* [bitcoin-dev] Off-chain transactions and miner fees
@ 2015-08-09 22:20 info
2015-08-10 5:01 ` Joseph Poon
` (2 more replies)
0 siblings, 3 replies; 13+ messages in thread
From: info @ 2015-08-09 22:20 UTC (permalink / raw)
To: bitcoin-dev
Hello all,
one argument I often read on this mailing list is that it's essential to
reward miners with transaction fees at some point to secure the network.
Off-chain transactions, whether it's Lightning or something else,
potentially extract fees, which may otherwise be paid to miners, if the
transactions were actually on-chain.
In this context, wouldn't it be contradictory, maybe even harmful, to
aim for an environment, where some/many/most transactions are off-chain?
I have not yet seen this conflict addressed in the recent discussions.
^ permalink raw reply [flat|nested] 13+ messages in thread* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-09 22:20 [bitcoin-dev] Off-chain transactions and miner fees info @ 2015-08-10 5:01 ` Joseph Poon 2015-08-10 5:57 ` Rune K. Svendsen 2015-08-10 18:50 ` Anthony Towns 2 siblings, 0 replies; 13+ messages in thread From: Joseph Poon @ 2015-08-10 5:01 UTC (permalink / raw) To: info; +Cc: bitcoin-dev Hi, On Mon, Aug 10, 2015 at 12:20:36AM +0200, info--- via bitcoin-dev wrote: > Off-chain transactions, whether it's Lightning or something else, > potentially extract fees, which may otherwise be paid to miners, if the > transactions were actually on-chain. > > In this context, wouldn't it be contradictory, maybe even harmful, to > aim for an environment, where some/many/most transactions are off-chain? I think the fee market's long-term implications for mining rewards is very important as well! However, opening and closing channels will not be infrequent to the point that it will never happen with Lightning. Individuals that fill up their channel will need to accommodate accumulation (as well as those that do a lot of disbursement). These fund flows are not too rare, and huge payments (think the equivalent to wire transfers today) will probably be still on-chain. I think the payment size of micropayments to credit cards are Lightning-scale, what people use today for wire transfers (e.g. buying a house) will be on-chain. What Lightning does is it mitigates the advantages that doing an end-run around bitcoin entirely via centralized systems provides to a sufficient level, e.g. everyone transacting on Coinbase. Having everything on centralized services will have significantly lower on-chain transactions than Lightning and is one of the more viable alternative off-chain payments. Fundamentally, without off-chain transactions, there's a paradox within a viable fee market. If you presume that fees should be relatively competitive (i.e. not asymptotically close to zero), that implies that higher-value transactions *will* be prioritized over low-value transactions, as high-value transactions are willing to pay higher fees. Wire transfers are cheap when it's a million-dollar wire. In my view, different transaction values is the much larger risk for on-chain transaction fee markets, with high-value transactions crowding out low-value transactions on-chain. With lightning, it significantly mitigates this problem by aggregating the low-value transactions off-chain. -- Joseph Poon ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-09 22:20 [bitcoin-dev] Off-chain transactions and miner fees info 2015-08-10 5:01 ` Joseph Poon @ 2015-08-10 5:57 ` Rune K. Svendsen 2015-08-10 8:39 ` Thomas Zander ` (2 more replies) 2015-08-10 18:50 ` Anthony Towns 2 siblings, 3 replies; 13+ messages in thread From: Rune K. Svendsen @ 2015-08-10 5:57 UTC (permalink / raw) To: info; +Cc: bitcoin-dev Nodes in the Lightning network earn fees that wouldn't be there if it weren't for the Lightning network. The base Bitcoin layer can't handle the transaction throughout that Lightning can, so the Lightning fees were never available to Bitcoin miners in the first place. What Lightning does is raise the value of a transaction on the block chain. Imagine you're a Lightning node, and in order to collect your fees, that you've earned over the past month, you have to settle on the blockchain. If you've earned, say, 0.5 BTC in fees, you can attach a huge 0.005 BTC fee to the Bitcoin settlement transaction. The miners earn a larger fee, and you make sure your transaction gets into the blockchain quickly, and you can afford to pay this fee because you've made much more on the Lightning transactions you've routed. /Rune > Den 10/08/2015 kl. 00.20 skrev info--- via