elaborate on describing economic nodes' weight on consensus

[moneyball]

per eric:
"There's a part where you are referring to economic nodes, which is good but a bit simplistic. If one just counts up these nodes he still knows nothing about the actual economic force at work. The count must be weighted.

Even though such a quantification is not possible, understanding the distinction is important. A merchant like Amazon may be a node, Coinbase is a node (just one). 1,000 other nodes may have ~zero economic power in relation to these."
https://x.com/evoskuil/status/1920996237345468422

[moneyball]

Other relevant posts as input for this issue:

"rate of settling" https://x.com/evoskuil/status/1921196647880499661

https://x.com/Yashraj__/status/1921009918334640577

[yashrajd]

Economic majority seems to be a popular/accepted term relating to the idea that emerged in the conversation that prompted this issue.

[yashrajd]

As mentioned in the link above, following sentence in Stakeholders > Economic nodes seems to capture the idea:

Economic Nodes, or nodes that regularly receive bitcoin, have power and influence which is proportional (emphasis mine) to the frequency and volume of payments received.

We could elaborate on this by saying:

Economic Nodes, or nodes that regularly receive bitcoin, have power and influence which is proportional to the frequency and volume of payments received. In other words, a node's relative economic power is determined by the fraction of total bitcoin transfer volume it captures.

The example that follows this in the text sounds vague when it says "devalue the chain", at least I don't understand it. Plus, it doesn't capture the proportionality the first sentence mentions. It could be improved as well.

For example, a high volume exchange has power in that if their nodes reject blocks mined by Miners, it would devalue the chain that Miners are building upon.

[rencryptofish]

We could elaborate on this by saying:

Economic Nodes, or nodes that regularly receive bitcoin, have power and influence which is proportional to the frequency and volume of payments received. In other words, a node's relative economic power is determined by the fraction of total bitcoin transfer volume it captures.

Would it only be bitcoin transfer volume that would be relevant to an economic node's power? Would it also include things like price discovery or liquidity of markets behind that node? They are correlated, but transfer volume can be artificially increased for medium periods of time

The example that follows this in the text sounds vague when it says "devalue the chain", at least I don't understand it. Plus, it doesn't capture the proportionality the first sentence mentions. It could be improved as well.

For example, a high volume exchange has power in that if their nodes reject blocks mined by Miners, it would devalue the chain that Miners are building upon.

It devalues the chain because the Miners can't sell those coins to pay for operating expenses or if they can, the liquidity might be low or access might be limited if the miner is not in that economic node's region

[moneyball]

@evoskuil fyi in case you want to chime in or follow along

[evoskuil]

Sure, thanks.

I’d be wary of the term “majority”. Unlike in mining there is no interesting status conferred on any percentage of economic nodes, weighted or otherwise. This tends to lead people to the error of thinking of the economy as some sort of democracy.

Otherwise it’s helpful to think of the economy (set of “merchants”) as an analog to the set of miners. Miners have hash rate, which depending on their efficiency of producing it implies their hash power (proportional influence). Merchants have economic rate, which implies their economic power. Neither are anything unless they are happening.

They are an instantaneous rate in which the power in both cases is the power to not trade, which is of course a voluntary act, as they are trading or not trading their own property for coin. Missing this nature of the act is another common error. Nobody has an obligation to trade a confirmation or some other stuff for coin.

In the mining case we call not trading censorship, which is overcome by others trading, potentially for a higher fee. In the economic model, not trading is a consequence of validation, where the merchant rejects a potential trade due to his belief that the coin is not coin (is invalid).

There is no other “power” associated with being a merchant, just as there is no other associated with being a miner. Merchants have power based on how much they are selling, because they are trying to sell (offering). Miners have power based on how much they are mining, because they are trying to mine (hashing). Both are power only because they can take them away.

[yashrajd]

I've come to this conversation multiple times over the past few weeks, and my overall sense is that no major updates are needed here. This is primarily because @evoskuil's basic point about proportionality is covered in the existing text. The below update would emphasise it (text in bold will be added):

Economic Nodes, or nodes that regularly receive bitcoin, have power and influence which is proportional to the frequency and volume of payments received. In other words, a node's relative economic power is determined by the fraction of total bitcoin transfer volume it captures. For example, a high volume exchange has power in that if their nodes reject blocks mined by Miners, it would devalue the chain that Miners are building upon , roughly in proportion to its relative economic power.

There still are nuances the above update would skip, but they can always be tackled in future updates if they come into focus. What do others think?

Otherwise happy to continue the conversation...

[moneyball]

I agree your bolded wording isn't really necessary. I don't feel strongly either way.

I'd be curious of @evoskuil has any specific wording he'd want to see added to add clarity.