[BUG]: spammers get Bitcoin blockspace at discounted price. Let's fix it

[BUG]: spammers get Bitcoin blockspace at discounted price. Let's fix it

Posted on: January 9, 2024 13:55 UTC

The discussion begins by addressing the consideration of byte size in transactions within the P2P protocol, emphasizing that its significance is not intrinsic but rather a consequence of the chosen encoding scheme.

It's pointed out that this measurement directly affects bandwidth and disk usage for nodes that do not prune data, suggesting that if minimizing this impact were a priority, more efficient encoding methods could be used. Such a change, however, would not alter the consensus rules that continue to count transaction sizes based on their original encoding, highlighting the arbitrary nature of weighing every byte equally under current serialization.

The topic then shifts to the concept of witness discount, which affects fees and the capacity for transactions to displace others within the block space. The writer illustrates that modifying the weight assigned to transactions has a two-fold effect: it changes the fee structure and alters how much other transaction data can be included in a block. For instance, doubling the weight of certain transactions would require them to pay higher fees and occupy more block space, thereby displacing other transactions. This indicates that changing transaction weights does not necessarily alleviate fee competition unless there is a superlinear relationship between fee increases and demand decreases.

Furthermore, the dialogue highlights the asymmetry in the Bitcoin ecosystem regarding who bears the costs of transactions. While fees are paid to miners, they are not the ones who incur the resource-intensive validation work; that burden falls on node operators who maintain the network independently of mining fees. Despite this, nodes have the collective power to enforce consensus rules, such as the witness discount, aiming to discourage resource-heavy transactions.

Lastly, the potential impact of Utreexo, a new technology poised to reduce the significance of the UTXO set size, is scrutinized. Utreexo introduces a novel type of node that requires proofs for full validation, necessitating bridge nodes to connect with traditional nodes. This arrangement implies higher resource costs for bridge nodes and an ongoing dependence on the UTXO set size. The integration of Utreexo into the Bitcoin network is complex; lightweight wallets would need external services for proof generation, and presigned transactions cannot include proofs due to their perishable nature. Unless there is widespread adoption of Utreexo among miners, those who use it will face latency disadvantages without access to bridge services for proof construction. Consequently, while Utreexo may shift the concern of UTXO set size, it also introduces additional costs and considerations.