bitcoin-dev <bitcoin-dev@lists•linuxfoundation.org>: > > Hello all, > > one argument I often read on this mailing list is that it's essential to > reward miners with transaction fees at some point to secure the network. > > Off-chain transactions, whether it's Lightning or something else, > potentially extract fees, which may otherwise be paid to miners, if the > transactions were actually on-chain. > > In this context, wouldn't it be contradictory, maybe even harmful, to > aim for an environment, where some/many/most transactions are off-chain? > > I have not yet seen this conflict addressed in the recent discussions. > > _______________________________________________ > bitcoin-dev mailing list > bitcoin-dev@lists•linuxfoundation.org > https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 5:57 ` Rune K. Svendsen @ 2015-08-10 8:39 ` Thomas Zander 2015-08-10 15:53 ` Leo Wandersleb 2015-08-10 9:01 ` GC 2015-08-10 15:35 ` info 2 siblings, 1 reply; 13+ messages in thread From: Thomas Zander @ 2015-08-10 8:39 UTC (permalink / raw) To: bitcoin-dev On Monday 10. August 2015 07.57.30 Rune K. Svendsen via bitcoin-dev wrote: > What Lightning does is raise the value of a transaction on the block chain. > Imagine you're a Lightning node, and in order to collect your fees, that > you've earned over the past month, you have to settle on the blockchain. If > you've earned, say, 0.5 BTC in fees, you can attach a huge 0.005 BTC fee to > the Bitcoin settlement transaction. The miners earn a larger fee, and you > make sure your transaction gets into the blockchain quickly, and you can > afford to pay this fee because you've made much more on the Lightning > transactions you've routed. I don't buy that argument, you are saying a company will give away profits because of... what? It can? The reason of it being faster makes no sense, as your example the channel has been open for a month then he really doesn't care it takes 1, 10 or 50 blocks before his transaction is included. What is 5 hours wait on a month of profit? -- Thomas Zander ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 8:39 ` Thomas Zander @ 2015-08-10 15:53 ` Leo Wandersleb 2015-08-10 21:16 ` Thomas Zander 0 siblings, 1 reply; 13+ messages in thread From: Leo Wandersleb @ 2015-08-10 15:53 UTC (permalink / raw) To: bitcoin-dev [-- Attachment #1: Type: text/plain, Size: 1379 bytes --] On 08/10/2015 05:39 AM, Thomas Zander via bitcoin-dev wrote: > On Monday 10. August 2015 07.57.30 Rune K. Svendsen via bitcoin-dev wrote: >> What Lightning does is raise the value of a transaction on the block chain. >> Imagine you're a Lightning node, and in order to collect your fees, that >> you've earned over the past month, you have to settle on the blockchain. If >> you've earned, say, 0.5 BTC in fees, you can attach a huge 0.005 BTC fee to >> the Bitcoin settlement transaction. The miners earn a larger fee, and you >> make sure your transaction gets into the blockchain quickly, and you can >> afford to pay this fee because you've made much more on the Lightning >> transactions you've routed. > I don't buy that argument, you are saying a company will give away profits > because of... what? It can? > > The reason of it being faster makes no sense, as your example the channel has > been open for a month then he really doesn't care it takes 1, 10 or 50 blocks > before his transaction is included. What is 5 hours wait on a month of profit? > I guess the assumption here is a full-block scenario where users of LN would be willing to pay 100 times the fees users of crude transactions would be willing to pay for the same limited space in the blockchain, simply because LN would group 100 real world payments into 1 crude transaction. [-- Attachment #2: OpenPGP digital signature --] [-- Type: application/pgp-signature, Size: 473 bytes --] ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 15:53 ` Leo Wandersleb @ 2015-08-10 21:16 ` Thomas Zander 0 siblings, 0 replies; 13+ messages in thread From: Thomas Zander @ 2015-08-10 21:16 UTC (permalink / raw) To: bitcoin-dev On Monday 10. August 2015 12.53.33 Leo Wandersleb via bitcoin-dev wrote: > > The reason of it being faster makes no sense, as your example the channel > > has been open for a month then he really doesn't care it takes 1, 10 or > > 50 blocks before his transaction is included. What is 5 hours wait on a > > month of profit? > > I guess the assumption here is a full-block scenario where users of LN would > be willing to pay 100 times the fees users of crude transactions would be > willing to pay for the