Subject: Re: [bitcoin-dev] Pseudocode for robust tail emission

From: Peter Todd <[email-masked]>
Date: Wed, 18 Jan 2023 15:58:07 -0500

On Sun, Jan 01, 2023 at 11:42:50PM +1100, Alfie John wrote:
> On 31 Dec 2022, at 10:28 am, Peter Todd via bitcoin-dev <[email-masked]> wrote:
> > 
> >> This way:
> >> 
> >> 1. system cannot be played
> >> 2. only in case of destructive halving: system waits for the recovery of network security
> > 
> > The immediate danger we have with halvings is that in a competitive market,
> > profit margins tend towards marginal costs - the cost to produce an additional
> > unit of production - rather than total costs - the cost necessary to recover
> > prior and future expenses. Since the halving is a sudden shock to the system,
> > under the right conditions we could have a significant amount of hashing power
> > just barely able to afford to hash prior to the halving, resulting in all that
> > hashing power immediately having to shut down and fees increasing dramatically,
> > and likely, chaotically.  Your proposal does not address that problem as it can
> > only measure difficulty prior to the halving point.
> 
> 
> > ... Since the halving is a sudden shock to the system
> 
> Is it though? Since everyone knows of the possible outcomes, wouldn't a possible halving be priced in? 

Re-read that I said. That explains why despite the halving being a forseeable
event, there's no mechanism to "price it in" when it comes to hashing power.

> > resulting in all that hashing power immediately having to shut down and fees increasing dramatically
> 
> Which should cause that hashing power to come back because of this fee increases.

Right now the total reward per transaction is $63, three orders of magnitude
higher than typical fees. Sufficient fee increases to bring back hashing power
in a scenario like that would cause enormous disruption to many things,
including Lightning channels.

-- 
https://petertodd.org 'peter'[:-1]@petertodd.org