Surprisingly, Tail Emission Is Not Inflationary

32 messages, 9 Jul to 20 Aug 2022. Started by Eric Voskuil.

jk_14 (6), Eric Voskuil (5), Erik Aronesty (5), Peter (3), alicexbt (2), Peter Todd (2), vjudeu (2), Billy Tetrud (2), +5 more

Supply, subsidy and halvings

Permalink Original thread on gnusha.org

Eric Voskuil 9 Jul 2022, 20:53 UTC permalink original

In Bitcoin we use the term “supply“ as a reference to the number of coins minted. This colloquialism is commonly conflated with the economic concept of supply, and then injected into a supply/demand relation as if it had the same applicability. Economically supply refers to desire to sell, while demand refers to desire to buy.

Quoted text (15 lines)

> On Jul 9, 2022, at 08:24, Eric Voskuil <eric@voskuil•org> wrote:
>
> To clarify, price inflation is not caused by market production. Attributing the observed lack of inflation (eg fee %) to loss is an assumed relation.
>
> Even if the amount of loss was known (which it is not), there remains an assumption in the correlation of non-lost coins to price. Demand determines price, not the amount of something in existence, hence the folly of S2F (1/monetary-inflation).
>
> e
>
>> On Jul 9, 2022, at 08:15, Peter Todd <pete@petertodd•org> wrote:
>> On Sat, Jul 09, 2022 at 07:26:22AM -0700, Eric Voskuil wrote:
>>>> Due to lost coins, a tail emission/fixed reward actually results in a stable money supply. Not an (monetarily) inflationary supply.
>>> This observation is not a proof of lost coins, that is an assumption.
>> To be clear, are you claiming that there is no proof that coins are lost?
>> --
>> https://petertodd.org 'peter'[:-1]@petertodd.org

Eric Voskuil 9 Jul 2022, 20:54 UTC in reply to Eric Voskuil permalink original

Yet you posted several links which made that specific correlation, to which I was responding.

Math cannot prove how much coin is “lost”, and even if it was provable that the amount of coin lost converges to the amount produced, it is of no consequence - for the reasons I’ve already pointed out. The amount of market production has no impact on market price, just as it does not with any other good.

The reason to object to perpetual issuance is the impact on censorship resistance, not on price.

Quoted text (16 lines)

> On Jul 9, 2022, at 08:31, Peter Todd <pete@petertodd•org> wrote:
> On Sat, Jul 09, 2022 at 08:24:51AM -0700, Eric Voskuil wrote:
>> To clarify, price inflation is not caused by market production. Attributing the observed lack of inflation (eg fee %) to loss is an assumed relation.
>
> My article is a mathematical proof that has nothing to do with observations of
> inflation.
>
> What I did is prove that if there is tail emission/fixed supply, the coin
> supply will converge towards a fixed amount because the coin supply dependant
> rate of coin loss balances out the fixed rate of coin production.
>
> That proof has nothing to do with market dynamics and would happen in any
> system, economic or not, with similar underlying dynamics.
>
> --
> https://petertodd.org 'peter'[:-1]@petertodd.org

ZmnSCPxj 9 Jul 2022, 21:59 UTC in reply to Eric Voskuil permalink original

Good morning e, and list,

Quoted text (5 lines)

> Yet you posted several links which made that specific correlation, to which I was responding.
>
> Math cannot prove how much coin is “lost”, and even if it was provable that the amount of coin lost converges to the amount produced, it is of no consequence - for the reasons I’ve already pointed out. The amount of market production has no impact on market price, just as it does not with any other good.
>
> The reason to object to perpetual issuance is the impact on censorship resistance, not on price.

To clarify about censorship resistance and perpetual issuance ("tail emission"):

* Suppose I have two blockchains, one with a constant block subsidy, and one which *had* a block subsidy but the block subsidy has become negligible or zero.
* Now consider a censoring miner.
  * If the miner rejects particular transactions (i.e. "censors") the miner loses out on the fees of those transactions.
  * Presumably, the miner does this because it gains other benefits from the censorship, economically equal or better to the earnings lost.
  * If the blockchain had a block subsidy, then the loss the miner incurs is small relative to the total earnings of each block.
  * If the blockchain had 0 block subsidy, then the loss the miner incurs is large relative to the total earnings of each block.
  * Thus, in the latter situation, the external benefit the miner gains from the censorship has to be proportionately larger than in the first situation.

Basically, the block subsidy is a market distortion: the block subsidy erodes the value of held coins to pay for the security of coins being moved. But the block subsidy is still issued whether or not coins being moved are censored or not censored. Thus, there is no incentive, considering *only* the block subsidy, to not censor coin movements. Only per-transaction fees have an incentive to not censor coin movements.

Thus, we should instead prepare for a future where the block subsidy *must* be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus. Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.

Regards, ZmnSCPxj

Peter 9 Jul 2022, 22:21 UTC in reply to Eric Voskuil permalink original

Quoted text (1 line)

>At present, all notable proof-of-work currencies reward miners with both a block reward, and transaction fees. With most currencies (including Bitcoin) phasing out block rewards over time. However in no currency have transaction fees consistently been more than 5% to 10% of the total mining reward[^fee-in-reward], with the exception of Ethereum, from June 2020 to Aug 2021. To date no proof-of-work currency has ever operated solely on transaction fees[^pow-tweet], and academic analysis has found that in this condition block generation is unstable.[^instability-without-block-reward] To paraphrase Andrew Poelstra, it's a scary phase change that no other coin has gone through.[^apoelstra-quote]

We should consider that a fixed block reward doesn't guarantee that the value of energy securing transactions is greater than the value being transacted in a practical amount of blocks where practical is a certain amount of time (currently 1 hour). If the energy expenditure is less than the value transacted in a given amount of blocks those transactions are at risk of being double spent. We have seen this failure with Ethereum Classic where any meaningful amount of value would need 2 weeks of blocks to be deeply confirmed for economic purposes.

We should also not assume that the Bitcoin emission curve implies there will be zero block rewards for mining Bitcoin, let me explain. There's an ugly solution that doesn't require a hard fork (I'm not advocating for this solution just presenting it) where a new coin is launched to merge mine with Bitcoin and that new coin (called BTail for discussion purposes) would enfranchise everyone who is a Bitcoin UTXO holder at the moment of the real-time launch of BTail at a well known block height. Using a technique we have seen with BCH to create an arguably fair launch. BTail would have a floating exchange rate to Bitcoin and its success or failure in terms of adoption would be determined by the market. It would require the same network effect barriers as a hard fork (opt-in) but would not put Bitcoin at risk while people can take time to install new software (and write new integrations) as they would with a soft fork.

Regards

Peter Kroll

John Tromp 10 Jul 2022, 07:44 UTC in reply to Eric Voskuil permalink original

A parallel discussion is taking place at https://bitcointalk.org/index.php?topic=5405755.0

alicexbt 10 Jul 2022, 14:17 UTC in reply to ZmnSCPxj permalink original

Hi ZmnSCPxj,

Quoted text (2 lines)

> Thus, we should instead prepare for a future where the block subsidy must be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
> Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.

`consensus.nSubsidyHalvingInterval` for mainnet in [chainparams.cpp][1] can be decreased to 195000. This will reduce the number of halvings from 34 to 14 and subsidy will be 0 when it becomes less than 0.01 although not sure if this will be a soft fork.

I doubt there will be consensus for it because all the [projections and predictability][2] about bitcoin(currency) would be affected by this change. Maybe everyone can agree with this change if most of the miners start being 'compliant' like one of the coinjoin implementation.

[1]: https://github.com/bitcoin/bitcoin/blob/master/src/chainparams.cpp#L66 [2]: https://en.bitcoin.it/wiki/Controlled_supply

/dev/fd0

Sent with Proton Mail secure email.

------- Original Message ------- On Saturday, July 9th, 2022 at 9:59 PM, ZmnSCPxj via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:

Quoted text (35 lines)

> Good morning e, and list,
>
> > Yet you posted several links which made that specific correlation, to which I was responding.
> >
> > Math cannot prove how much coin is “lost”, and even if it was provable that the amount of coin lost converges to the amount produced, it is of no consequence - for the reasons I’ve already pointed out. The amount of market production has no impact on market price, just as it does not with any other good.
> >
> > The reason to object to perpetual issuance is the impact on censorship resistance, not on price.
>
>
> To clarify about censorship resistance and perpetual issuance ("tail emission"):
>
> * Suppose I have two blockchains, one with a constant block subsidy, and one which had a block subsidy but the block subsidy has become negligible or zero.
> * Now consider a censoring miner.
> * If the miner rejects particular transactions (i.e. "censors") the miner loses out on the fees of those transactions.
> * Presumably, the miner does this because it gains other benefits from the censorship, economically equal or better to the earnings lost.
> * If the blockchain had a block subsidy, then the loss the miner incurs is small relative to the total earnings of each block.
> * If the blockchain had 0 block subsidy, then the loss the miner incurs is large relative to the total earnings of each block.
> * Thus, in the latter situation, the external benefit the miner gains from the censorship has to be proportionately larger than in the first situation.
>
> Basically, the block subsidy is a market distortion: the block subsidy erodes the value of held coins to pay for the security of coins being moved.
> But the block subsidy is still issued whether or not coins being moved are censored or not censored.
> Thus, there is no incentive, considering only the block subsidy, to not censor coin movements.
> Only per-transaction fees have an incentive to not censor coin movements.
>
>
> Thus, we should instead prepare for a future where the block subsidy must be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
> Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.
>
>
> Regards,
> ZmnSCPxj
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev

alicexbt 10 Jul 2022, 16:38 UTC in reply to alicexbt permalink original

Sorry, I made some wrong calculations in the last email. I think the change would just be required in validation.cpp:

https://github.com/bitcoin/bitcoin/blob/a7f3479ba3fda4c9fb29bd7080165744c02ee921/src/validation.cpp#L1472

/dev/fd0

Sent with Proton Mail secure email.

