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Miners make money principally through seignorage, but will eventually have to replace it with transaction fees, as Bitcoin is designed to throttle seigniorage d

by patio11 11y ago

Miners make money principally through seignorage, but will eventually have to replace it with transaction fees, as Bitcoin is designed to throttle seigniorage down over time and does so in an abrupt, stairstep fashion (50% at a go). Core (a group of people who presently control the code of the only software that matters on the Bitcoin network) has an argument for miners which goes like this: "We believe the space on the blockchain should be scarce. If space is scarce, people will a) conduct transactions offchain, which is conducive to our interests and b) bid up the price of onchain transactions, which is conducive to your interests. You'll shortly receive a counterproposal from another development group which wants space on the blockchain to be abundant. In this case, the price of transactions will go back to ~0 and, with it, your revenue. Make the right choice." The "economic majority" [+] of Bitcoin has an argument for miners which goes like this: "You presently have been given, literally, a license to make money -- substantial CapEx and OpEx, granted, but making money is what you do every day. If you attempt to make the Bitcoin network unreliable to increase fees generated by it, the tokens you are creating daily become not-money. You should prefer your license to make money to the planned future license to make not-money." The economic majority is hoping that miners are long-term thinking entrepreneurs and not, to pick an example totally randomly, slash-and-grab operators taking advantage of a ponzi scheme. [+] Jargon from the Bitcoin community. The Bitcoin "protocol" allows miners to essentially vote with hashpower. The "economic majority" phrasing is an attempt to recenter the notion of votes away from hashpower, by saying that exchanges/retailers/customers/etc are substantial stakeholders in the network even if they do not control a meaningful number of ASICs. In practice, the economic majority is Coinbase, Bitpay, and "the loosely affiliated ecosystem which turns cash to Bitcoins to drugs to Bitcoins to cash."

kang 11y ago
> Core believes the space on the blockchain should be scarce The demand for a free replicated database is virtually infinite. Space on blockchain would not be abundant at any blocksize. > Miners presently have been given, a license to make money This is a license anyone took up on themselves & nobody is doing anyone any favors; everyone(users as well as miners) is looking at their own advantages. Rather this "economic majority" (debatable) desires something that is not-money in future because in short-term greed of the insatiable desire for golden egg that is the blockchain-space they will kill the bitcoin goose by centralizing it even further.
- sgt101 11y ago
  >The demand for a free replicated database is virtually infinite. Space on blockchain would not be abundant at any blocksize. but "blockchain" is not (only) bitcoin's blockchain, anyone can make one and can validate and replicate it with any group of collaborators or adversaries. I can't understand the second point, it would help me if you could explain what you mean for a simple person like me :)
  - kang 11y ago
    Bitcoin has mining centralization problem due to following phenomena, bigger blocks increase it further & will kill bitcoin in long-term: 1. The median propagation time is comparable for various locations[0] & mostly a factor of blocksize. Article[1]. Or you could watch the scaling bitcoin conference videos on youtube. 2. Mining variance[3] [0]https://research.tradeblock.com/wp-content/uploads/2015/06/Prop-Time-by-Geog.png https://research.tradeblock.com/wp-content/uploads/2015/06/P... [1]https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-6-data-propagation https://tradeblock.com/blog/bitcoin-network-capacity-analysi... [3]https://medium.com/@lmgoodman/why-mining-variance-matters-80ef0ff4b183 https://medium.com/@lmgoodman/why-mining-variance-matters-80...
  - gnaritas 11y ago
    > but "blockchain" is not (only) bitcoin's blockchain, anyone can make one and can validate and replicate it with any group of collaborators or adversaries. This is a misunderstanding. Yes, anyone can launch any blockchain, but those blockchains would not be secure from attack and are thus untrustable. The "only" blockchain that can be trusted is bitcoins and that's precisely the point, there can be only one winner due to network effects as size of the network is where the security of the network comes from. A blockchains primary feature is decentralized trustless transactions and that only works when the network is large enough that no single player or group of players can control more than half the network. There is quite literally no point in using any blockchain other than bitcoins as it's the only one with enough scale for the trust to exist.
maaku 11y ago
patio11 this is horribly incorrect and you know better. The core argument is about the nature of bitcoin and the relationship of max block size limit to centralization pressures.
- dangerlibrary 11y ago
  You may have some more reading to do. I think patio11 is absolutely correct. https://news.ycombinator.com/item?id=11229299 https://news.ycombinator.com/item?id=11229299
Natanael_L 11y ago
A limited blocksize won't result in fees climbing higher in the long term. It would result in a short term peak followed by abandonment and loss of value for being unusable. People pay fees for that which they need and find more desirable than the alternatives - an effectively unusable Bitcoin won't be worth paying fees for. And assuming unlimited block limits will lead to no fees paid is ridiculous and senseless. Why would miners willingly use up more and more bandwidth as the subsidy keeps falling through accepting more and more fee-less transactions? They'd be losing money! First of all, the miners should be requiring that the total level of fees reaches to a certain minimum level which exceeds what a plausible coalition of adversaries might try to gather, so that the mining efforts they can pay for will exceed that level. Then you require that the minimum fee per transaction is that minimum divided by the largest number of transactions that the network reasonably can handle per block. Then miners prioritize transactions with larger fees and publishes estimates for how fast people can anticipate transactions to be processed based on fee density, in order to incentivize keeping the total transactions fees to a reasonable level. Fee densities so low that they given the network capacity makes it easier for attackers would then be discouraged.