same limited space in the blockchain, simply because > LN would group 100 real world payments into 1 crude transaction. Thats exactly what I argued makes no sense to me. Why pay for something you don't need? Paying something Just because you have money is really not a good business strategy. I doubt that will happen. -- Thomas Zander ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 5:57 ` Rune K. Svendsen 2015-08-10 8:39 ` Thomas Zander @ 2015-08-10 9:01 ` GC 2015-08-10 15:35 ` info 2 siblings, 0 replies; 13+ messages in thread From: GC @ 2015-08-10 9:01 UTC (permalink / raw) To: Rune K. Svendsen, info; +Cc: bitcoin-dev Following this, Bitcoin and proposed payment networks like LN will be competing for fees based on duration and cost to process transactions. If fees on Bitcoin network stay low and zero-conf txns are possible, competing payment networks will need some very special features to survive and make money for their investors. On 10/8/15 10:27 am, "Rune K. Svendsen via bitcoin-dev" <bitcoin-dev@lists•linuxfoundation.org> wrote: >Nodes in the Lightning network earn fees that wouldn't be there if it >weren't for the Lightning network. The base Bitcoin layer can't handle >the transaction throughout that Lightning can, so the Lightning fees were >never available to Bitcoin miners in the first place. > >What Lightning does is raise the value of a transaction on the block >chain. Imagine you're a Lightning node, and in order to collect your >fees, that you've earned over the past month, you have to settle on the >blockchain. If you've earned, say, 0.5 BTC in fees, you can attach a huge >0.005 BTC fee to the Bitcoin settlement transaction. The miners earn a >larger fee, and you make sure your transaction gets into the blockchain >quickly, and you can afford to pay this fee because you've made much more >on the Lightning transactions you've routed. > >/Rune > > > >> Den 10/08/2015 kl. 00.20 skrev info--- via bitcoin-dev >><bitcoin-dev@lists•linuxfoundation.org>: >> >> Hello all, >> >> one argument I often read on this mailing list is that it's essential to >> reward miners with transaction fees at some point to secure the network. >> >> Off-chain transactions, whether it's Lightning or something else, >> potentially extract fees, which may otherwise be paid to miners, if the >> transactions were actually on-chain. >> >> In this context, wouldn't it be contradictory, maybe even harmful, to >> aim for an environment, where some/many/most transactions are off-chain? >> >> I have not yet seen this conflict addressed in the recent discussions. >> >> _______________________________________________ >> 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 ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 5:57 ` Rune K. Svendsen 2015-08-10 8:39 ` Thomas Zander 2015-08-10 9:01 ` GC @ 2015-08-10 15:35 ` info 2 siblings, 0 replies; 13+ messages in thread From: info @ 2015-08-10 15:35 UTC (permalink / raw) To: bitcoin-dev > Nodes in the Lightning network earn fees that wouldn't be there if it weren't for the Lightning network. The base Bitcoin layer can't handle the transaction throughout that Lightning can, so the Lightning fees were never available to Bitcoin miners in the first place. This is questionable to some degree: While it's given that limited space inherently limits the number of on-chain transactions, one could argue that the limited space could result in significantly higher fees due to the competition. Likewise, if we assume there were a higher/no limit, then it would also, or especially, be favorable to pay miners, instead of off-chain-serivce-provider X. In both scenarios, with, or without capacity limit, it doesn't seem favorable to move transactions off-chain. -------- Original Message -------- Subject: Re: [bitcoin-dev] Off-chain transactions and miner fees From: Rune K. Svendsen <runesvend@gmail•com> To: info@bitmarkets•net <info@bitmarkets•net> Cc: "bitcoin-dev@lists•linuxfoundation.org" <bitcoin-dev@lists•linuxfoundation.org> Date: Mon, 10 Aug 2015 07:57:30 +0200 > Nodes in the Lightning network earn fees that wouldn't be there if it weren't for the Lightning network. The base Bitcoin layer can't handle the transaction throughout that Lightning can, so the Lightning fees were never available to Bitcoin miners in the first place. > > What Lightning does is raise the value of a transaction on the block chain. Imagine you're a Lightning node, and in order to collect your fees, that you've earned over the past month, you have to settle on the blockchain. If you've earned, say, 