------- Original Message ------- On Sunday, July 10th, 2022 at 2:17 PM, alicexbt via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:

Quoted text (61 lines)

> Hi ZmnSCPxj,
>
> > Thus, we should instead prepare for a future where the block subsidy must be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
> > Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.
>
>
> `consensus.nSubsidyHalvingInterval` for mainnet in [chainparams.cpp][1] can be decreased to 195000. This will reduce the number of halvings from 34 to 14 and subsidy will be 0 when it becomes less than 0.01 although not sure if this will be a soft fork.
>
> I doubt there will be consensus for it because all the [projections and predictability][2] about bitcoin(currency) would be affected by this change. Maybe everyone can agree with this change if most of the miners start being 'compliant' like one of the coinjoin implementation.
>
> [1]: https://github.com/bitcoin/bitcoin/blob/master/src/chainparams.cpp#L66
> [2]: https://en.bitcoin.it/wiki/Controlled_supply
>
>
> /dev/fd0
>
> Sent with Proton Mail secure email.
>
>
> ------- Original Message -------
> On Saturday, July 9th, 2022 at 9:59 PM, ZmnSCPxj via bitcoin-dev bitcoin-dev@lists•linuxfoundation•org wrote:
>
>
>
> > Good morning e, and list,
> >
> > > Yet you posted several links which made that specific correlation, to which I was responding.
> > >
> > > Math cannot prove how much coin is “lost”, and even if it was provable that the amount of coin lost converges to the amount produced, it is of no consequence - for the reasons I’ve already pointed out. The amount of market production has no impact on market price, just as it does not with any other good.
> > >
> > > The reason to object to perpetual issuance is the impact on censorship resistance, not on price.
> >
> > To clarify about censorship resistance and perpetual issuance ("tail emission"):
> >
> > * Suppose I have two blockchains, one with a constant block subsidy, and one which had a block subsidy but the block subsidy has become negligible or zero.
> > * Now consider a censoring miner.
> > * If the miner rejects particular transactions (i.e. "censors") the miner loses out on the fees of those transactions.
> > * Presumably, the miner does this because it gains other benefits from the censorship, economically equal or better to the earnings lost.
> > * If the blockchain had a block subsidy, then the loss the miner incurs is small relative to the total earnings of each block.
> > * If the blockchain had 0 block subsidy, then the loss the miner incurs is large relative to the total earnings of each block.
> > * Thus, in the latter situation, the external benefit the miner gains from the censorship has to be proportionately larger than in the first situation.
> >
> > Basically, the block subsidy is a market distortion: the block subsidy erodes the value of held coins to pay for the security of coins being moved.
> > But the block subsidy is still issued whether or not coins being moved are censored or not censored.
> > Thus, there is no incentive, considering only the block subsidy, to not censor coin movements.
> > Only per-transaction fees have an incentive to not censor coin movements.
> >
> > Thus, we should instead prepare for a future where the block subsidy must be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
> > Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.
> >
> > Regards,
> > ZmnSCPxj
> > _______________________________________________
> > bitcoin-dev mailing list
> > bitcoin-dev@lists•linuxfoundation•org
> > https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev

Peter Todd 10 Jul 2022, 17:27 UTC in reply to ZmnSCPxj permalink original

On Sat, Jul 09, 2022 at 09:59:06PM +0000, ZmnSCPxj wrote:

Quoted text (17 lines)

> Good morning e, and list,
>
> > Yet you posted several links which made that specific correlation, to which I was responding.
> >
> > Math cannot prove how much coin is “lost”, and even if it was provable that the amount of coin lost converges to the amount produced, it is of no consequence - for the reasons I’ve already pointed out. The amount of market production has no impact on market price, just as it does not with any other good.
> >
> > The reason to object to perpetual issuance is the impact on censorship resistance, not on price.
>
> To clarify about censorship resistance and perpetual issuance ("tail emission"):
>
> * Suppose I have two blockchains, one with a constant block subsidy, and one which *had* a block subsidy but the block subsidy has become negligible or zero.
> * Now consider a censoring miner.
>   * If the miner rejects particular transactions (i.e. "censors") the miner loses out on the fees of those transactions.
>   * Presumably, the miner does this because it gains other benefits from the censorship, economically equal or better to the earnings lost.
>   * If the blockchain had a block subsidy, then the loss the miner incurs is small relative to the total earnings of each block.
>   * If the blockchain had 0 block subsidy, then the loss the miner incurs is large relative to the total earnings of each block.
>   * Thus, in the latter situation, the external benefit the miner gains from the censorship has to be proportionately larger than in the first situation.

Now let's look at an actual, real-world, attempt to censor Bitcoin via mining:

https://petertodd.org/2016/mit-chainanchor-bribing-miners-to-regulate-bitcoin

The Chain Anchor model was to simply straight up bribe and coerce miners into only accepting compliant transactions. That's only effective when a large % of miners actually do that - if a small % do the effect on confirmation time is miniscule. Obviously, censoring transactions is a significant threat to the value of Bitcoin - and thus all your Bitcoin-only hashing equipment.

So how do you make a Chain Anchor attack cheaper? By reducing total mining reward, and making it tied to transaction volume rather than the value of Bitcoin as a whole.

Quoted text (1 line)

> Basically, the block subsidy is a market distortion: the block subsidy erodes the value of held coins to pay for the security of coins being moved.

The block subsidy directly ties miner revenue to the total value of Bitcoin: that's exactly how you want to incentivise a service that keeps Bitcoin secure.

Quoted text (3 lines)

> But the block subsidy is still issued whether or not coins being moved are censored or not censored.
> Thus, there is no incentive, considering *only* the block subsidy, to not censor coin movements.
> Only per-transaction fees have an incentive to not censor coin movements.

The strongest incentive not to censor is because it'll keep Bitcoin valuable. Not some piddling transaction fees.

Quoted text (2 lines)

> Thus, we should instead prepare for a future where the block subsidy *must* be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
> Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.

Absolutely not.

The historical reality of transaction fees is they've had huge swings, about 10x more volatile than total miner revenue. In the past three years they've ranged from $8.4 million USD/30-day-average to as little as $140k/30-day-avg, with the current amount being $370k/30-day-avg. That's a 60x difference.

Meanwhile miner revenue has ranged from $60 million/30-day-avg to $9 million/30-day-avg, a 7x difference.

https://www.blockchain.com/charts/fees-usd-per-transaction

We want mining to be is a boring, predictable, business that anyone can do, with as little reward as possible to larger scale miners. That's what you need for maximal decentralization. Making mining a sophisticated business reduces the pool of entities that can profitably compete in it, and increases their visibility to government regulation.

Additionally, we want mining to be predictable to avoid having large gluts of unprofitable mining equipment laying around: mining equipment that could be used to attack Bitcoin. Fee revenue is obviously doing a much worse job of achieving that goal than subsidy revenue.

If transaction-fee-only mining was such a good idea, why hasn't any other coin done it?

Peter Todd 10 Jul 2022, 17:29 UTC in reply to alicexbt permalink original

On Sun, Jul 10, 2022 at 02:17:36PM +0000, alicexbt via bitcoin-dev wrote:

Quoted text (7 lines)

> Hi ZmnSCPxj,
>
>
> > Thus, we should instead prepare for a future where the block subsidy must be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
> > Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.
>
> `consensus.nSubsidyHalvingInterval` for mainnet in [chainparams.cpp][1] can be decreased to 195000. This will reduce the number of halvings from 34 to 14 and subsidy will be 0 when it becomes less than 0.01 although not sure if this will be a soft fork.

What exactly would the benefit be of going through all the political headache of a soft fork for what I assume you are thinking would be an insignificant change in total miner revenue?

Or do you think total transaction fees at that point would be less than 0.01BTC?

Eric Voskuil 10 Jul 2022, 17:42 UTC in reply to Eric Voskuil permalink original

Quoted text (8 lines)

> On Jul 10, 2022, at 07:17, alicexbt <alicexbt@protonmail•com> wrote:
> Hi ZmnSCPxj,
>
>
>> Thus, we should instead prepare for a future where the block subsidy must be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
>> Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.
>
> `consensus.nSubsidyHalvingInterval` for mainnet in [chainparams.cpp][1] can be decreased to 195000. This will reduce the number of halvings from 34 to 14 and subsidy will be 0 when it becomes less than 0.01 although not sure if this will be a soft fork.

Soft fork, though a bit aggressive, as it would invalidate all existing blocks above the first new halving height block which claimed more than the reduced reward.

Increasing the value would be a hard fork, as it would validate blocks that would previously have been invalid, as opposed to a soft fork, which invalidates blocks that would previously have been valid.

