I heard that a large number of inputs to a small number of outputs will actually Reduce the Blockchain Size. How will this be incentivised? Smaller fees for everybody or just those transactions? Any ideas?
My mailing list proposal for incentivizing small blocks at
https://lists.launchpad.net/mimblewimble/msg00450.html
requires defining a “size” or “weight” of a block in terms of its number of inputs,
number of outputs, and number of kernels.
We prefer inputs over outputs, since the UTXO size changes by n_outputs - n_inputs.
So a definition like size(block) = 10 * n_outputs + n_kernels, which doesn’t penalize
inputs at all, works to incentivize shrinking the UTXO set.