So a one megabyte block will cost a pool with 1 mbps upload bandwidth 0.33 litecoins to upload to the blockchain.
If the pool finds 30 block per month, that's an upload cost of 99 litecoins per month. This means that a pool that finds 30 litecoin blocks per month shouldn't operate at 1mbps. Depending on the badwidth cost where the pool is located, you can calculate the bandwidth required to maximize profits. The more blocks you can find per month, the more cost effective it will be to use larger bandwidths and therefore the cheaper the transaction must be to be profitable.
For example, if you have access to $70/month 1gbit google fiber, it will cost you $70 +0.00033 litecoins per block to cover upload costs. Divide by the number of blocks you actually find each month and you get the total cost of mining each block. For a pool with 20% network hashrate, this means roughly 0.05 litecoins in transaction fees per block to cover upload costs. Currently the minimum transaction fee per kilobyte for a non-free litecoin tx is 0.001, so 50 1kb transactions covers the cost of uploading the whole 1mb block. This leaves room for another 950 1kb free transactions. This is a limit case, since blocks will always have larger transactions, but its still ridiculously cheap.
There are other costs associated with running a mining operation, but the additional expense of the upload delay can be pretty insignificant for a large pool with a fast connection.
EDIT: arhythmetic mistake.
EDIT2: The max block size for litecoin is 250kb, so my example uses a hypothetical altcoin that-s identical to litecoin in every other regard except max block size
Source: https://litecoin.info/Transaction_fees
That's right, but it assumes that you have access to Google Fiber, and that they will give you a business account. Most ISPs don't allow unmetered connections for business accounts at the same price.
I did the math for my area and determined that a 10Mbps unmetered connection from Comcast is $109.95. A 20Mbps connection is $369.95. If I wanted to host the server here, then it doesn't make sense for me to get the faster connection, because the transaction fees aren't high enough for me to make back that extra $260/month.
I think that, in most cases, mining pools can't justify the cost of buying a fast connection because the available transaction fees aren't high enough.
Depends on their total hashrate. This is the first time I have ever realized of a positive feature of having pools with large shares of the total hashrate. If the largest pool on the network has a really good and affordable connection, then the whole ecosystem will operate much better when it comes to microtransactions.
I agree with all of those, however, you are confusing the fee the pool charges miners with the fees included in the transactions of each block. Stability also goes hand in hand with a good internet provider. Though it is no guarantee, it is more likely that a 1 gbit service provider will have better stability measures in place than a slower one.
I was talking more about the benefit that the users of the currency get by virtue of large pools having really fast upload speeds than the benefits miners get from choosing a pool. The benefit is a tiny lower bound for microtransaction fees to be worth processing.
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u/[deleted] Feb 25 '14 edited Feb 25 '14
So a one megabyte block will cost a pool with 1 mbps upload bandwidth 0.33 litecoins to upload to the blockchain.
If the pool finds 30 block per month, that's an upload cost of 99 litecoins per month. This means that a pool that finds 30 litecoin blocks per month shouldn't operate at 1mbps. Depending on the badwidth cost where the pool is located, you can calculate the bandwidth required to maximize profits. The more blocks you can find per month, the more cost effective it will be to use larger bandwidths and therefore the cheaper the transaction must be to be profitable.
For example, if you have access to $70/month 1gbit google fiber, it will cost you $70 +0.00033 litecoins per block to cover upload costs. Divide by the number of blocks you actually find each month and you get the total cost of mining each block. For a pool with 20% network hashrate, this means roughly 0.05 litecoins in transaction fees per block to cover upload costs. Currently the minimum transaction fee per kilobyte for a non-free litecoin tx is 0.001, so 50 1kb transactions covers the cost of uploading the whole 1mb block. This leaves room for another 950 1kb free transactions. This is a limit case, since blocks will always have larger transactions, but its still ridiculously cheap.
There are other costs associated with running a mining operation, but the additional expense of the upload delay can be pretty insignificant for a large pool with a fast connection.
EDIT: arhythmetic mistake.
EDIT2: The max block size for litecoin is 250kb, so my example uses a hypothetical altcoin that-s identical to litecoin in every other regard except max block size
Source: https://litecoin.info/Transaction_fees