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Merge pull request #283 from dimitris-t/patch-12

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Typo in appdx-future-segwit.asciidoc
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Will Binns 2017-03-20 10:59:05 -06:00 committed by GitHub
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@ -328,7 +328,7 @@ Memory :: Nodes that validate transactions keep the UTXO index or the entire UTX
As you can see from the list above, not every part of a transaction has an equal impact on the cost of running a node or on the ability of bitcoin to scale to support more transactions. The most expensive part of a transaction are the newly created outputs, as they are added to the in-memory UTXO set. By comparison, signatures (aka witness data) add the least burden to the network and the cost of running a node, because witness data are only validated once and then never used again. Furthermore, immediately after receiving a new transaction and validating witness data, nodes can discard that witness data. If fees are calculated on transaction size, without discriminating between these two types of data, then the market incentives of fees are not aligned with the actual costs imposed by a transaction. In fact, the current fee structure actually encourages the opposite behavior, because witness data is the largest part of a transaction. As you can see from the list above, not every part of a transaction has an equal impact on the cost of running a node or on the ability of bitcoin to scale to support more transactions. The most expensive part of a transaction are the newly created outputs, as they are added to the in-memory UTXO set. By comparison, signatures (aka witness data) add the least burden to the network and the cost of running a node, because witness data are only validated once and then never used again. Furthermore, immediately after receiving a new transaction and validating witness data, nodes can discard that witness data. If fees are calculated on transaction size, without discriminating between these two types of data, then the market incentives of fees are not aligned with the actual costs imposed by a transaction. In fact, the current fee structure actually encourages the opposite behavior, because witness data is the largest part of a transaction.
The incentives created by fees matter because they affect the behavior of wallets. All wallets must implement some strategy for assembling transactions that takes into considerations a number of factors, such as privacy (reducing address re-use), fragmentation (making lots of loose change) and fees. If the fees are overwhelmingly motivating wallets to use as few inputs as possible in transactions, this can lead to UTXO picking and change address strategies that inadvertently bloat the UTXO set. The incentives created by fees matter because they affect the behavior of wallets. All wallets must implement some strategy for assembling transactions that takes into consideration a number of factors, such as privacy (reducing address re-use), fragmentation (making lots of loose change) and fees. If the fees are overwhelmingly motivating wallets to use as few inputs as possible in transactions, this can lead to UTXO picking and change address strategies that inadvertently bloat the UTXO set.
Transactions consume UTXO in their inputs and create new UTXO with their outputs. A transaction, therefore, that has more inputs than outputs will result in a decrease in the UTXO set, whereas a transaction that has more outputs than inputs will result in an increase in the UTXO set. Let’s consider the _difference_ between inputs and outputs and call that the “Net new UTXO”. That’s an important metric, as it tells us what impact a transaction will have on the most expensive network-wide resource, the in-memory UTXO set. A transaction with positive Net-new-UTXO, adds to that burden. A transaction with a negative Net-new-UTXO reduces the burden. We would therefore want to encourage transactions that are either negative Net-new-UTXO or neutral with zero Net-new-UTXO. Transactions consume UTXO in their inputs and create new UTXO with their outputs. A transaction, therefore, that has more inputs than outputs will result in a decrease in the UTXO set, whereas a transaction that has more outputs than inputs will result in an increase in the UTXO set. Let’s consider the _difference_ between inputs and outputs and call that the “Net new UTXO”. That’s an important metric, as it tells us what impact a transaction will have on the most expensive network-wide resource, the in-memory UTXO set. A transaction with positive Net-new-UTXO, adds to that burden. A transaction with a negative Net-new-UTXO reduces the burden. We would therefore want to encourage transactions that are either negative Net-new-UTXO or neutral with zero Net-new-UTXO.