Quoted text (47 lines)

> I doubt there will be consensus for it because all the [projections and predictability][2] about bitcoin(currency) would be affected by this change. Maybe everyone can agree with this change if most of the miners start being 'compliant' like one of the coinjoin implementation.
>
> [1]: https://github.com/bitcoin/bitcoin/blob/master/src/chainparams.cpp#L66
> [2]: https://en.bitcoin.it/wiki/Controlled_supply
>
>
> /dev/fd0
>
> Sent with Proton Mail secure email.
>
> ------- Original Message -------
> On Saturday, July 9th, 2022 at 9:59 PM, ZmnSCPxj via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:
>
>
>> Good morning e, and list,
>>
>>> Yet you posted several links which made that specific correlation, to which I was responding.
>>> Math cannot prove how much coin is “lost”, and even if it was provable that the amount of coin lost converges to the amount produced, it is of no consequence - for the reasons I’ve already pointed out. The amount of market production has no impact on market price, just as it does not with any other good.
>>> The reason to object to perpetual issuance is the impact on censorship resistance, not on price.
>>
>>
>> To clarify about censorship resistance and perpetual issuance ("tail emission"):
>>
>> * Suppose I have two blockchains, one with a constant block subsidy, and one which had a block subsidy but the block subsidy has become negligible or zero.
>> * Now consider a censoring miner.
>> * If the miner rejects particular transactions (i.e. "censors") the miner loses out on the fees of those transactions.
>> * Presumably, the miner does this because it gains other benefits from the censorship, economically equal or better to the earnings lost.
>> * If the blockchain had a block subsidy, then the loss the miner incurs is small relative to the total earnings of each block.
>> * If the blockchain had 0 block subsidy, then the loss the miner incurs is large relative to the total earnings of each block.
>> * Thus, in the latter situation, the external benefit the miner gains from the censorship has to be proportionately larger than in the first situation.
>>
>> Basically, the block subsidy is a market distortion: the block subsidy erodes the value of held coins to pay for the security of coins being moved.
>> But the block subsidy is still issued whether or not coins being moved are censored or not censored.
>> Thus, there is no incentive, considering only the block subsidy, to not censor coin movements.
>> Only per-transaction fees have an incentive to not censor coin movements.
>>
>>
>> Thus, we should instead prepare for a future where the block subsidy must be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
>> Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.
>>
>>
>> Regards,
>> ZmnSCPxj
>> _______________________________________________
>> bitcoin-dev mailing list
>> bitcoin-dev@lists•linuxfoundation•org
>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev

vjudeu 10 Jul 2022, 18:12 UTC in reply to Peter Todd permalink original

Quoted text (1 line)

> We want mining to be is a boring, predictable, business that anyone can do, with as little reward as possible to larger scale miners.

To reach that, miners should earn their block rewards inside Lightning Network. Then, if you want to send some transaction, and you have one satoshi fee, you can produce a Bitcoin block on your CPU, and get a discount on your fee for doing that. Imagine mining a block with difficulty one, and getting some millisatoshis, or even microsatoshis as a reward. Then, to bootstrap that system, it could at first accept any blocks, so existing miners could redirect their shares to such network, then a pool will be able to claim those rewards. And then, when miners will see that the system works as intended, they could switch to solo mining, to get their rewards directly to their addresses.

On 2022-07-10 19:27:28 user Peter Todd via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:

Quoted text (18 lines)

> On Sat, Jul 09, 2022 at 09:59:06PM +0000, ZmnSCPxj wrote:
> Good morning e, and list,
>
> > Yet you posted several links which made that specific correlation, to which I was responding.
> >
> > Math cannot prove how much coin is “lost”, and even if it was provable that the amount of coin lost converges to the amount produced, it is of no consequence - for the reasons I’ve already pointed out. The amount of market production has no impact on market price, just as it does not with any other good.
> >
> > The reason to object to perpetual issuance is the impact on censorship resistance, not on price.
>
> To clarify about censorship resistance and perpetual issuance ("tail emission"):
>
> * Suppose I have two blockchains, one with a constant block subsidy, and one which *had* a block subsidy but the block subsidy has become negligible or zero.
> * Now consider a censoring miner.
>   * If the miner rejects particular transactions (i.e. "censors") the miner loses out on the fees of those transactions.
>   * Presumably, the miner does this because it gains other benefits from the censorship, economically equal or better to the earnings lost.
>   * If the blockchain had a block subsidy, then the loss the miner incurs is small relative to the total earnings of each block.
>   * If the blockchain had 0 block subsidy, then the loss the miner incurs is large relative to the total earnings of each block.
>   * Thus, in the latter situation, the external benefit the miner gains from the censorship has to be proportionately larger than in the first situation.

Now let's look at an actual, real-world, attempt to censor Bitcoin via mining:

https://petertodd.org/2016/mit-chainanchor-bribing-miners-to-regulate-bitcoin

So how do you make a Chain Anchor attack cheaper? By reducing total mining reward, and making it tied to transaction volume rather than the value of Bitcoin as a whole.

Quoted text (1 line)

> Basically, the block subsidy is a market distortion: the block subsidy erodes the value of held coins to pay for the security of coins being moved.

The block subsidy directly ties miner revenue to the total value of Bitcoin: that's exactly how you want to incentivise a service that keeps Bitcoin secure.

Quoted text (3 lines)

> But the block subsidy is still issued whether or not coins being moved are censored or not censored.
> Thus, there is no incentive, considering *only* the block subsidy, to not censor coin movements.
> Only per-transaction fees have an incentive to not censor coin movements.

The strongest incentive not to censor is because it'll keep Bitcoin valuable. Not some piddling transaction fees.

Quoted text (2 lines)

> Thus, we should instead prepare for a future where the block subsidy *must* be removed, possibly before the existing schedule removes it, in case a majority coalition of miner ever decides to censor particular transactions without community consensus.
> Fortunately forcing the block subsidy to 0 is a softfork and thus easier to deploy.

Absolutely not.

Meanwhile miner revenue has ranged from $60 million/30-day-avg to $9 million/30-day-avg, a 7x difference.

https://www.blockchain.com/charts/fees-usd-per-transaction

If transaction-fee-only mining was such a good idea, why hasn't any other coin done it?

David A. Harding 18 Jul 2022, 11:34 UTC in reply to Peter Todd permalink original

On 2022-07-10 07:27, Peter Todd via bitcoin-dev wrote:

Quoted text (4 lines)

> The block subsidy directly ties miner revenue to the total value of
> Bitcoin:
> that's exactly how you want to incentivise a service that keeps Bitcoin
> secure.

I'm confused. I thought your argument in the OP of this thread was that a perpetual block subsidy would *not* be tied to the total value of bitcoin. It'd be tied to the total value of bitcoin *lost* each year on average.

If so, would you then agree that the inability of a perpetual block subsidy to directly tie miner revenue to the total value of Bitcoin makes it not exactly how we want to incentivise a service that keeps Bitcoin secure?

Thanks,

-Dave

Erik Aronesty 18 Jul 2022, 19:14 UTC in reply to David A. Harding permalink original

Quoted text (6 lines)

>
>
> subsidy to directly tie miner revenue to the total value of Bitcoin
> makes it not exactly how we want to incentivise a service that keeps
>
>

again, this is meaningless. if the fees aren't enough to keep bitcoin secure for large transactions, then large holders are incentivised to mine

that's it.

it's not complicated

Eric Voskuil 18 Jul 2022, 21:48 UTC in reply to Erik Aronesty permalink original

Quoted text (9 lines)

> On Jul 18, 2022, at 14:14, Erik Aronesty via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:
>
> 
>>
>> subsidy to directly tie miner revenue to the total value of Bitcoin
>> makes it not exactly how we want to incentivise a service that keeps
>>
>
> again, this is meaningless.   if the fees aren't enough to keep  bitcoin secure for large transactions, then large holders are incentivised to mine

Yes, this is another way to pay the tx fee - you mine at cost sufficient to overpower the censor. You are spending the block reward in getting your txs confirmed, and that’s your fee.

But unless you are mining full blocks of only your own transactions, this implies that you are accepting these higher fees on censored txs from others. Otherwise you are simply mining at a loss, which we cannot use as a rational basis for security.

And therefore this reduces to the simple fact that tx fees are what provides censorship resistance, whether you mine your own or others’.

Quoted text (7 lines)

> that's it.
>
> it's not complicated
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev

Peter 19 Jul 2022, 18:36 UTC in reply to Eric Voskuil permalink original

Quoted text (1 line)

>And therefore this reduces to the simple fact that tx fees are what provides censorship resistance, whether you mine your own or others?.

What's the business model of the person who mines with the intention to censor transactions when there's no block reward?

Regards

Peter Kroll

Eric Voskuil 20 Jul 2022, 14:35 UTC in reply to Peter permalink original

If there’s no block reward, there’s no Bitcoin, so that’s moot. But setting that aside. The business model of the state is to preserve the reward it obtains from its own money. This is the reason for currency controls, which are common.

Quoted text (17 lines)

> On Jul 20, 2022, at 03:17, Peter via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:
>
> >And therefore this reduces to the simple fact that tx fees are what provides censorship resistance, whether you mine your own or others?.
>
>
> What's the business model of the person who mines with the intention to censor transactions when there's no block reward?
>
>
>
> Regards
>
> Peter Kroll
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev

Erik Aronesty 25 Jul 2022, 15:04 UTC in reply to Erik Aronesty permalink original

even with zero block reward and minimal fees, large holders who perform zero transactions will still mine in order to preserve the value of the network

this is not "mining your own tx", it is unrelated

this is "mining at a small loss to preserve your stake"

not only don't we need issuance or fees, but also the censorship resistance is not meaningfully improved with issuance

On Mon, Jul 18, 2022 at 3:14 PM Erik Aronesty <erik@q32•com> wrote:

Quoted text (12 lines)

>
>> subsidy to directly tie miner revenue to the total value of Bitcoin
>> makes it not exactly how we want to incentivise a service that keeps
>>
>>
> again, this is meaningless.   if the fees aren't enough to keep  bitcoin
> secure for large transactions, then large holders are incentivised to mine
>
> that's it.
>
> it's not complicated
>

jk_14 26 Jul 2022, 15:44 UTC in reply to Erik Aronesty permalink original

"large holders who perform zero transactions will still mine in order to preserve the value of the network" let me slightly modify the sentence below: "The Prisoner's Dilemma is a standard example of a game analyzed in game theory that shows why completely rational large holders might not cooperate, even if it appears that it is in their best interests to do so." I'm pretty sure we will have a textbook case of Prisoner's Dilemma here. Regards Jaroslaw W dniu 2022-07-26 10:20:38 użytkownik Erik Aronesty via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> napisał: even with zero block reward and minimal fees, large holders who perform zero transactions will still mine in order to preserve the value of the network

this is not "mining your own tx", it is unrelated

this is "mining at a small loss to preserve your stake"

not only don't we need issuance or fees, but also the censorship resistance is not meaningfully improved with issuance

On Mon, Jul 18, 2022 at 3:14 PM Erik Aronesty <erik@q32•com> wrote: subsidy to directly tie miner revenue to the total value of Bitcoin makes it not exactly how we want to incentivise a service that keeps

again, this is meaningless. if the fees aren't enough to keep bitcoin secure for large transactions, then large holders are incentivised to mine

that's it.

it's not complicated

Erik Aronesty 26 Jul 2022, 17:05 UTC in reply to jk_14 permalink original

Quoted text (1 line)

> I'm pretty sure we will have a textbook case of Prisoner's Dilemma here.

no, there is no large payoff for betrayal

jk_14 26 Jul 2022, 20:01 UTC in reply to Eric Voskuil permalink original

Let's assume fees don't compensate low block reward. And for example every 10 BTC holding needs to be secured by one Antminer S19 running.