0.5 BTC in fees, you can attach a huge 0.005 BTC fee to the Bitcoin settlement transaction. The miners earn a larger fee, and you make sure your transaction gets into the blockchain quickly, and you can afford to pay this fee because you've made much more on the Lightning transactions you've routed. > > /Rune > > > >> Den 10/08/2015 kl. 00.20 skrev info--- via bitcoin-dev <bitcoin-dev@lists•linuxfoundation.org>: >> >> Hello all, >> >> one argument I often read on this mailing list is that it's essential to >> reward miners with transaction fees at some point to secure the network. >> >> Off-chain transactions, whether it's Lightning or something else, >> potentially extract fees, which may otherwise be paid to miners, if the >> transactions were actually on-chain. >> >> In this context, wouldn't it be contradictory, maybe even harmful, to >> aim for an environment, where some/many/most transactions are off-chain? >> >> I have not yet seen this conflict addressed in the recent discussions. >> >> _______________________________________________ >> bitcoin-dev mailing list >> bitcoin-dev@lists•linuxfoundation.org >> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-09 22:20 [bitcoin-dev] Off-chain transactions and miner fees info 2015-08-10 5:01 ` Joseph Poon 2015-08-10 5:57 ` Rune K. Svendsen @ 2015-08-10 18:50 ` Anthony Towns 2015-08-10 19:14 ` Hector Chu 2015-08-10 21:12 ` Eric Voskuil 2 siblings, 2 replies; 13+ messages in thread From: Anthony Towns @ 2015-08-10 18:50 UTC (permalink / raw) To: bitcoin-dev On Mon, Aug 10, 2015 at 12:20:36AM +0200, info--- via bitcoin-dev wrote: > one argument I often read on this mailing list is that it's essential to > reward miners with transaction fees at some point to secure the network. That's not a universally held belief. See for example: https://en.bitcoin.it/wiki/Funding_network_security#Alternatives https://bitcointalk.org/index.php?topic=157141.0 It's also not clear to me what amount of security people actually "want". In late May, Mike Hearn wrote: "Currently the Bitcoin community is being effectively taxed about $832,000 per day ... just to support mining! [...] We’re not spending so much on mining because we really need it. It’s because printing money distorts behaviour." -- https://medium.com/@octskyward/hashing-7d04a887acc8 If $832k (25*240 btc/day * $231 USD/btc) is too much, maybe $475k/day (reward halved, at current price) will still be too much in a year's time? If bitcoin's price rises at just 19% pa on average (which doesn't seem like much if you're thinking in startup/VC terms?), then the block reward will still be worth about $475k/day after it halves again to 6.25 coins per block. So maybe the block reward pays for bitcoin transactions and fees are effectively zero right up until the day the block reward goes away entirely? In any event, the lightning network offers three potential benefits over on-chain transactions: - lower fees - shorter confirmation times - no ongoing costs once the channel is closed If you have zero fees, lightning is still interesting for quick transactions (since they offer better assurance of payment than zero-confirmation transactions), and also for microtransactions (where spamming the blockchain and the UTXO db with thousands of transactions just to move $1 from here to there isn't appealing). > Off-chain transactions, whether it's Lightning or something else, > potentially extract fees, which may otherwise be paid to miners, if the > transactions were actually on-chain. Every lightning transaction happens through a series of channels (at least one, but realistically at least two; with any amount of decentralisation, probably more likely somewhere in the range of three to twenty). Each of those channels requires at least two blockchain transactions (one or two to create the channel; one or three to close the channel and spend the balances). It's not 100% clear at this point, but keeping a lightning channel open will probably have (hardware) costs that grow linearly in the number of transactions [0]; in which case keeping them open forever won't be an option, and they'll be closed when the cost of keeping it open is less than the cost of resetting it on the blockchain (only one blockchain transaction required). So in that case even if lightning is crazy popular, there'll still be activity on the blockchain at whatever fee rate there is, just by people trading off storage costs for blockchain fees. [0] http://lists.linuxfoundation.org/pipermail/lightning-dev/2015-July/000057.html Even if it's not the