title: Pettycoin Revisited Part II: Proof of Propogation

layout: post

title: Pettycoin Revisited Part III: Miner Rewards

commentIssueId: 41

In bitcoin, miners take any difference between the amounts input in a

transaction, and the amount output; this is called the transaction

fee. When designing a system where nodes don't know every

transaction, how do you verify that the miner has claimed the correct fee?

Every 2016 blocks, the hash of that block is used to select a random

transaction in each of the previous 2016 blocks. The fee on this

random transaction is multiplied by the number of transactions, giving

the mining reward.

While miners will fight to get a block which gives them a good reward,

this should cancel out as a block which gives one a good reward is

likely not to do so for the others.

This solution involves hashing the fee amount in with the transaction

to form the merkle tree; you prefix the transaction with the fee total

and hash that, and also sum the totals for the two sub-nodes.

This lets you audit any transaction to ensure it's been summed

correctly. On the downside, it adds some bytes (say, 4) to each proof

in the merkle hash (usually 32 bytes). This can replace the normal

merkle hash, but that makes it unlike bitcoin and you might need both

depending on how flexible sidechains are (assuming you want to be a

sidechain).

The fee hashing is a better alternative: this way a miner knows what

the reward for a block is. The alternative means that you might not

get any reward if you include a transaction without a fee; though

equally, you might get a huge one, psychology tells us that humans

fear loss more than hope for gain.