In an ideal world every large bitcoin holder will run proper amount of ASICs and run it at loss. The holders of less than 10 BTC - will organize "group pays", this time for sharing loss (electricity costs) (exactly the same way like people made "group buys" of ASIC hardware in 2013)

Pretty sure in real world it won't work. And there is a large payoff for betrayal, or more precise: People will think there is tiny punishment for betrayal.

Even Bitcoin can't beat a human nature.

Regards Jaroslaw

W dniu 2022-07-26 19:06:12 użytkownik Erik Aronesty <erik@q32•com> napisał:

Quoted text (1 line)

> I'm pretty sure we will have a textbook case of Prisoner's Dilemma here.

no, there is no large payoff for betrayal

jk_14 15 Aug 2022, 21:46 UTC in reply to Eric Voskuil permalink original

Quoted text (2 lines)

> New blog post:
> https://petertodd.org/2022/surprisingly-tail-emission-is-not-inflationary

Tail emission is inevitable, Milton Friedman says...

The key thing here in my opinion is to properly understand the seriousness of the situation. "There is no such thing as a free lunch" - is definitely helpful quote here.

There are two edge cases.

1. while starting given cryptocurrency
- the annual inflation is huge, nobody (in developed/mature monetary system) would like to keep such kind of money with e.g. 100% annual inflation rate, but from the other side there is no problem for transaction fee to be free of charge here

2. while given cryptocurrency is switching off the block reward, in supposed "mature phase":
- the annual inflation is zero, everyone want to hoard such money, transaction fees must carry the whole security of the system

In the first edge case: active users have got "free lunches" and passive users (i.e. holders) are paying for it (by "inflation tax") In the second edge case: passive users have got "free lunches" and active users should pay for it (by "transactional tax")

So far I only highlighted some maybe not very well recognized, but pure facts (it's not comfortable to contradict the facts...)

The reason people do pay in the first phase - is a hope/promise of system growth (future coin price appreciation = profit) The problem in the second phase is that there is no real incentive for people to pay for other's free lunches.

Any wishful thinking that most (or even: any significant part) of holders will resign from a free lunch and will buy and run ASIC mining equipment at loss - is just a delusional perspective. It's well proven by game theory and what says us the Prisoner's Dilemma about it. For better understanding - here is my modified version of Prisoner's Dilemma short description:

"The Prisoner's Dilemma is a standard example of a game analyzed in game theory that shows why completely rational large holders might not cooperate, even if it appears that it is in their best interests to do so."

I'm pretty sure we will have a textbook case of Prisoner's Dilemma here.

As a useful example - let's assume that fees don't compensate low block reward. Btw, right now a single transaction fee need to be $60 to compensate that (and it will only get worse in time). System is not inclusive with $60 per transaction fee. Only rich people will use it. Another possible scenario is a x100 drop of network hashrate to catch a previous fee levels. The network is x100 less secure, then. It really doesn't matter if this process is spread over the long run...

So, for example - let every 10 BTC holding needs to be secured by one Antminer S19 running.

In an ideal world every large bitcoin holder will run proper amount of ASICs and run it at loss. The holders of less than 10 BTC - will organize "group pays", this time for sharing loss (electricity costs) Exactly the same way like people made "group buys" of ASIC hardware in 2013.

I hope it's clear that in the real world it WILL NOT work. People will simply think, that there is only a tiny punishment for betrayal. Noone will waste his renewable energy on unprofitable Antminer while he/she can sell this energy for the market price. Even Bitcoin can't beat the human nature.

Thanks to Milton Friedman - we can easily say that situation with "free lunches" (at least for some part of users) - is an unhealthy state of financial system. And may last only exceptionally for short period of time, and definitely not as a default state. System must be sustainable and time to accept that there is a real problem here (or: an elephant in the room - but maybe not such invisible like was before).

The good news is a natural solution exists. Bitcoin can solve this issue natural way.

While decreasing block reward and moving from the first edge case to the second one - the system naturally cross the Area of Balance. And healthy system should stay somewhere in such area. And that's exactly what Monero did. But they did it arbitrally, at 0.9% level. Bitcoin is able to do it much better - because empirically.

There is a simple trigger if the system is leaving an Area of Balance and cross the line of Phase 2 with "free lunches". The network difficulty / global network hashrate chart. Four years after some particular halving (in 2028, 2032 or later - no matter when in fact) - we will (definitely) see difficulty is not recovered during four long years. This is a big red light. It means that halvings starts to be destructive to the network security.

Something what became destructive to the network - must be removed. Halving must be removed in such moment. Moment determined empirically - what is good thing. Satoshi Nakamoto wasn't able to properly predict when this moment may appear, but we are in better situation.

"Bitcoin to the moon" (and any other pro-21M hardcap shortsighted slogans) - must have a lower priority than network security/health. I'm sure Satoshi would agree with it. Of course, someone may set up such environment, where holders (i.e. passive users) have got a free lunches and security of network is based on active users' shoulders only. Someone could even insist that it is quite fair... But please don't expect a lack of impact for the network security where not all, but only a part of users - participate in supporting network health. Many people don't realise a simple fact: keeping destructive halvings in such situation above, just for maximising appreciation of already hoarded coins - is counterproductive. Because the network security is decreasing.

We have a lot of time yet to educate people about it - for reaching common consensus for halvings removal with "ease". We should probably use Milton Friedman's quote and highlight that balanced system with 0.45% / 0.225% / 0.1125% (?) annual inflation rate (and slowly decreasing) - is still enormously better than any surrounding fiat system. But system still balanced and stable - and not in spiral of death...

“Bitcoin should have had a 0.1% or 1% monetary inflation tax to pay for security,” Peter said long time ago, further arguing bitcoin will die if it doesn’t change the limit.

I fully agree with Peter. The halvings should be removed in case it starts to be destructive to the network security (lack of hashrate recovery during long 4 years after given halving). Because that means bitcoin system has reached equilibrium / saturation on a globe scale level. The evolutionary path is the best path. The worst path is: overcomplicated constructs, completely unclear for Average Joe. Additional merge-mining coins, whatever etc. - just to achieve the same final goal. KISS = Keep It Simple. Halving removal is the most honest, simplest and most understandable way to make every bitcoin pasive user to participate in keeping Bitcoin network secure. It just force the rule, that someone pay proportionally to amount of bitcoins he/she hold, and all participants are sure that everybody participate (no Prisoner's Dilemma, what is crucial matter)

Yes, that means: hard fork. But as written above - Bitcoin will die without the solution.

Bitcoin may be also out of sudden in a deadly risk from quantum computers. In such circumstances everyone (or: almost, i.e. everyone who cares) - would immediately download a quantum resistant, freshly released bitcoin wallet, no doubt. And these two dangers are similar at least in one aspect: both will cause the spiral of death. Widespread consensus would be the best scenario, but from the other side: a fork always shows retrospectively, who was right (BCH turmoil in 2017)

Regards Jaroslaw

P.S some other resources yet:

"Friedman originally proposed a fixed monetary rule, called Friedman's k-percent rule, where the money supply would be automatically increased by a fixed percentage per year. Under this rule, there would be no leeway for the central reserve bank, as money supply increases could be determined "by a computer", and business could anticipate all money supply changes. With other monetarists he believed that the active manipulation of the money supply or its growth rate is more likely to destabilise than stabilise the economy.

Most monetarists oppose the gold standard. Friedman, for example, viewed a pure gold standard as impractical.[9] For example, whereas one of the benefits of the gold standard is that the intrinsic limitations to the growth of the money supply by the use of gold would prevent inflation, if the growth of population or increase in trade outpaces the money supply, there would be no way to counteract deflation and reduced liquidity (and any attendant recession) except for the mining of more gold"

no block reward => reduced liquidity (reduced number of transactions) => network security in spiral of death

https://en.wikipedia.org/wiki/Monetarism https://en.wikipedia.org/wiki/Friedman%27s_k-percent_rule https://twitter.com/hasufl/status/1511470668457652224

Peter 16 Aug 2022, 16:05 UTC in reply to Eric Voskuil permalink original

Hi Jaroslaw,

In the Prisoner's Dilemma the prisoners cannot communicate. In Bitcoin large holders are able to communicate with each other. Also, prisoners need not make an all or nothing decision in Bitcoin. Miners can join and leave the network freely over time. You can change your decision based on the decision of others.

The Bitcoin design is such that security is volatile but the issuance of blocks is timely and evened out to a 10 minutes average even after the reward is exhausted.

The existing incentive that miners earn money for including transactions is enough to motivate human nature. Transaction initiators have an incentive to mine and run full nodes for personal interest.

Quoted text (1 line)

>Noone will waste his renewable energy on unprofitable Antminer while he/she can sell this energy for the market price.

