Changing the minimum relay feerate

The dynamic adjustment of minimum relay fees in Bitcoin Core to better align with blockspace demand and exchange rates, while maintaining DoS protections, presents a complex challenge. The difficulty lies not just in choosing which transactions to include in blocks based on a metric like the percentile of transactions included, but also in accounting for the costs associated with relaying transactions across the network. Miners bear only a fraction of the total cost of relaying a transaction, which might incentivize them to include transactions at a feerate (sats/vB) lower than the actual network relay cost.

The network relay cost can be exemplified through calculations that consider the cost of bandwidth and the number of nodes in the network. For instance, using EC2's highest bandwidth tier priced at $0.09/GB and a Bitcoin value of 100,000 USD, the bandwidth cost translates to approximately 0.036 sats/vB for 100,000 nodes. This calculation underpins a proposed minimum relay feerate of 0.1 sats/vB, aimed at making the cost of conducting a DoS attack via transaction relay higher than that of other methods such as exploiting EC2 bandwidth.

However, accurately determining the external cost to relay transactions to the Bitcoin network involves variables that are difficult to precisely measure, such as the cost of internet bandwidth (in sats / 4 bytes) and the exact number of nodes, which is susceptible to manipulation through sybil attacks. This complexity raises questions about whether Bitcoin Core can dynamically adjust minimum relay feerates or if it will continue to rely on hardcoded values, adjusting to shifts in network and market conditions only with subsequent release cycles.

The discussion also references a proposal by @0xB10C concerning prefill strategies that could alleviate issues with compact block relay related to minimum relay feerate settings. Coupled with considerations around the cost implications for the network and miners, these discussions highlight the intricate balance between operational efficiency, economic factors, and security measures within the Bitcoin protocol.