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Last Notes

2023-06-08 01:12:43 CEST

- reply

📅 Original date posted:2022-08-16
📝 Original message:Hi Jaroslaw,
In the Prisoner's Dilemma the prisoners cannot communicate. In Bitcoin large holders are able to communicate with each other. Also, prisoners need not make an all or nothing decision in Bitcoin. Miners can join and leave the network freely over time. You can change your decision based on the decision of others.
The Bitcoin design is such that security is volatile but the issuance of blocks is timely and evened out to a 10 minutes average even after the reward is exhausted.
The existing incentive that miners earn money for including transactions is enough to motivate human nature. Transaction initiators have an incentive to mine and run full nodes for personal interest.
>Noone will waste his renewable energy on unprofitable Antminer while he/she can sell this energy for the market price.
The law in most jurisdictions prevents the resale of spare electricity unless an expensive license is obtained (and in most cases no license is available as the government maintains a monopoly). Mining with waste electricity is reducing losses. Another incentive to motivate human nature.
Bitcoin holders can be enfranchised into any new system. So, no need for bike shedding the original design which is a Schelling Point.
Regards
Peter Kroll
pointbiz/ BTCCuracao
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2023-06-08 01:11:46 CEST

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📅 Original date posted:2022-07-12
📝 Original message: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)
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2023-06-08 01:11:46 CEST

- reply

📅 Original date posted:2022-07-12
📝 Original message:>Probably the only thing Bitcoiners should do is to advertise this rather than to make it some sort of secret
Satoshi made this clear in the beginning that mining will trend to where energy is free.
During this stage of bootstrapping we need a security budget to prevent nation state attacks. In the future we will need to lose money mining Bitcoin to prevent the reemergence of a fiat reserve currency.
The emission curve lasts over 100 years because Bitcoin success state requires it to be entrenched globally.
We all work for Satoshi because he invented a currency that is digital and deflationary. Gold doesn't work as a deflationary currency because of physical limitations.
Yes, today people are spending some of their Bitcoin to protect the remainder of their bag. We should expect this to continue into the future. I routinely give away Bitcoin to grow support for it in my local jurisdiction. This is another form of securing Bitcoin (people power). This helps protect my deflationary wealth increase and is net profitable in my view because increased adoption powers deflation. If Bitcoin loses its deflationary promise then it will be abandoned.
In the future all the miners will be energy producers. There may be small home miners who have excess energy but most energy is produced by governments today and likely in the future.
So, a potential solution is you take 1% of your Bitcoin annually to secure the network for the promise of 10% deflation (increase in purchasing power). More likely large holders will be doing this. Yes, there will be free riders. Today there's also free riders who receive part of our Bitcoins via tax collection and welfare. In the future they receive free deflation instead and are incentived to save Bitcoin to receive this stipend.
Regards
Peter Kroll
-------- Original Message --------
On 12 Jul 2022, 07:57, Erik Aronesty wrote:
>> we can expect mining to transition to a public service from the current for-profit business model
>
> I get it now
>
> Game theory would predict all of the major players mining in the future will be large holders
>
> If you're holding a hundred Bitcoin you should take one, sell it for mining equipment and use it to ensure the rest is stable
>
> I guess that's perfectly reasonable
>
> Yeah I'm on board with the idea that this is a non-issue
>
> Interested parties will continue to maintain the security of the chain with the same basic game theoretic stuff
>
> Bitcoin doesn't need a security budget
>
> Existing holders have the ability the means and the incentive to secure their funds
>
> Probably the only thing Bitcoiners should do is to advertise this rather than to make it some sort of secret
>
>>
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2023-06-08 01:11:30 CEST

- reply

📅 Original date posted:2022-07-09
📝 Original message:>At present, all notable proof-of-work currencies reward miners with both a block reward, and transaction fees. With most currencies (including Bitcoin) phasing out block rewards over time. However in no currency have transaction fees consistently been more than 5% to 10% of the total mining reward[^fee-in-reward], with the exception of Ethereum, from June 2020 to Aug 2021. To date no proof-of-work currency has ever operated solely on transaction fees[^pow-tweet], and academic analysis has found that in this condition block generation is unstable.[^instability-without-block-reward] To paraphrase Andrew Poelstra, it's a scary phase change that no other coin has gone through.[^apoelstra-quote]
We should consider that a fixed block reward doesn't guarantee that the value of energy securing transactions is greater than the value being transacted in a practical amount of blocks where practical is a certain amount of time (currently 1 hour). If the energy expenditure is less than the value transacted in a given amount of blocks those transactions are at risk of being double spent. We have seen this failure with Ethereum Classic where any meaningful amount of value would need 2 weeks of blocks to be deeply confirmed for economic purposes.
We should also not assume that the Bitcoin emission curve implies there will be zero block rewards for mining Bitcoin, let me explain. There's an ugly solution that doesn't require a hard fork (I'm not advocating for this solution just presenting it) where a new coin is launched to merge mine with Bitcoin and that new coin (called BTail for discussion purposes) would enfranchise everyone who is a Bitcoin UTXO holder at the moment of the real-time launch of BTail at a well known block height. Using a technique we have seen with BCH to create an arguably fair launch. BTail would have a floating exchange rate to Bitcoin and its success or failure in terms of adoption would be determined by the market. It would require the same network effect barriers as a hard fork (opt-in) but would not put Bitcoin at risk while people can take time to install new software (and write new integrations) as they would with a soft fork.
Regards
Peter Kroll
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