The law in most jurisdictions prevents the resale of spare electricity unless an expensive license is obtained (and in most cases no license is available as the government maintains a monopoly). Mining with waste electricity is reducing losses. Another incentive to motivate human nature.

Bitcoin holders can be enfranchised into any new system. So, no need for bike shedding the original design which is a Schelling Point.

Regards

Peter Kroll

pointbiz/ BTCCuracao

jk_14 17 Aug 2022, 08:54 UTC in reply to Eric Voskuil permalink original

Hi, Peter

Thanks to human nature, still:

1. Bitcoin large holders are able to communicate with each other... - and as a large bitcoin holder someone will very well understand that he should run his Antminers at loss for goodness of Bitcoin network security. But he won't communicate that - due to his greed - he just betrayed it. Maybe someone will communicate that he is running Anminers... But it doesn't change a lot. We can assume this additional possibility of communication (especially taking into account big number of large holders and their anonimity) - doesn't change this Prisoner's Dilemma into a "not textbook case enough".

2. The existing incentive that miners earn money for including transactions is enough to motivate human nature... - but paying $50 usd per such transaction (the amount necessary to compensate lack of block reward right now) - is "no way" to motivate a human nature, just due to: personal interest (as you correctly highlighted). It really doesn't matter that the process of disappearance of block reward is spreaded over the long run. (the same, but more terse: https://twitter.com/hasufl/status/1511470668457652224 )

3. In many jurisdictions you can take back from grid for free - the amount you have produced and uploaded earlier (I'm in one of such). So I won't invest and oversize my solar panels by additional ~24kW of power for additional Antminer runing 24h/day - if I know it will be running at loss. (side note: it's not a good idea to be dependant with future health of bitcoin -  on what type of jurisdiction is the most popular one in given moment)

There are two statements to repeat then, but more precisely:

A. Bitcoiners (me too) are proud the bitcoin system is designed so clever, that from the beginning till now - is able to run without the trust to anyone. And utilise even people's greed - for system goodness/expansion. But when I wrote the FIRST edge case is behind us, but the SECOND one - with no doubt with pathological Friedman's "free lunches" for part of participants - is only some years ahead (like in a Titanic scene) - then most of them suddenly say:

"Ok, then... Bitcoin idea is so brilliant that maybe the game theory won't apply anymore. Let's TRUST the large holders they will run Antminers at loss."

It's not The Satoshi's Vision anymore.

B. Bitcoiners (me too) want to remove or neutralise all destructive things to Bitcoin, like for example: unfriendly government regulations, etc. But when I wrote there will be in the future (and the only question is: when) an alarm siren that halvings start to be destructive to the Bitcoin network, while start to cause consecutive network security/hashrate regressions - then most of them suddenly say:

"Ok, then... I'm to greed to resign from it."

It's not The Satoshi's Vision anymore.

Regards Jaroslaw

W dniu 2022-08-16 23:21:30 użytkownik Peter via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> napisał: Hi Jaroslaw,

The Bitcoin design is such that security is volatile but the issuance of blocks is timely and evened out to a 10 minutes average even after the reward is exhausted.

The existing incentive that miners earn money for including transactions is enough to motivate human nature. Transaction initiators have an incentive to mine and run full nodes for personal interest.

Quoted text (1 line)

>Noone will waste his renewable energy on unprofitable Antminer while he/she can sell this energy for the market price.

Bitcoin holders can be enfranchised into any new system. So, no need for bike shedding the original design which is a Schelling Point.

Regards

Peter Kroll

pointbiz/ BTCCuracao

Erik Aronesty 17 Aug 2022, 11:10 UTC in reply to jk_14 permalink original

you can stop talking about the "security of the system" as meaningful

this has been discussed enough

if fees are not sufficient, clearance times increase and large stakeholders are incentivised to mine

in the best case, fees are sufficient

in the worst case, it degrades to proof of stake

i'm sure you can see how that's fine either way

On Mon, Aug 15, 2022 at 9:59 PM Jaroslaw via bitcoin-dev < bitcoin-dev@lists•linuxfoundation•org> wrote:

Quoted text (210 lines)

>
> > New blog post:
> >
> https://petertodd.org/2022/surprisingly-tail-emission-is-not-inflationary
>
>
> Tail emission is inevitable, Milton Friedman says...
>
>
> The key thing here in my opinion is to properly understand the seriousness
> of the situation.
> "There is no such thing as a free lunch" - is definitely helpful quote
> here.
>
> There are two edge cases.
>
> 1. while starting given cryptocurrency
> - the annual inflation is huge, nobody (in developed/mature monetary
> system) would like to keep such kind of money with e.g. 100% annual
> inflation rate, but from the other side there is no problem for transaction
> fee to be free of charge here
>
> 2. while given cryptocurrency is switching off the block reward, in
> supposed "mature phase":
> - the annual inflation is zero, everyone want to hoard such money,
> transaction fees must carry the whole security of the system
>
>
> In the first edge case: active users have got "free lunches" and passive
> users (i.e. holders) are paying for it (by "inflation tax")
> In the second edge case: passive users have got "free lunches" and active
> users should pay for it (by "transactional tax")
>
> So far I only highlighted some maybe not very well recognized, but pure
> facts (it's not comfortable to contradict the facts...)
>
>
> The reason people do pay in the first phase - is a hope/promise of system
> growth (future coin price appreciation = profit)
> The problem in the second phase is that there is no real incentive for
> people to pay for other's free lunches.
>
>
> Any wishful thinking that most (or even: any significant part) of holders
> will resign from a free lunch and will buy and run ASIC mining equipment at
> loss - is just a delusional perspective. It's well proven by game theory
> and what says us the Prisoner's Dilemma about it. For better understanding
> - here is my modified version of Prisoner's Dilemma short description:
>
> "The Prisoner's Dilemma is a standard example of a game analyzed in game
> theory that shows why completely rational large holders might not
> cooperate, even if it appears that it is in their best interests to do so."
>
> I'm pretty sure we will have a textbook case of Prisoner's Dilemma here.
>
> As a useful example - let's assume that fees don't compensate low block
> reward. Btw, right now a single transaction fee need to be $60 to
> compensate that (and it will only get worse in time). System is not
> inclusive with $60 per transaction fee. Only rich people will use it.
> Another possible scenario is a x100 drop of network hashrate to catch a
> previous fee levels. The network is x100 less secure, then. It really
> doesn't matter if this process is spread over the long run...
>
> So, for example - let every 10 BTC holding needs to be secured by one
> Antminer S19 running.
>
> In an ideal world every large bitcoin holder will run proper amount of
> ASICs and run it at loss.
> The holders of less than 10 BTC - will organize "group pays", this time
> for sharing loss (electricity costs)
> Exactly the same way like people made "group buys" of ASIC hardware in
> 2013.
>
> I hope it's clear that in the real world it WILL NOT work. People will
> simply think, that there is only a tiny punishment for betrayal.
> Noone will waste his renewable energy on unprofitable Antminer while
> he/she can sell this energy for the market price. Even Bitcoin can't beat
> the human nature.
>
>
> Thanks to Milton Friedman - we can easily say that situation with "free
> lunches" (at least for some part of users) - is an unhealthy state of
> financial system.
> And may last only exceptionally for short period of time, and definitely
> not as a default state. System must be sustainable and time to accept that
> there is a real problem here (or: an elephant in the room - but maybe not
> such invisible like was before).
>
> The good news is a natural solution exists. Bitcoin can solve this issue
> natural way.
>
> While decreasing block reward and moving from the first edge case to the
> second one - the system naturally cross the Area of Balance.
> And healthy system should stay somewhere in such area. And that's exactly
> what Monero did. But they did it arbitrally, at 0.9% level.
> Bitcoin is able to do it much better - because empirically.
>
> There is a simple trigger if the system is leaving an Area of Balance and
> cross the line of Phase 2 with "free lunches". The network difficulty /
> global network hashrate chart.
> Four years after some particular halving (in 2028, 2032 or later - no
> matter when in fact) - we will (definitely) see difficulty is not recovered
> during four long years.
> This is a big red light. It means that halvings starts to be destructive
> to the network security.
>
> Something what became destructive to the network - must be removed.
> Halving must be removed in such moment. Moment determined empirically -
> what is good thing. Satoshi Nakamoto wasn't able to properly predict when
> this moment may appear, but we are in better situation.
>
> "Bitcoin to the moon" (and any other pro-21M hardcap shortsighted slogans)
> - must have a lower priority than network security/health.
> I'm sure Satoshi would agree with it. Of course, someone may set up such
> environment, where holders (i.e. passive users) have got a free lunches
> and security of network is based on active users' shoulders only. Someone
> could even insist that it is quite fair...
> But please don't expect a lack of impact for the network security where
> not all, but only a part of users - participate in supporting network
> health.
> Many people don't realise a simple fact: keeping destructive halvings in
> such situation above, just for maximising appreciation of already hoarded
> coins
> - is counterproductive. Because the network security is decreasing.
>
>
> We have a lot of time yet to educate people about it - for reaching common
> consensus for halvings removal with "ease".
> We should probably use Milton Friedman's quote and highlight that balanced
> system with 0.45% / 0.225% / 0.1125% (?) annual inflation rate (and slowly
> decreasing)
> - is still enormously better than any surrounding fiat system. But system
> still balanced and stable - and not in spiral of death...
>
>
> “Bitcoin should have had a 0.1% or 1% monetary inflation tax to pay for
> security,” Peter said long time ago, further arguing bitcoin will die if it
> doesn’t change the limit.
>
> I fully agree with Peter. The halvings should be removed in case it starts
> to be destructive to the network security (lack of hashrate recovery during
> long 4 years after given halving). Because that means bitcoin system has
> reached equilibrium / saturation on a globe scale level. The evolutionary
> path is the best path.
> The worst path is: overcomplicated constructs, completely unclear for
> Average Joe. Additional merge-mining coins, whatever etc. - just to achieve
> the same final goal.
> KISS = Keep It Simple. Halving removal is the most honest, simplest and
> most understandable way to make every bitcoin pasive user to participate in
> keeping Bitcoin network secure. It just force the rule, that someone pay
> proportionally to amount of bitcoins he/she hold, and all participants are
> sure that everybody participate (no Prisoner's Dilemma, what is crucial
> matter)
>
>
> Yes, that means: hard fork. But as written above - Bitcoin will die
> without the solution.
>
> Bitcoin may be also out of sudden in a deadly risk from quantum computers.
> In such circumstances everyone (or: almost, i.e. everyone who cares) -
> would immediately download a quantum resistant, freshly released bitcoin
> wallet, no doubt. And these two dangers are similar at least in one aspect:
> both will cause the spiral of death.
> Widespread consensus would be the best scenario, but from the other side:
> a fork always shows retrospectively, who was right (BCH turmoil in 2017)
>
>
> Regards
> Jaroslaw
>
>
> P.S  some other resources yet:
>
> "Friedman originally proposed a fixed monetary rule, called Friedman's
> k-percent rule, where the money supply would be automatically increased by
> a fixed percentage per year. Under this rule, there would be no leeway for
> the central reserve bank, as money supply increases could be determined "by
> a computer", and business could anticipate all money supply changes. With
> other monetarists he believed that the active manipulation of the money
> supply or its growth rate is more likely to destabilise than stabilise the
> economy.
>
> Most monetarists oppose the gold standard. Friedman, for example, viewed a
> pure gold standard as impractical.[9] For example, whereas one of the
> benefits of the gold standard is that the intrinsic limitations to the
> growth of the money supply by the use of gold would prevent inflation, if
> the growth of population or increase in trade outpaces the money supply,
> there would be no way to counteract deflation and reduced liquidity (and
> any attendant recession) except for the mining of more gold"
>
> no block reward  => reduced liquidity (reduced number of transactions) =>
> network security in spiral of death
>
> https://en.wikipedia.org/wiki/Monetarism
> https://en.wikipedia.org/wiki/Friedman%27s_k-percent_rule
> https://twitter.com/hasufl/status/1511470668457652224
>
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>

