Subject: Re: [bitcoin-dev] Security problems with relying on transaction fees for security

From: Peter <[email-masked]>
Date: Tue, 12 Jul 2022 03:56:03 +0000

The Bitcoin emission curve requires a 2x value increase per 210,000 blocks to maintain the existing security level.

Transactions are practically irreversible when the value the miners expend (not receive) is greater than said transaction value.

If you send 1000 gold grams of value in a transaction then it's finalized after 1000 gold grams worth of energy have been spent on mining blocks.

Bitcoin is bootstrapping from the English population and its final steady state is to eliminate fiat and be a global reserve currency and a daily transactional currency. So, we should engineer for other language and religious communities to join in. Saturday and Sunday are business days in a large portion of the planet.

Bike shedding a tail emission to try to support Bitcoin with the current 2% to 4% global adoption (in terms of holding not spending) as the world's premier pet rock is a poor strategy.

We can expect Bitcoin to never have a steady value because businesses turn profits on average of 10% so there will be a steady increase in hoarding to fuel number go up technology. Prices will be more reliably accounted for in gold grams, as well as corporate and government accounts being denominated in gold grams not satoshis. We can expect the boom and bust economic cycle to disappear when the price of money (interest rates) is set by the market. The value of money will still be set by the government via average government wages.

With 3000 Lightning open/ close tx per block and 6 billion adults it's 38 years of backlog to onboard the entire adult population. That's not including corporations.

If we assume 20% of people use non-custodial Lightning but they each have 5 channels open we are back to 38 years backlog.

There's a cost and risk to reorganize the chain to chase fees in a zero block reward world. And as stated miners can leave honey in the mempool pot. We shouldn't expect empty mempools with occational transactions with outlier large fees that cause overnight reorganizations.

In a state of victory, nation-states will use solar power during the daytime to ensure local entities have priority access to confirmations and Bitcoin will receive nation-state altruism in such a future as it receives person-based altruism today. Because we as individuals and nation states all win if we keep the Schelling point of 21M bitcoins.

We shouldn't make naive miner centralization models when there's national security considerations to keep the chain moving forward in a stable way. Big miners won't take all the fees and put small miners out of business because energy production itself is decentralized and idle energy will always keep a diverse set of miners on the network.

Block rewards are no guarantee of security as we have seen with lesser PoW coins (Ethereum Classic and others). And during the Bitcoin immaculate conception period of 2009 to 2012 the block reward served mainly as a distribution method since JP Morgan had enough GPU power to reorganize us to block 0 but that didn't happen. So, the block reward offered little security in those days.

Bitcoin works but in order to win it needs global adoption. No amount of arbitrary inflation can ensure a sufficient security budget.

Block rewards are to distribute the money we can expect mining to transition to a public service from the current for-profit business model when there's a 38 year backlog and every nation is on board for the game theoretic reason to deny any single nation the power of seigniorage of the global reserve currency.

Regards

Peter Kroll

(pointbiz / BTCCuracao)