Subject: Re: [bitcoin-dev] Bitcoin covenants are inevitable

From: Peter Todd <[email-masked]>
Date: Thu, 23 Jun 2022 15:17:37 -0400

On Tue, Jun 21, 2022 at 01:00:07PM -0600, Keagan McClelland via bitcoin-dev wrote:
> > The PoW security of Bitcoin benefits all Bitcoin users, proportional to
> the
> value of BTC they hold; if Bitcoin blocks aren't reliably created the value
> of
> *all* BTC goes down. It doesn't make sense for the entire cost of that
> security
> to be paid for on a per-tx basis. And there's a high chance paying for it
> on a
> per-tx basis won't work anyway due to lack of consistent demand.
> 
> FWIW I prefer the demurrage route. Having something with finite supply as a
> means of measuring economic activity is unprecedented and I believe deeply
> important. I'm sympathetic to the argument that the security of the chain
> should not be solely the responsibility of transactors. We realize the
> value of money on receipt, hold *and* spend and it would be appropriate for
> there to be a balance of fees to that effect. While inflation may be
> simpler to implement (just chop off the last few halvings), I think it
> would be superior (on the assumption that such a hodl tax was necessary) to
> keep the supply fixed and have people's utxo balances decay, at least at
> the level of the UX.

Demurrage makes protocols like Lightning much more complex, and isn't
compatible with existing implementations. While demurrage could in theory be
implemented in a soft-fork by forcing txs to contain an output with the
demurrage-taxed amount, spending to a pool of future mining fees, I really
don't think it's practical to actually do that.

Anyway, demurrage and inflation have identical economic properties. They're
both a tax on savings. The only difference is the way that tax is implemented.

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