jk_14 17 Aug 2022, 13:43 UTC in reply to Eric Voskuil permalink original

On one scale you puts the Trust to the large stakeholders (why we avoid plenty of small stakeholders, btw), and on the other side I put game theory and well defined Prisoner's Dilemma.

Again: large stakeholders WILL NOT incentivised to mine, they will have the hundreds excuses why not to switch-on Antminers back. That's how it simply works. Bitcoin would fail miserably if Satoshi was based his concept mainly on existence of idealists.

If we will observe lack of hashrate recovery four years after some halving and still unprepared like today - means the trust in large stakeholders was a very costly mistake.

Superiority of Proof of Work against Proof of Stake has been discussed enough either The overall conclusion with what I fully agree is: swapping PoW to PoS - would be a degradation. You can stop talking about degradation to proof of stake, but just: degradation.

Degradation of Bitcoin, due to human greed.

Now you mine and you have an INSTANT gratification. Then you will mine and it will cost you real money, but simple switch - and you have a DELAYED, maybe some day in the future, maybe only a tiny - punishment. And The Punishment Won't Be Tiny.

"If the pain after hitting the hand with a hammer would appear after a month - people would notoriously walk with swollen fingers" 100% (^2)

Regards Jaroslaw

W dniu 2022-08-17 13:10:38 użytkownik Erik Aronesty <erik@q32•com> napisał:

Quoted text (6 lines)

> you can stop talking about  the "security of the system" as meaningful
> this has been discussed enough
> if fees are not sufficient, clearance times increase and large stakeholders are incentivised to mine
> in the best case, fees are sufficient
> in the worst case, it degrades to proof of stake
> i'm sure you can see how that's fine either way

Breno Brito 18 Aug 2022, 15:29 UTC in reply to jk_14 permalink original

Since we are talking about inflation and Milton Friedman, this Friedman's interview seems relevant. [image: image.png] Source: https://www.econlib.org/library/Columns/y2006/Friedmantranscript.html

Regards, Breno Brito

On Wed, Aug 17, 2022 at 11:31 AM Jaroslaw via bitcoin-dev < bitcoin-dev@lists•linuxfoundation•org> wrote:

Quoted text (70 lines)

>
> On one scale you puts the Trust to the large stakeholders (why we avoid
> plenty of small stakeholders, btw),
> and on the other side I put game theory and well defined Prisoner's
> Dilemma.
>
> Again: large stakeholders WILL NOT incentivised to mine, they will have
> the hundreds excuses why not to switch-on Antminers back.
> That's how it simply works.  Bitcoin would fail miserably if Satoshi was
> based his concept mainly on existence of idealists.
>
> If we will observe lack of hashrate recovery four years after some halving
> and still unprepared like today
> - means the trust in large stakeholders was a very costly mistake.
>
>
> Superiority of Proof of Work against Proof of Stake has been discussed
> enough either
> The overall conclusion with what I fully agree  is: swapping PoW to PoS -
> would be a degradation.
> You can stop talking about degradation to proof of stake, but just:
> degradation.
>
> Degradation of Bitcoin, due to human greed.
>
> Now you mine and you have an INSTANT gratification.
> Then you will mine and it will cost you real money, but simple switch -
> and you have a DELAYED, maybe some day in the future, maybe only a tiny -
> punishment.
> And The Punishment Won't Be Tiny.
>
>
> "If the pain after hitting the hand with a hammer would appear after a
> month - people would notoriously walk with swollen fingers"
> 100% (^2)
>
> Regards
> Jaroslaw
>
>
>
> W dniu 2022-08-17 13:10:38 użytkownik Erik Aronesty <erik@q32•com>
> napisał:
>
> > you can stop talking about  the "security of the system" as meaningful
> > this has been discussed enough
> > if fees are not sufficient, clearance times increase and large
> stakeholders are incentivised to mine
> > in the best case, fees are sufficient
> > in the worst case, it degrades to proof of stake
> > i'm sure you can see how that's fine either way
>
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>

Billy Tetrud 18 Aug 2022, 15:44 UTC in reply to jk_14 permalink original

While constant tail emission does in fact converge to 0 inflation over time (which bitcoin's halvings do as well mind you), tail emission does *not* solve the potential problem of mining rewards, it only delays it. A tail emission of 200,000 btc/year (~1% of the current supply) would be equivalent to halvings every ~50 years rather than every 4 years. Were we to implement this kind of thing right after the last non-" destructive" halving, it would buy us 46 years of extra time. Nothing more, nothing less.

While its mildly interesting to know that tail emission converges to a stable point, while no inflation implies monetary deflation at the rate of loss, this feels very likely to be an insignificant problem. I think 1% loss rate per year is an absurdly high estimate these days, and the loss rate is likely to decrease as methods of storing bitcoin mature. Imagine bitcoin was worth $1 trillion (not so hard, since it was not too long ago), then try imagining people losing $10 billion of bitcoin every year. Highly unlikely IMO. A rate of loss of 0.01%/year might be more realistic for a near-future mature bitcoin. That's not going to be enough to make a significant difference even over 100s of years.

If we actually wanted to solve the potential problem of not-enough-fees to upkeep mining security, there are less temporary ways to solve that. For example, if fees end up not being able to support sufficient mining, we could add emission based on a constant fraction of fees in the block. For example, every block could emit new bitcoin amounting to 10% of the fees collected in that block. This would tie coinbase rewards to the real world (since the fee market is tied to the real economy) and ensure higher block revenue indefinitely - ie not just for another 50 years.

But its also worth saying that blockchain security (which mining revenue correlates with) does *not* need to increase indefinitely. There is some amount of security (and therefore some amount of mining revenue) that is sufficient, beyond which additional security is simply unnecessary, unwarranted, and wasteful (you wouldn't buy a $1000 safe to store $1000 of valuables). Do we, as the bitcoin community, have some good idea how much security we need? Do we have some idea how costly a 51% attack must be where we can be comfortable it will never happen? I'm curious to hear what people think about that. Because without having some kind of estimates of what "enough security" is, there's absolutely no way of evaluating whether or not its likely that bitcoin fees alone will be able to sustain enough security.

On Wed, Aug 17, 2022 at 9:31 AM Jaroslaw via bitcoin-dev < bitcoin-dev@lists•linuxfoundation•org> wrote:

Quoted text (70 lines)

>
> On one scale you puts the Trust to the large stakeholders (why we avoid
> plenty of small stakeholders, btw),
> and on the other side I put game theory and well defined Prisoner's
> Dilemma.
>
> Again: large stakeholders WILL NOT incentivised to mine, they will have
> the hundreds excuses why not to switch-on Antminers back.
> That's how it simply works.  Bitcoin would fail miserably if Satoshi was
> based his concept mainly on existence of idealists.
>
> If we will observe lack of hashrate recovery four years after some halving
> and still unprepared like today
> - means the trust in large stakeholders was a very costly mistake.
>
>
> Superiority of Proof of Work against Proof of Stake has been discussed
> enough either
> The overall conclusion with what I fully agree  is: swapping PoW to PoS -
> would be a degradation.
> You can stop talking about degradation to proof of stake, but just:
> degradation.
>
> Degradation of Bitcoin, due to human greed.
>
> Now you mine and you have an INSTANT gratification.
> Then you will mine and it will cost you real money, but simple switch -
> and you have a DELAYED, maybe some day in the future, maybe only a tiny -
> punishment.
> And The Punishment Won't Be Tiny.
>
>
> "If the pain after hitting the hand with a hammer would appear after a
> month - people would notoriously walk with swollen fingers"
> 100% (^2)
>
> Regards
> Jaroslaw
>
>
>
> W dniu 2022-08-17 13:10:38 użytkownik Erik Aronesty <erik@q32•com>
> napisał:
>
> > you can stop talking about  the "security of the system" as meaningful
> > this has been discussed enough
> > if fees are not sufficient, clearance times increase and large
> stakeholders are incentivised to mine
> > in the best case, fees are sufficient
> > in the worst case, it degrades to proof of stake
> > i'm sure you can see how that's fine either way
>
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>

jk_14 18 Aug 2022, 20:22 UTC in reply to Eric Voskuil permalink original

Fortunately halving in 2020 will be non destructive because it looks like we will have higher difficulty in 2024 than in 2020.