by patio11 11y ago

kang 11y ago

> Core believes the space on the blockchain should be scarce The demand for a free replicated database is virtually infinite. Space on blockchain would not be abundant at any blocksize. > Miners presently have been given, a license to make money This is a license anyone took up on themselves & nobody is doing anyone any favors; everyone(users as well as miners) is looking at their own advantages. Rather this "economic majority" (debatable) desires something that is not-money in future because in short-term greed of the insatiable desire for golden egg that is the blockchain-space they will kill the bitcoin goose by centralizing it even further.

sgt101 11y ago
>The demand for a free replicated database is virtually infinite. Space on blockchain would not be abundant at any blocksize. but "blockchain" is not (only) bitcoin's blockchain, anyone can make one and can validate and replicate it with any group of collaborators or adversaries. I can't understand the second point, it would help me if you could explain what you mean for a simple person like me :)
- kang 11y ago
  Bitcoin has mining centralization problem due to following phenomena, bigger blocks increase it further & will kill bitcoin in long-term: 1. The median propagation time is comparable for various locations[0] & mostly a factor of blocksize. Article[1]. Or you could watch the scaling bitcoin conference videos on youtube. 2. Mining variance[3] [0]https://research.tradeblock.com/wp-content/uploads/2015/06/Prop-Time-by-Geog.png https://research.tradeblock.com/wp-content/uploads/2015/06/P... [1]https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-6-data-propagation https://tradeblock.com/blog/bitcoin-network-capacity-analysi... [3]https://medium.com/@lmgoodman/why-mining-variance-matters-80ef0ff4b183 https://medium.com/@lmgoodman/why-mining-variance-matters-80...
- gnaritas 11y ago
  > but "blockchain" is not (only) bitcoin's blockchain, anyone can make one and can validate and replicate it with any group of collaborators or adversaries. This is a misunderstanding. Yes, anyone can launch any blockchain, but those blockchains would not be secure from attack and are thus untrustable. The "only" blockchain that can be trusted is bitcoins and that's precisely the point, there can be only one winner due to network effects as size of the network is where the security of the network comes from. A blockchains primary feature is decentralized trustless transactions and that only works when the network is large enough that no single player or group of players can control more than half the network. There is quite literally no point in using any blockchain other than bitcoins as it's the only one with enough scale for the trust to exist.

maaku 11y ago

patio11 this is horribly incorrect and you know better. The core argument is about the nature of bitcoin and the relationship of max block size limit to centralization pressures.

dangerlibrary 11y ago
You may have some more reading to do. I think patio11 is absolutely correct. https://news.ycombinator.com/item?id=11229299 https://news.ycombinator.com/item?id=11229299

Natanael_L 11y ago

A limited blocksize won't result in fees climbing higher in the long term. It would result in a short term peak followed by abandonment and loss of value for being unusable. People pay fees for that which they need and find more desirable than the alternatives - an effectively unusable Bitcoin won't be worth paying fees for. And assuming unlimited block limits will lead to no fees paid is ridiculous and senseless. Why would miners willingly use up more and more bandwidth as the subsidy keeps falling through accepting more and more fee-less transactions? They'd be losing money! First of all, the miners should be requiring that the total level of fees reaches to a certain minimum level which exceeds what a plausible coalition of adversaries might try to gather, so that the mining efforts they can pay for will exceed that level. Then you require that the minimum fee per transaction is that minimum divided by the largest number of transactions that the network reasonably can handle per block. Then miners prioritize transactions with larger fees and publishes estimates for how fast people can anticipate transactions to be processed based on fee density, in order to incentivize keeping the total transactions fees to a reasonable level. Fee densities so low that they given the network capacity makes it easier for attackers would then be discouraged.