Erlay: Define fanout rate based on the transaction reception method

At the heart of this study is the concept that the efficiency of transaction propagation can be significantly enhanced by adjusting the fanout rate based on the transaction's stage within the propagation process. Initially, a high fanout rate is advantageous as it enables rapid dissemination across the network with minimal redundancy. As the transaction permeates through the network, a gradual reduction in the fanout rate is recommended, shifting the emphasis towards set reconciliation to address any remaining discrepancies.

A pivotal aspect of this approach hinges on distinguishing the propagation method—whether a node receives a transaction via fanout or set reconciliation. The premise is that transactions received through fanout, indicative of being closer to the source, should be propagated at a higher rate compared to those received via set reconciliation. This strategy aligns with the notion that fanout, being inherently faster, serves as an ideal mechanism for initial propagation, while reconciliation is more suited for later stages to refine the dissemination process.

To validate these hypotheses, a series of simulations were conducted, underpinned by two fundamental assumptions: maintaining a higher, yet not excessive, fanout rate when transactions are received via fanout to avoid undue redundancy, and increasing the number of outbound connections for fanout without altering inbound connections to safeguard against potential malicious activities. These simulations, executed across a network comprising 110,000 nodes (10,000 reachable and 100,000 unreachable), explored various configurations to ascertain the optimal balance between fanout rates during reception via fanout and set reconciliation.

The findings from these simulations revealed a tangible reduction in transaction latency, particularly notable in configurations that employed a balanced approach to fanout rates. For instance, a setup marked as "1/10% + 4/10%" not only matched the baseline reference in terms of propagation speed but also demonstrated an approximate 18% improvement in speed with a mere 6.5% increase in bandwidth usage for reachable nodes. This contrasted with more aggressive configurations, which, while further reducing latency, incurred significantly higher bandwidth costs.

In conclusion, the study posits that adjusting the fanout rate based on the transaction's reception method presents a viable strategy for enhancing transaction propagation efficiency within the Bitcoin network. The "1/10% + 4/10%" configuration, in particular, emerges as a promising candidate, offering a judicious blend of reduced latency and conservative bandwidth utilization. This nuanced approach underscores the potential of leveraging dynamic fanout rates to optimize the trade-off between speed and resource consumption in transaction relaying.