Logic of Ethereum Consensus - Part 2

Question

Consensus Logic with an example

1. Person A generates a transaction to pass some ether to person B
2. The transaction is submitted on the node
3. Node then passes that unconfirmed transaction to the whole connected network
4. The miners pickup the unconfirmed transaction
5. They start trying to randomly generate the nonce to find the correct hash
6. So one of the miners finds the correct nonce to generate the block
7. Now this miner sends this block to peer who then further send to the next peers and gradually everyone receives the block
8. Everyone verifies the work whether it is meeting the criteria
9. Once satisfied they include that block in their ledger
10. Miner gets rewarded
11. B's balance gets updated
12. Thus A's payment is now confirmed
13. Just like A think multiple transactions of passing ether were invoked at the same time
14. Lets say from C->D, E->F, G-H etc.

Questions:

1. In Ethereum how does a miner determine how many transactions to be included in the block?
2. Is it based on total count of transactions or total price or total size?
3. Is there a concept of wait time also applied i.e. if there are less unconfirmed transactions the miners will wait for certain time and then group all the available transactions to generate a block?

Answer 1

Q1 and Q2: the number of transactions in a block is governed by the block gas limit - a computational limit representing the maximum amount of computations that a miner will undertake to execute the full set of transactions in any given block. Each transaction will be formed from a set of instructions and a gas price is associated with each instruction. Gas prices are published in the appendix G of the Ethereum yellow paper.

Q3: strictly speaking there is no direct wait time (measured in raw time). The difficulty of the proof of work computation is however set such that the time between block creations averages to a pre-defined interval which is known to maintain a stable system.

If there are no transactions in that interval then a block is still generated. This is still useful as new blocks will re-enforce earlier blocks.

Miners are also rewarded for the transactions included in a block they mine successfully, therefore they are incentivised to include as many transactions they can - within the block gas limit. This dis-incentvises miners from trimming the list of transactions they include in a block, though a miner could, strictly speaking do this. If all miners would adopt such a strategy then there would be a loss of efficiency (transaction backlog grows), but the integrity of the blockchain is not lost.

Answer 2

1. The miner influences which transactions are included in the block. He is incentivized however to include as many txs with high gas prices as he can in order to receive maximum compensation

2. Yes, every block has a gas limit, so if there are too many unconfirmed TXs, not all of them will be included in the block. Instead, transactions will be processed until the block gas limit is reached. This gas limit is around 4.000.000 at the time of writing. The protocol allows this limit to adjust dynamically (~0.09% per block) relative to network utilization. So Ethereum is built to gradually adjust to a higher utilization.

3. To my knowledge, there is no such thing as a waiting time. If a miner can guess the required hash, the block is mined. If it wouldn't, there would never be a block with lower gas usage and thus no downward gas limit adjustment.