might come up with a parallele block with more transaction that will invalidate his work.
So what's keeping a miner from considering all transactions available, without regard to fee.
Or in other words, what is the mechanism by which a transaction with a higher fee will receive faster treatment?
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theymos
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April 25, 2011, 03:40:27 PM
 #2

A block with more transactions isn't "more valid". Miners can generate blocks with no transactions if they want. Transaction fees encourage them not to create empty blocks.

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udibr
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April 25, 2011, 05:32:45 PM
 #3

Thanks,
So if two new blocks started from the same previous block, then the first to appear is taken as the "best" block, regardless of its content?
In this case, why do fee-less transactions are handled at all by the miners (each transaction requires at least the validation work)?
Ricochet
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April 25, 2011, 06:30:29 PM
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My understanding is that the 50 bitcoin reward per block is enough incentive for them to mine, so at the moment it's more at the point where they simply don't care enough to bother blocking fee-less transactions.  Consider it an act of goodwill, if you will.
MoonShadow
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April 25, 2011, 06:40:14 PM
 #5

Thanks,
So if two new blocks started from the same previous block, then the first to appear is taken as the "best" block, regardless of its content?
In this case, why do fee-less transactions are handled at all by the miners (each transaction requires at least the validation work)?

For now, the block reward is enough of an economic incentive for miners.  In the future, as the reward goes down, it is expected that the transaction fees that some people choose to contribute will add up into a block to a respectable amount and take over as the primary incentive.

As it is, there is no advantage to mining an empty block, because the hashing is done against the 80 byte header only; and thus adding more transactions to the block is trivial.  So miners add free transactions out of kindness.  It's a form of charity that will become less common in the future.  There will likely always be miners who are doing it for more reasons than simply the profit from mining itself, and these people are unlikely to reject free transactions.  So in a successful Bitcoin future, traders who have a high value transaction are likely to be contributing a transaction fee in order to have their transaction processed in a timely manner; whereas small transactions, transactions involving external trust (i.e. from friend to friend), and basic donations are likely to have to wait to a lull in the network.  Furthermore, free transactions are prioritized based on how long the (youngest?) input have been in the blockchain, oldest being of the highest priority so that spamming of the network can't significantly delay an honest transaction lacking a fee.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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