case, closing a channel eventually is probably good practice in order to rollover keys. Channels also have a maximum theoretical number of transactions, but that's likely on the order of exa-transactions, so is probably irrelevant. Channel profitability likely varies over time, and since channels lock up bitcoin, closing less profitable channels so the funds can be used elsewhere is likely also valuable. With all those things together, ballpark max lifetime of a random channel (IMHO) is somewhere in the range of two weeks to two years. If lightning is the only thing doing transactions on the blockchain and only using 250B/txn, 8M channels with an average lifetime of 2 weeks would fill 1MB blocks; as would 210M channels with an average lifetime of a year, or 420M channels with an average lifetime of two years. Those sort of numbers probably roughly cover lots of Americans having access to a lightning based point-of-sale network to buy Starbucks, eg, but not much more than that. (You need at least one channel per customer, plus one per business, plus something on the order of log(N) hubs to connect them all; having multiple channels is probably about as good an idea as having multiple credit cards). > In this context, wouldn't it be contradictory, maybe even harmful, to > aim for an environment, where some/many/most transactions are off-chain? Lightning transactions will have to pay for several things: - the blockchain fees for opening/closing the channel - the time value of the funds being used to keep the channels open, for each channel in the route from payer to payee - the maintenance costs of the hardware/software to run a lightning channel By contrast, blockchain transactions just have to pay miners the blockchain fee for the transaction; there's no other intermediaries who have to be compensated. At some point, the latter will certainly be cheaper than the former -- since the lightning network has to pay for third parties' time value of bitcoin there should certainly be some "sufficiently large" amount whose time value is higher than the bitcoin txn fee, even for a very short txn time. It's all a bit hypothetical though -- not only is lightning still unimplemented as yet, but I think at present the time value of bitcoin is effectively zero (ie, afaik people recommend "just buy and hold bitcoin and wait for the next bubble", rather than "buy bitcoin and put it in AwesomeBank's Term Deposit product and gain 3% pa"), and most of the time fees seem to be basically zero too. I think the general answer is that lightning relies on the blockchain -- if the blockchain doesn't work, neither does lightning. So whatever level of txn fees it takes to make the blockchain work; whether that's $0/txn, 1c/txn or $50/txn, nodes in the lightning network will pay that fee, and, presumably, pass it on to the lightning network's end users in the form of txn fees on the lightning network. Cheers, aj ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 18:50 ` Anthony Towns @ 2015-08-10 19:14 ` Hector Chu 2015-08-10 19:26 ` Anthony Towns 2015-08-10 21:12 ` Eric Voskuil 1 sibling, 1 reply; 13+ messages in thread From: Hector Chu @ 2015-08-10 19:14 UTC (permalink / raw) To: Anthony Towns; +Cc: Bitcoin Dev [-- Attachment #1: Type: text/plain, Size: 361 bytes --] On 10 August 2015 at 19:50, Anthony Towns via bitcoin-dev < bitcoin-dev@lists•linuxfoundation.org> wrote: > ...but I think at present the time value of bitcoin is effectively zero Since bitcoin is liquid you forget that one can just sell off his bitcoin for fiat and hold that for interest. The time value is thus given by the yield curve of interest rates. [-- Attachment #2: Type: text/html, Size: 687 bytes --] ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 19:14 ` Hector Chu @ 2015-08-10 19:26 ` Anthony Towns 2015-08-10 19:54 ` Hector Chu 0 siblings, 1 reply; 13+ messages in thread From: Anthony Towns @ 2015-08-10 19:26 UTC (permalink / raw) To: Hector Chu; +Cc: Bitcoin Dev On Mon, Aug 10, 2015 at 08:14:08PM +0100, Hector Chu wrote: > On 10 August 2015 at 19:50, Anthony Towns via bitcoin-dev < > bitcoin-dev@lists•linuxfoundation.org> wrote: > > ...but I think at present the time value of bitcoin is effectively zero > Since bitcoin is liquid you forget that one can just sell off his bitcoin > for fiat and hold that for interest. The time value is thus given by the > yield curve of interest rates. Sure, that's a way to increase your net worth in real terms, but it only works if your interest rate on your fiat account is greater than the price rise in bitcoin