[BUG]: Bitcoin blockspace price discrimination put simple transactions at disadvantage

Posted by Greg Tonoski

Jan 21, 2024/17:14 UTC

The discussion on transactional efficiency within blockchain technology often revolves around the UTXO (Unspent Transaction Output) set size, which is a critical factor in the overall health and scalability of certain blockchains. However, a point of contention arises with the assertion that the UTXO set size is an irrelevant metric when considering the disadvantage simple transactions face. These transactions, which do not necessarily alter the UTXO set size, are still at a disadvantage due to other factors.

It's argued that there is a financial disincentive for users to incorporate data into non-witness parts of a transaction, such as the outputs. This leads to an increase in witness data, which is where additional information related to a transaction is stored, separate from the main part of the transaction that affects the UTXO set. As a consequence, the blockchain could become bloated with this type of data—highlighted by the example of a JPEG image embedded within a transaction in an exceptionally large 4MB block—instead of being populated with simpler, more straightforward transactions.

Moreover, while it is understood that the UTXO set will naturally expand as the number of participants in the network increases, it is noted that blockspace price discrimination has not successfully curbed this growth. In essence, the debate suggests that focusing solely on UTXO set size misses the broader implications of how blockchains are evolving and the types of data they are increasingly being asked to store. The argument posits that as these trends continue, the fundamental nature of blockchain is shifting away from its original purpose.

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