Bitcoin mining is entering a transformative phase, with miners at OCEAN incorporating the Coin Age Priority algorithm into their block template construction via DATUM. This shift marks a significant departure from the traditional mechanics where Bitcoin Core selected transactions based solely on their chronological order in the mempool. Originally, the process focused on older coins, giving priority to transactions that had been unspent for extended periods. However, this methodology faced obsolescence around the time of Segwit but remains a feature in Bitcoin Knots.
The rationale behind the miners’ adoption of this algorithm remains somewhat speculative. One plausible motive could be a drive towards enhancing the viability of financial transactions over others, a consideration that may not intuitively align with the essential goals of maximizing miner revenue. Even if the intent is to streamline transaction processing for small-value UTXO owners, such decisions reflect a broader tendency toward economic irrationality.
As miners, you have the autonomy to partition blockspace and prioritize transaction ordering based on various criteria. Yet, this strategic freedom does not negate an essential truth: blockspace operates as a fungible good within an open market. Choosing inclusion criteria that deviate from fee rates typically leads to one inevitable outcome—leaving money on the table. Only under conditions where the alternative criteria align perfectly with fee rate considerations can this practice be deemed economically sound.
Implementing a distinct blockspace subsection based on alternative criteria yields two critical consequences:
- Foregone profits: Any selected criteria that diverges from pure fee rates will ultimately reduce the total fees collected by miners.
- Competitively pressured transactions: Miners subjected to varied competitive pressures will see the efficiency of their revenue collection methodologies compromised, as users can exploit these newly-established transaction selection criteria without any genuine financial benefit flowing back to the miners themselves.
This newly created subsection of blockspace may indeed fail to alleviate overall fee pressure. Instead, it only positions miners to earn diminished profits while enabling users to navigate non-standard transaction pathways. Ultimately, this leads to the stark reality that blockspace pricing remains a matter for the open market, demanding either acceptance or a relinquishment of potential earnings.
A misguided endeavor might involve attempting to censor certain transaction types based on personal preferences. Should such censorship succeed, it would irrevocably compromise one of Bitcoin’s foundational attributes—its decentralized nature.
Lastly, preserving a decentralized mining ecosystem is essential for sustaining Bitcoin’s resistance to censorship. Unfortunately, the emergence of economically irrational behaviors among smaller miners raises significant concerns about their long-term viability within the network.
This article embodies a detailed analysis of current trends in Bitcoin mining. The views expressed are solely those of the author and do not reflect any organizational perspective.