Estimating the marginal cost of a transaction on the Bitcoin (Cash) network
Recently, the mempool has not been clearing with every block found. Should we immediately raise the block-size? Perhaps put plans to make the easy relay of sub satoshi/byte transaction on hold? Assumptions:
The marginal cost is made up of: hard-drive space (replicated world-wide), bandwidth relaying (also world wide -- partial fixed cost?)
Expanding the UTXO set incurs a further penalty, based on the price of RAM.
Mature network needs about 1000 mining nodes world-wide. Further, these mining nodes avoid the "tragedy of the commons" problem by charging a proportionally higher fee if they are less likely to get a block.
The following are fixed costs: Hashing equipment and maintenance, Space rental, electric, cooling, staff, etc.
I will neglect the CPU time required to validate a transaction since I have no good way to estimate that.
Assuming 1 CAD is 80 cents USD
Based on this discussion thread I am going to assume 8GB blocks to approximate the limit as the number of transactions go to infinity. Note: Chassis I chose only supports 300TB after parity.
Step 1: find the price of storing a transaction Searching NCIX:
As you can see. miners have a strong incentive to offer free UTXO consolidation transactions: and require bulk UTXO fanning transaction to pay a fee of 494.86sat/kB -- about 0.5 sat/byte. ((0.01249USD/kB)/(2523.96USD/BCH)*100,000,000sat/BCH) Fees are no where near that high due to the block subsidy. For an 8MB block: 1,250,000,000 satoshies/ 8000 kB -> 156,250sat/kB; or more conventionally: 157satosies/byte.. Note that the block subsidy per kB goes down with larger block-sizes. Step 2: Estimate Bandwidth costs Disclaimer: I am not too familiar with commercial bandwidth plans
According to slide 19 on this PDF document, you should be able to get IP transit for less than $10/Mbps in major cities (10GB-ethernet pricing).
Let's assume you budget 1Gbps of IP transit for your full node. You are also sharing with at least 8 peers. -> $10,000 USD/month
8GB blocks work out to 34.560TB/month x8 -> 276TB/month
That implies a utilization of: 64GB/600s*10bits/byte -> 1.066 Gbps -> we need a 10Gbps connection.
Cost Per kB: ($100,000/month)/(34.560TB/month)/(1,000,000,000kB/TB) -> 2.89 microdollars/kB (rounding error, unless I messed up the math)
Edit: If we assume the miners average their costs (like earlier) x1000: 2.89Mills/kB (57x the storage costs)
Exercise to the reader: Re-do these calculations for hobbyist hardware and internet connections. You probably have to assume a smaller block size: such as 100MB. Disclaimer: I later learned the site I was using for prices (NCIX) was bankrupt. Not sure how much that would skew prices.
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