over the same term. If you pull out a BTC today at $300, put it in a bank account earning 3% interest for a year and then buy $309 worth of bitcoin when the price has risen to $400 per BTC, and only get 0.7725 of a bitcoin, that's not a winning proposition. I'd call that earning a -22.75% rate (in bitcoin terms), while a 0% rate would just be ending up with as many bitcoin after a year as you started with. Note that in USD (and real) terms, in this scenario 77% of a bitcoin is actually worth more after a year than 1 bitcoin is now. You might get a positive rate of return on bitcoin invested today by running an exchange or a gambling service of some sort; but I think mostly, people are just sitting on their coins hoping they appreciate. If so, (in my terminology at least) they're earning 0%, denominated in bitcoin, and have a time-value of bitcoin of zero. Cheers, aj ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 19:26 ` Anthony Towns @ 2015-08-10 19:54 ` Hector Chu 0 siblings, 0 replies; 13+ messages in thread From: Hector Chu @ 2015-08-10 19:54 UTC (permalink / raw) To: Anthony Towns; +Cc: Bitcoin Dev [-- Attachment #1: Type: text/plain, Size: 1897 bytes --] Nonsense. Hoping that the bitcoin price will rise is called speculation. Hub operators won't want to do that, since prices can go down as well as up. The money markets and government bond yield curve prices risk-free rates of return, a guaranteed rise in value. These rates are always positive. On 10 August 2015 at 20:26, Anthony Towns <aj@erisian•com.au> wrote: > On Mon, Aug 10, 2015 at 08:14:08PM +0100, Hector Chu wrote: > > On 10 August 2015 at 19:50, Anthony Towns via bitcoin-dev < > > bitcoin-dev@lists•linuxfoundation.org> wrote: > > > ...but I think at present the time value of bitcoin is effectively zero > > Since bitcoin is liquid you forget that one can just sell off his bitcoin > > for fiat and hold that for interest. The time value is thus given by the > > yield curve of interest rates. > > Sure, that's a way to increase your net worth in real terms, but it only > works if your interest rate on your fiat account is greater than the > price rise in bitcoin over the same term. If you pull out a BTC today at > $300, put it in a bank account earning 3% interest for a year and then > buy $309 worth of bitcoin when the price has risen to $400 per BTC, > and only get 0.7725 of a bitcoin, that's not a winning proposition. > I'd call that earning a -22.75% rate (in bitcoin terms), while a 0% > rate would just be ending up with as many bitcoin after a year as you > started with. Note that in USD (and real) terms, in this scenario 77% > of a bitcoin is actually worth more after a year than 1 bitcoin is now. > > You might get a positive rate of return on bitcoin invested today by > running an exchange or a gambling service of some sort; but I think > mostly, people are just sitting on their coins hoping they appreciate. If > so, (in my terminology at least) they're earning 0%, denominated in > bitcoin, and have a time-value of bitcoin of zero. > > Cheers, > aj > > [-- Attachment #2: Type: text/html, Size: 2432 bytes --] ^ permalink raw reply [flat|nested] 13+ messages in thread
* Re: [bitcoin-dev] Off-chain transactions and miner fees 2015-08-10 18:50 ` Anthony Towns 2015-08-10 19:14 ` Hector Chu @ 2015-08-10 21:12 ` Eric Voskuil 1 sibling, 0 replies; 13+ messages in thread From: Eric Voskuil @ 2015-08-10 21:12 UTC (permalink / raw) To: Anthony Towns, bitcoin-dev [-- Attachment #1: Type: text/plain, Size: 4902 bytes --] Hi Anthony, No belief can be shown to be universally held, and an appeal to authority is also a logical fallacy for good reason. The blog you quote is littered with flawed economic ideas. It's become a pet peeve of mine that people refer to mining (and/or validation) as a "tragedy of the commons" problem, or a "public good" subject to a "free rider" problem. This betrays a fundamental misunderstanding of both money and Bitcoin. I'm not commenting on the other merits of your argument or others in this thread, I mean just to dispute the validity of this particular reference. Even the portion you quoted is quite absurd: >> "We’re not spending so much on mining because we really need it. >> It’s because printing money distorts behaviour." We don't "really need" to prevent "printing money" - Bitcoin could somehow get by without that constraint? Preventing the printing of money is the only reason that Bitcoin exists. The tragedy of the commons scenario properly applies only to property controlled by the state. In the