It has been quite some time since we heard complains of transactions not making it into blocks in any blockchain.
Their sudden appearance does give some a warmy fuzzy feeling of 2015-16. Even the Blockstream employees couldn’t help it:
Yet what happened, why now, what are the considerations and what is the potential temporary solution to the never ending blocksize matter.
Politics, What Politics?
When airdrops clogged eth for a day or two, everyone knew it was temporary – as in some weeks of one after the other doing it. Now, however, it’s Tether, and that is unlikely to be temporary.
They are handling incredible volumes of 100,000 on-chain transactions within just the past seven hours. So adding pressure with a backlog of 100,000 transactions created.
That spike in demand for the movement of tokenized dollars messes up gas/fee calculations as the cost of inclusion suddenly becomes outdated.
There are ways around it by having a max fee, but complications arise due to smart contract transactions costing a dollar or so even when there is no congestion.
So the end user experience can be less convenient during a congested period, with Binance for some reason deciding that all tether need to be ERC-20 tokens.
Why? Well, they don’t say, so we have to point out they have their own BNB chain which tries to sort of serve tokens, so look at our uncongested network could be one play.
Then there are eth like chains which plan to launch perhaps within weeks. It so happens one of them “controls” quite a bit of ethereum’s network, with the miner that is holding out perhaps running their software.
The play there is obvious too: we have capacity, you don’t. Look at our blockchain, our blockchains amazin.
Pure speculation, all of the above, but the entire ethereum network pays in fees just 900 eth a day, or about $160,000.
If you have VC money and a lot of tokens to sell and want to make a splash of sorts, with just $100,000 you can probably increase complains 10x.
Little is known about this pool which happens to control about 25% of ethereum’s known hashrate.
They are owned by Peter Pratscher (pictured above), a former cement specialist who in 2016 founded Bitfly, the Austrian registered parent owner of Ethermine.
Their mining facilities appear to be in Asia, Europe, and in America where they have two of them:
They appear to be loud supporters of ProgPoW, with it unclear what relationship, if any, they might have with Core Scientific.
What is very clear is that they have a very close relationship with ethereum developers:
The client they seem to run is Parity or was last year, with Bitfly so stating at the time:
Most importantly, they admit significant efficiency gains in regards to orphaned uncle blocks, stating:
Raising the question as to why they are voting down the gas limit. We asked, but received no response in time for publishing.
Too Cheap or Too Much Greed?
Simple ethereum transactions currently cost about 10 cent for next block inclusion. Arguably that’s a bit too cheap, and arguably tether users can bear a lot more than that.
As a tangent, if fees rise 10x from here to a dollar, they would just about replace the current block reward given to miners daily at circa 13,000 eth as fees would be about ◊9,000.
That presumes demand obviously, but it is somewhat interesting just how low fees have to be even under current capacity to support security.
As there is a very substantial amount of miners’ subsidy paid by holders who have seen their wealth drop at times by 90%, you would think a doubling of eth’s current capacity would be absolutely uncontroversial as it would still be a bit less than bitcoin’s capacity even after the doubling.
Yet some perhaps rightly raise the matter of resources, node synching and so on, with perhaps a more important point here being whether eth should be subsidizing USDT.
We say subsidizing because they’re kind of demanding the same resources as eth itself, while not quite contributing to the demand for eth the token except for in a very minimal way.
If you are in the business of arbitrage, then fees of $1, $10 or even $100 might be just a business cost. If instead you want to use eth in the ordinary course of action, then fees of $10 would obviously make you a bit uncomfortable.
Yet what we have is the opposite of incentive alignments. USDT takes more gas, and thus pays more, at the same level of priority as eth which takes less gas, and pays less, unless it’s a smart contract interaction in which case it might take more gas/fee than USDT, with all constrained within the same amount of total space.
Discriminating there can be done in regards to bytes with a lot of efficiency possible here, but in some ways one can see a situation where eth is a second class citizen in its own house because cost considerations can be very different for specialized arb use cases which can crowd out eth.
Yet if you look at it from a pure money making perspective, as a cement specialist probably does, whether it is USDT paying you or eth, is irrelevant as long as they pay you the utmost they can bear.
In addition an entity like Ethermine might care more about how much they pay their miners in a fierce competition with the China based Spark Pool.
So if the latter includes cheaper transactions while Ethermine tries and up them, then perhaps they think they might attract more miners.
The ProgPoW team furthermore is perhaps utilizing this pool – which seems to have some connection with My Crypto – with their own hash, a pool that mines ETC and Zcash and for some reason forked the latter.
So we may well have here something completely unsurprising: a merger of some miners and devs in a collusion with the latter being under the influence of the former. Hence the complete silence from any dev in regards to this matter.
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