Subject: Re: [Bitcoin-development] Long-term mining incentives

From: Thomas Voegtlin <[email-masked]>
Date: Tue, 26 May 2015 20:47:15 +0200

Hello Mike,

> 
> Are you aware of my proposal for network assurance contracts?
> 

Yes I am aware of that; sorry for not mentioning it. I think it is an
interesting proposal, but I would not rely on it today, because it
includes a large share of unproven social experiment.

(Bitcoin too is a social experiment, but so far it has been working)

> But I agree with Gavin that attempting to plan for 20 years from now is
> ambitious at best. Bitcoin might not even exist 20 years from now, or might
> be an abandoned backwater a la USENET.

I agree with that, but I don't think it can be used as a way to justify
how decisions are made today.

The opposition to block size increase comes from two things:
(1) The perceived risk of increased centralization.
(2) Long-term considerations on the need for fee pressure.

I believe you and Gavin have properly addressed (1). Concerning (2), I
think the belief that miners can eventually be funded by a fee market is
wishful thinking. Thus, I am not against the proposed block size increase.

However, the issue of long-term mining incentives remains. So far, the
only proven method to incentivize mining has been direct block reward.

The easiest solution to ensure long-term viability of Bitcoin would be
to put an end to the original block halving schedule, and to keep the
block reward constant (this is what Monero does, btw). That solution is
inflationary, but in practice, users happen to lose private keys all the
time. The rate of coins loss would eventually converge to whatever rate
of emission is chosen, because the care people take of their coins
depends on their value.

Another solution, that does not break Bitcoin's social contract, would
be to keep the original block halving schedule, but to allow miners to
also redeem lost coins (defined as: coins that have not moved for a
fixed number of years. Some time averaging of the lost coins may be
needed in order to prevent non-productive miner strategies). That
solution would create less uncertainty on the actual money supply, and
better acceptability.

I do not expect such a solution to be adopted before miner incentives
become a problem. Neither am I attempting to predict the future; a
completely different solution might be found before the problem arises,
or Bitcoin might stop to exist for some other reason.

However, if I had to decide today, I would choose such a solution,
instead of relying on completely unproven mechanisms.

More important, since we need to decide about block size today, I want
to make it clear that my support is motivated by that long-term
possibility. I believe that the "we will need fee pressure" argument can
reasonably be dismissed, not because we don't know how Bitcoin will work
in 20 years, but because we know how it works today, and it is not
thanks to fee pressure.

Thomas