quoted blog the analogy is so misapplied that it fundamentally misrepresents the forces at work in Bitcoin. Bitcoin is not at all "like a lighthouse". State run lighthouses are financed via taxation. That may be taxation of anything, whether or not related to the shipping the lighthouse purports to protect. It may in fact protect no shipping at all, since payment is generally completely divorced from benefit, and the benefits may be completely divorced from shipping. For example, preservation of jobs for lighthouse keepers and the Coast Guard, or even nostalgia. Just as with a private grazing field, a truly private lighthouse would not have a "commons problem" at all. Bitcoin mining is financed by a fixed schedule of inflation and transaction fees. State inflation is a tax on all holders of currency and a form of default on state debt. This and other taxes fund lighthouses. A tax is the seizure of someone else's property through force. Bitcoin inflation is predictable, so the inflation cost is factored in to its value before it is acquired, according to the depreciation schedule, just like bond valuation for example. This means it is NOT a tax, is merely a cost that is paid to miners for use of their security services. Bitcoin transaction "fees" are not fees in the state use-fee (taxation) sense, since the fees are priced based on voluntary trade. The blog misinterprets who is paying the cost of securing a transaction when it claims, "it's the sender who pays." Both parties to a transaction bear the cost of using any given medium of exchange. If the receiver is concerned about double spending risk, it's the sender who will have to compensate with time and/or money. But this is just as much a cost to the receiver as it has raised the effective price of his sales with the difference in money accruing to the third party. Finally, transaction fees *are* mining contracts. Creating *another* system of mining contracts initiated by a receiver would do nothing to change the economics, but it would significantly complicate the implementation (raising costs generally). The cost of paying a mining contract would of course be paid by the sender, in terms of increased price charged by the receiver. I believe that a fundamental misunderstanding of the important distinction between voluntary trade and state-controlled trade is underpinning a lot of confusion and misunderstanding with respect to the block size debate. Bitcoin does not have a commons problem specifically because it's designed to resist state control. It's only in the loss of that independence that such a problem would arise (and effectively kill Bitcoin altogether). Ironically the desire to fix a non-existent commons problem in Bitcoin seems to be a driving force behind what may in fact weaken its only defence against eventually becoming a commons. e On 08/10/2015 11:50 AM, Anthony Towns via bitcoin-dev wrote: > On Mon, Aug 10, 2015 at 12:20:36AM +0200, info--- via bitcoin-dev wrote: >> one argument I often read on this mailing list is that it's essential to >> reward miners with transaction fees at some point to secure the network. > > That's not a universally held belief. See for example: > > https://en.bitcoin.it/wiki/Funding_network_security#Alternatives > https://bitcointalk.org/index.php?topic=157141.0 > > It's also not clear to me what amount of security people actually "want". > In late May, Mike Hearn wrote: > >> "Currently the Bitcoin community is being effectively taxed about >> $832,000 per day ... just to support mining! [...] >> >> We’re not spending so much on mining because we really need it. It’s >> because printing money distorts behaviour." > > -- https://medium.com/@octskyward/hashing-7d04a887acc8 [-- Attachment #2: OpenPGP digital signature --] [-- Type: application/pgp-signature, Size: 473 bytes --] ^ permalink raw reply [flat|nested] 13+ messages in thread
end of thread, other threads:[~2015-08-10 21:16 UTC | newest] Thread overview: 13+ messages (download: mbox.gz / follow: Atom feed) -- links below jump to the message on this page -- 2015-08-09 22:20 [bitcoin-dev] Off-chain transactions and miner fees info 2015-08-10 5:01 ` Joseph Poon 2015-08-10 5:57 ` Rune K. Svendsen 2015-08-10 8:39 ` Thomas Zander 2015-08-10 15:53 ` Leo Wandersleb 2015-08-10 21:16 ` Thomas Zander 2015-08-10 9:01 ` GC 2015-08-10 15:35 ` info 2015-08-10 18:50 ` Anthony Towns 2015-08-10 19:14 ` Hector Chu 2015-08-10 19:26 ` Anthony Towns 2015-08-10 19:54 ` Hector Chu 2015-08-10 21:12 ` Eric Voskuil
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