Let's assume the worst case scenario: after halving in 2024, we have regression of difficulty in 2028. Annual inflation rate in 2028 is 0.81%. Removal of halvings in this year means that in year 2100 (72 years later) we will have 0.51% annual inflation rate, still. And that is Monero concept in fact: constant annual supply, thus very slowly decreasing of inflation.

Yes, you are right. Better that that - would be to wait for bitcoin ecosystem to show us what is the equilibrium/saturation level at globe scale - I hope it will be several years later and "the annual inflation to keep" - will be 0.40% in 2032 or even 0.20% only in 2036.

And then instead of halving every 210k blocks - just to adjust the block reward (i.e. slightly increase). To keep the annual inflation rate constant. Constant forever. On most proper level - because determined empirically. I didn't propose it, because of certain, immediate backlash :)

And for the same reason, as an answer how much security we need. Empirically reached security level is - the most accurate one. In military terminology: the protection of already conquered land. Regression is sign of weakness and we probably don't want to see it in Bitcoin.

Anyway, keeping Bitcoin in the middle of ultra-obvious Edge Case, with pathological Friedman's "free lunches" for stakeholders, due to this overtaxing (punish) people which are simply want to use Bitcoin, additionally with pure form of Prisoner's Dilemma here, and with Trust to "large" stakeholders, while almost every of them will convince himself he is not really a large one and "let Microstrategy run Antminers" (and burn money)

- and all above only because we are too greed to pay miners as low as only few tenths of a percent per year for their real service as keeping network secure, pay in most honest way, because with no exceptions and proportionally to holdings - and instead of it we rather prefer to take the high risk of spiral of death - is madness.

Pure madness. This is what almost 50y old cynic may assure you.

Regards Jaroslaw

W dniu 2022-08-18 17:44:29 użytkownik Billy Tetrud <billy.tetrud@gmail•com> napisał: While constant tail emission does in fact converge to 0 inflation over time (which bitcoin's halvings do as well mind you), tail emission does *not* solve the potential problem of mining rewards, it only delays it. A tail emission of 200,000 btc/year (~1% of the current supply) would be equivalent to halvings every ~50 years rather than every 4 years. Were we to implement this kind of thing right after the last non-" destructive" halving, it would buy us 46 years of extra time. Nothing more, nothing less.

Erik Aronesty 18 Aug 2022, 20:49 UTC in reply to jk_14 permalink original

1...

Quoted text (1 line)

>  Degradation

Remember, if hash rate declines (no sign that it will so far), the net-effect is longer clearance times for large transactions.

It's not "failure" or "breaking"

2... Certainly, if demand for blockspace isn't high enough to support clearance then the *first *thing to do would be to improve the utility of the chain so that demand for blockspace is high.

This is one of the strong reasons to support research like covenants and rgb and taro. If those tools become popular, we will see rising fees. Indeed, large miners should be *paying* researchers to advance these tools. It's in their own best interests.

3...

Quoted text (1 line)

> and on the other side I put game theory and well defined Prisoner's

Dilemma.

The prisoner's dilemma does not state that zero stakeholders will mine, just far fewer. Real world experiments with actual prisoners and students show cooperation rates of 33%. Plus there are incentives. Stakeholders who want to move large amounts in a reasonable amount of time are incentivised to mine.

4... Changing issuance is a non-starter, forte very game-theoretic reasons you refer to

it would destroy the value proposition of the chain, fork the coin and i have every confidence that the surviving fork would be the one without the new issuance

On Wed, Aug 17, 2022 at 9:43 AM <jk_14@op•pl> wrote:

Quoted text (66 lines)

>
> On one scale you puts the Trust to the large stakeholders (why we avoid
> plenty of small stakeholders, btw),
> and on the other side I put game theory and well defined Prisoner's
> Dilemma.
>
> Again: large stakeholders WILL NOT incentivised to mine, they will have
> the hundreds excuses why not to switch-on Antminers back.
> That's how it simply works.  Bitcoin would fail miserably if Satoshi was
> based his concept mainly on existence of idealists.
>
> If we will observe lack of hashrate recovery four years after some halving
> and still unprepared like today
> - means the trust in large stakeholders was a very costly mistake.
>
>
> Superiority of Proof of Work against Proof of Stake has been discussed
> enough either
> The overall conclusion with what I fully agree  is: swapping PoW to PoS -
> would be a degradation.
> You can stop talking about degradation to proof of stake, but just:
> degradation.
>
> Degradation of Bitcoin, due to human greed.
>
> Now you mine and you have an INSTANT gratification.
> Then you will mine and it will cost you real money, but simple switch -
> and you have a DELAYED, maybe some day in the future, maybe only a tiny -
> punishment.
> And The Punishment Won't Be Tiny.
>
>
> "If the pain after hitting the hand with a hammer would appear after a
> month - people would notoriously walk with swollen fingers"
> 100% (^2)
>
> Regards
> Jaroslaw
>
>
>
> W dniu 2022-08-17 13:10:38 użytkownik Erik Aronesty <erik@q32•com>
> napisał:
>
> > you can stop talking about  the "security of the system" as meaningful
> > this has been discussed enough
> > if fees are not sufficient, clearance times increase and large
> stakeholders are incentivised to mine
> > in the best case, fees are sufficient
> > in the worst case, it degrades to proof of stake
> > i'm sure you can see how that's fine either way
>
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
>

vjudeu 19 Aug 2022, 05:34 UTC in reply to Eric Voskuil permalink original

Quoted text (1 line)

> If we actually wanted to solve the potential problem of not-enough-fees to upkeep mining security, there are less temporary ways to solve that. For example, if fees end up not being able to support sufficient mining, we could add emission based on a constant fraction of fees in the block. For example, every block could emit new bitcoin amounting to 10% of the fees collected in that block. This would tie coinbase rewards to the real world (since the fee market is tied to the real economy) and ensure higher block revenue indefinitely - ie not just for another 50 years.

Miners can game this system by moving their own coins in 100% fees transactions, just to produce more coins. You have one million BTC? No problem, just move them as fees, and you just created 100k BTC out of thin air, just because you are a wealthy miner. And even if that amount will be stolen, when some other miner will reorg your block, then still, miners will keep creating coins by moving them as fees, and the strongest miner will get the whole pot. And guess what: 100 blocks later you can reuse newly created 100k BTC to make another 10k BTC, so it will exponentially explode as (amountOfCoins*(1+0.1))^n function. And guess what: (1.1)^8 is 2.14358881. That means, after eight moves, you can double your coins, if you are a wealthy miner. And you can start with smaller amounts, to play it safe, but eventually, this system will degrade into "coin doubler after 800 blocks" or something similar.

On 2022-08-18 18:45:43 user Billy Tetrud via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote: While constant tail emission does in fact converge to 0 inflation over time (which bitcoin's halvings do as well mind you), tail emission does *not* solve the potential problem of mining rewards, it only delays it. A tail emission of 200,000 btc/year (~1% of the current supply) would be equivalent to halvings every ~50 years rather than every 4 years. Were we to implement this kind of thing right after the last non-" destructive" halving, it would buy us 46 years of extra time. Nothing more, nothing less.

On Wed, Aug 17, 2022 at 9:31 AM Jaroslaw via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:

On one scale you puts the Trust to the large stakeholders (why we avoid plenty of small stakeholders, btw), and on the other side I put game theory and well defined Prisoner's Dilemma.

If we will observe lack of hashrate recovery four years after some halving and still unprepared like today - means the trust in large stakeholders was a very costly mistake.

Degradation of Bitcoin, due to human greed.

"If the pain after hitting the hand with a hammer would appear after a month - people would notoriously walk with swollen fingers" 100% (^2)

Regards Jaroslaw

W dniu 2022-08-17 13:10:38 użytkownik Erik Aronesty <erik@q32•com> napisał:

Quoted text (6 lines)

> you can stop talking about  the "security of the system" as meaningful
> this has been discussed enough
> if fees are not sufficient, clearance times increase and large stakeholders are incentivised to mine
> in the best case, fees are sufficient
> in the worst case, it degrades to proof of stake
> i'm sure you can see how that's fine either way

aliashraf.btc At protonmail 19 Aug 2022, 17:21 UTC in reply to Peter permalink original

Hi Peter, everyone This issue has been discussed thoroughly in bitcointalk, general discussions are more suited to forums, I believe, still ....

First and foremost, it is more than obvious that bitcoin block subsidy algorithm is a total disaster, not just for the zero subsidy security consequences, but also for the overly rewarding scheme that favors (few) first-runners against (masses of) people who join later, a policy that looks to be a cheap marketing trick rather than a decent strategic monetary, system design, no matter how natural it is presumed nowadays, after being implemented by Bitcoin.

For now, the brilliance of the idea behind Bitcoin and the enthusiasm have compensated for its bizzar, upside-down inflation policy, in practice as newcomers have been paying the price to lucky first-runners and adopting anyway. Is it happening for low block subsidy? Is it going to be solved somehow? I don't think so.

