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Why would mining be anything but selfish? The only reason miners are operating is because they expect a reward that is greater than their expenses. That means

Why would mining be anything but selfish? The only reason miners are operating is because they expect a reward that is greater than their expenses. That means block rewards plus TX fees need to be greater than the cost of running the network. Block rewards are effectively a tax on existing holders through inflation of supply, but that will go to zero in the long run. As the rewards decreases, TX fees will need to increase, which means the average TX will rise. This will increasingly make using BTC prohibitively expensive unless the block size is increased so as to allow more TX per block. But if the scenario should arise where revenue no longer covers the costs of being a miner, the whole economic model breaks down. This could even get to the point where going rogue, and attempting to exploit the network with the hash power, could become more profitable for a miner.

1996 6y ago
I think you do not understand "selfish mining": it's a technical term for a miner trying to take the lead over the existing blockchain, but only in some very specific cases outside normal mining. It's predicted by game theory - google for it, it's interesting! The rest of your analysis is correct: as rewards decrease, TX fees may increase. You can also see that due to competition for the limited tps, as seen in 2017. But this is also exactly why the scenario discussed in the paper is implausible: miners get to pick the transactions with the highest fees for inclusion in the next block. If your transaction is not urgent, you pay the minimum and wait. Eventually, it will be processed - if the expected delay (given the mempool) is not to your liking, you can update the fee with RBF. But again, it means there will be little variance - just a smooth adjustment, meaning the required condition this whole paper is based on is dead wrong. About the economic model breaking down, you make 2 mistakes: 1) you fail to account for difficulty adjustments made just for this situation, but even people who do often forgot 2) when revenue no longer covers costs (as say for a factory), the company doesn't immediately give up and fire everybody. It's industrial organization 101, and due to the difference between short term and long term. Of course, there is less friction and fewer rigidities with software, and mining equipment could be deployed differently if it was still CPUs or GPUs. But the genius of ASICs having no alternative use means it can't happen (except maybe switching to another coin with the same algorithm) Overall, regardless of the situation and what you throw at it, there's no situation I can see where the economic model break - except maybe if miners are tracked and executed on sight by the army? But even then, all it would do is move the mining to another country - or lead to bribes!
- DennisP 6y ago
  Regarding point (2), it's not "giving up" for a miner to shut down the equipment temporarily. It can even be done automatically. Mining is competitive. A miner who shuts down while revenue is less than electricity cost, and starts up again when fees rise, will outcompete a miner who just leaves everything running even while taking losses.

1996 6y ago

I think you do not understand "selfish mining": it's a technical term for a miner trying to take the lead over the existing blockchain, but only in some very specific cases outside normal mining. It's predicted by game theory - google for it, it's interesting! The rest of your analysis is correct: as rewards decrease, TX fees may increase. You can also see that due to competition for the limited tps, as seen in 2017. But this is also exactly why the scenario discussed in the paper is implausible: miners get to pick the transactions with the highest fees for inclusion in the next block. If your transaction is not urgent, you pay the minimum and wait. Eventually, it will be processed - if the expected delay (given the mempool) is not to your liking, you can update the fee with RBF. But again, it means there will be little variance - just a smooth adjustment, meaning the required condition this whole paper is based on is dead wrong. About the economic model breaking down, you make 2 mistakes: 1) you fail to account for difficulty adjustments made just for this situation, but even people who do often forgot 2) when revenue no longer covers costs (as say for a factory), the company doesn't immediately give up and fire everybody. It's industrial organization 101, and due to the difference between short term and long term. Of course, there is less friction and fewer rigidities with software, and mining equipment could be deployed differently if it was still CPUs or GPUs. But the genius of ASICs having no alternative use means it can't happen (except maybe switching to another coin with the same algorithm) Overall, regardless of the situation and what you throw at it, there's no situation I can see where the economic model break - except maybe if miners are tracked and executed on sight by the army? But even then, all it would do is move the mining to another country - or lead to bribes!

DennisP 6y ago
Regarding point (2), it's not "giving up" for a miner to shut down the equipment temporarily. It can even be done automatically. Mining is competitive. A miner who shuts down while revenue is less than electricity cost, and starts up again when fees rise, will outcompete a miner who just leaves everything running even while taking losses.