With subsidy still being the major (like 90%) portion of the block reward, there is an equalizer factor pushing equilibrium by paying security costs on behalf of current coin owners.Note that every single new bitcoin paid as subsidy is actually paid by the rest of the wallets proportional to their balance. Other than its direct contribution to security, once understood as a ballance-based taxing scheme, it is a crucial mechanism for re-distribution of wealth because to compensate for their costs, unlike speculators (who are among the worst adopters of Bitcoin, and unfortunately the most influencers), miners are used to dumping their coins, providing more fair opportunities for people to join. So, halving and the hard cap, put both adoption and security as risk, It is why, unlike "believers", I'm deeply concerned about a future with low block subsidy because it puts both security and adoption in an awkward situation.

Additionally, It is not considered an engineering practice by any measure to speculate about the security of a system that we abundantly recommend to friends, family for joining. We need proofs, security proof, ease of adaptation proof, etc., Fantasies are not proofs, having faith in a magical incentive mechanism that fixes everything is not an argument, let alone being a proof. Incentives are irrelevant, rules, schemes, projects, and so fort, matter. There are always incentives in games, but rules are in charge of determining the fate. Without rules, there is no game, flawed schemes and rules move the game behind its equilibrium to fail eventually.

I've not to mention the unfeasibility of tempering Bitcoin's basic consensus rules, Bitcoin rules are not subject to change specially when it comes to something that is widely considered a basic characteristic, a Schelling point, and so forth.

So, it is the paradoxical situation: we are exposed to, on one hand, it is a deficiency and on the other hand it is inevitable because is critically hard-code to Bitcoin, advertised more than any feature as its identity. But it is our job, isn't it? Dealing with the impossible and taking care of it, but I think before reaching to that point we have to settle the basics.:

- There is a problem with long term security and adoption consequences.
- It is built deeply to bitcoin consensus rules, and considered a critical
- It is not going to disappear magically, neither it will be addressed by whales, etc.
- The 21M cap, halving, and generally, Bitcoin consensus, is not subject to change.

Don't panic, it is not exactly a catch-22 situation. Tip: It is always possible to help a system without aggressive intervention, either by smart tweaks or by supporting it using other system(s).

Cheers, Ali Ashraf

------- Original Message ------- On Tuesday, August 16th, 2022 at 8:35 PM, Peter via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:

Quoted text (18 lines)

> Hi Jaroslaw,

> In the Prisoner's Dilemma the prisoners cannot communicate. In Bitcoin large holders are able to communicate with each other. Also, prisoners need not make an all or nothing decision in Bitcoin. Miners can join and leave the network freely over time. You can change your decision based on the decision of others.
>
> The Bitcoin design is such that security is volatile but the issuance of blocks is timely and evened out to a 10 minutes average even after the reward is exhausted.
>
> The existing incentive that miners earn money for including transactions is enough to motivate human nature. Transaction initiators have an incentive to mine and run full nodes for personal interest.
>
>>Noone will waste his renewable energy on unprofitable Antminer while he/she can sell this energy for the market price.
>
> The law in most jurisdictions prevents the resale of spare electricity unless an expensive license is obtained (and in most cases no license is available as the government maintains a monopoly). Mining with waste electricity is reducing losses. Another incentive to motivate human nature.
>
> Bitcoin holders can be enfranchised into any new system. So, no need for bike shedding the original design which is a Schelling Point.
>
> Regards
>
> Peter Kroll
>
> pointbiz/ BTCCuracao

Billy Tetrud 20 Aug 2022, 15:30 UTC in reply to aliashraf.btc At protonmail permalink original

@vjudeu

Quoted text (1 line)

> Miners can game this system by moving their own coins in 100% fees

transactions, just to produce more coins. You have one million BTC? No problem, just move them as fees, and you just created 100k BTC out of thin air, just because you are a wealthy miner.

Hmm, I believe you're right about that. If a miner can make 1 BTC of fees by honestly mining + 0.1 BTC of inflation, they could instead make 2 BTC by mining their own transactions with 20 BTC of fees. That does sound very gameable. I rescind my suggestion.

One could imagine modifications to that suggestion that attempts to make it more difficult to game directly. For example, if an average sum of fees/block was calculated over a window (eg 2 weeks, 2 months, etc) and 10% of that was released in coinbase rewards, you would eliminate the possibility for individual miners to game the system. However, you would then have to consider the group of miners as a whole - since they all have an interest in increasing their revenues, it certainly seems like a dangerous incentive that could lead to runaway inflation. So perhaps even extensions of my suggestion are too gameable to be safe.

But my point still stands that tail emission is not a permanent solution. One permanent solution would be some constant inflation *rate *(eg 0.1%/year). Given that the necessary security is a function of the total value of the currency, perhaps that would be a reasonable natural way to scale security as needed.

Again tho, I haven't seen any convincing evidence that any solution like this will likely be necessary at all. Total collected fees will also scale up as bitcoin grows, probably quadratically (since the value of the network grows quadratically). I'm rather more inclined to think collected fees will get far *too* high - ie substantially higher than needed to pay for sufficient blockchain security.

On Fri, Aug 19, 2022 at 1:48 PM aliashraf.btc At protonmail via bitcoin-dev <bitcoin-dev@lists•linuxfoundation•org> wrote:

Quoted text (130 lines)

> Hi Peter, everyone
> This issue has been discussed thoroughly in bitcointalk, general
> discussions are more suited to forums, I believe, still ....
>
> First and foremost, it is more than obvious that bitcoin block subsidy
> algorithm is a total disaster, not just for the zero subsidy security
> consequences, but also for the overly rewarding scheme that favors (few)
> first-runners against (masses of) people who join later, a policy that
> looks to be a cheap marketing trick rather than a decent strategic
> monetary, system design, no matter how natural it is presumed nowadays,
> after being implemented by Bitcoin.
>
> For now, the brilliance of the idea behind Bitcoin and the enthusiasm have
> compensated for its bizzar, upside-down inflation policy, in practice as
> newcomers have been paying the price to lucky first-runners and adopting
> anyway.
> Is it happening for low block subsidy? Is it going to be solved somehow? I
> don't think so.
>
> With subsidy still being the major (like 90%) portion of the block reward,
> there is an equalizer factor pushing equilibrium by paying security costs
> on behalf of current coin owners.Note that every single new bitcoin paid as
> subsidy is actually paid by the rest of the wallets proportional to their
> balance.
> Other than its direct contribution to security, once understood as a
> ballance-based taxing scheme, it is a crucial mechanism for re-distribution
> of wealth because to compensate for their costs, unlike speculators (who
> are among the worst adopters of Bitcoin, and unfortunately the most
> influencers), miners are used to dumping their coins, providing more fair
> opportunities for people to join.
> So, halving and the hard cap, put both adoption and security as risk, It
> is why, unlike  "believers", I'm deeply concerned about a future with low
> block subsidy because it puts both security and adoption in an awkward
> situation.
>
> Additionally, It is not considered an engineering practice by any measure
> to speculate about the security of a system that we abundantly recommend to
> friends, family for joining.
> We need proofs, security proof, ease of adaptation proof, etc.,
> Fantasies are not proofs, having faith in a magical incentive mechanism
> that fixes everything is not an argument, let alone being a proof.
> Incentives are irrelevant, rules, schemes, projects, and so fort, matter.
> There are always incentives in games, but rules are in charge of
> determining the fate.
> Without rules, there is no game, flawed schemes and rules move the game
> behind its equilibrium to fail eventually.
>
> I've not to mention the unfeasibility of tempering Bitcoin's basic
> consensus rules, Bitcoin rules are not subject to change specially when it
> comes to something that is widely considered a basic characteristic, a
> Schelling point, and so forth.
>
> So, it is the paradoxical situation: we are exposed to, on one hand, it is
> a deficiency and on the other hand it is inevitable because is critically
> hard-code to Bitcoin, advertised more than any feature as its identity.
> But it is our job, isn't it? Dealing with the impossible and taking care
> of it, but I think before reaching to that point we have to settle the
> basics.:
>
>
>    1. There is a problem with long term security and adoption
>    consequences.
>    2. It is built deeply to bitcoin consensus rules, and considered a
>    critical
>    3. It is not going to disappear magically, neither it will be
>    addressed by whales, etc.
>    4. The 21M cap, halving, and generally, Bitcoin consensus, is not
>    subject to change.
>
>
> Don't panic, it is not exactly a catch-22 situation. Tip:
> It is always possible to help a system without aggressive intervention,
> either by smart tweaks or by supporting it using other system(s).
>
> Cheers, Ali Ashraf
>
>
>
> ------- Original Message -------
> On Tuesday, August 16th, 2022 at 8:35 PM, Peter via bitcoin-dev <
> bitcoin-dev@lists•linuxfoundation•org> wrote:
>
> Hi Jaroslaw,
>
>
>
> In the Prisoner's Dilemma the prisoners cannot communicate. In Bitcoin
> large holders are able to communicate with each other. Also, prisoners need
> not make an all or nothing decision in Bitcoin. Miners can join and leave
> the network freely over time. You can change your decision based on the
> decision of others.
>
>
> The Bitcoin design is such that security is volatile but the issuance of
> blocks is timely and evened out to a 10 minutes average even after the
> reward is exhausted.
>
>
> The existing incentive that miners earn money for including transactions
> is enough to motivate human nature. Transaction initiators have an
> incentive to mine and run full nodes for personal interest.
>
>
> >Noone will waste his renewable energy on unprofitable Antminer while
> he/she can sell this energy for the market price.
>
>
> The law in most jurisdictions prevents the resale of spare electricity
> unless an expensive license is obtained (and in most cases no license is
> available as the government maintains a monopoly). Mining with waste
> electricity is reducing losses. Another incentive to motivate human nature.
>
>
> Bitcoin holders can be enfranchised into any new system. So, no need for
> bike shedding the original design which is a Schelling Point.
>
>
> Regards
>
> Peter Kroll
>
> pointbiz/ BTCCuracao
>
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists•linuxfoundation•org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>