0 sats \ 0 replies \ @03393ec3a3 8 Nov 2023 \ on: Question on Bitcoin transaction fees bitcoin
The spike coincides with the ORDI BRC-20 listing on Binance. ORDI price mooned pretty hard upon listing, so all the gamblers are rushing to/from the casino, as it were.
Unless I misunderstand locktime, I don't see how either of these points is going to deter greedy mining. There is no need to reorg to have less fees, as plenty of new transactions are always percolating in. Likewise, locktime doesn't materially affect miners - the coinbase transaction will still sum to the same value and the winner will eventually get the sats.
This can manifest much sooner than 2140, probably in about three halvings from now. All we need is for the value of the highest fees in the last block, plus the highest fees in the mempool to exceed the block subsidy. At that point, you get more sats from reorging the last block than you do from simply advancing the chain. At this point, the game theory starts unravelling.
This is a "gradually then suddenly" thing. Depending on market conditions, there will be small instances at first. Before long it becomes problematic. Then, users will be forced to increase their fees to incentivize their transactions to reliably mine into competing forks. Unfortunately, this further increases the incentive to reorg, as miners get even more sats by successfully reorging each successive block.
In case it helps clear up understanding, the price of BTC is immaterial here. The point is, the miner gets more sats by reorging than from orderly chain advancement (because they capture larger fees that outweigh the decreasing block subsidy).
Mining is extremely competitive, and every possible incentive is continuously explored to gain an edge. Even publicly traded miners are engaging in MEV: https://www.coindesk.com/business/2023/09/27/bitcoin-miner-marathon-reportedly-mines-invalid-btc-block/
"We utilize a small portion of our hash rate to experiment with our development pool and research potential methods to optimize our operations."
This is a transparent admission of MEV in action.
Hashrate is not a relevant measure versus an internal threat. Instead, that is simply a measure to deter external actors like an adversarial SHA256 chain or an upset nation. Hashrate markets allow hashrate malleability, and transitioning from a subsidy-heavy model to a fee-heavy model removes the incentive to behave in an orderly fashion. Misbehavior becomes increasingly profitable as fees increase and dominate the overall block reward.
As for why now, it is a question of risk/reward. As individuals continue to increase our stacks, we become increasingly concerned about risk. Once your stack is at a point where the potential for loss is a material concern, it becomes important to limit risk. Ideally, that can occur by removing tail risk from the project itself, rather than millions of HODLers limiting our exposure to the project.
Considering how many years it took to make a soft fork change like Taproot, I think this is a matter that needs to be discussed constantly. I suspect it will require 2-3 halvings to approach consensus around ways for handling the matter. Plus, I think it is important to have the dialog running so that newcomers to understand that there are aspects of Bitcoin that are far more important and value-add than a hard cap. Decentralization, rules with rulers, and reliability are crucial.
Yes, I agree on both points, but I also think your point about decreasing value of BTC would be a second-order consequence and the naughty miners would already have their profits in the bag. In today's advanced marketplace, these "miners" may not even need to own ASICs, since they can purchase hashrate to scalp large fees - without a subsidy, hashrate becomes more malleable to the highest bidder. Likewise, a decreasing BTC value could result in fewer miners, which lowers the difficulty for reorg shenanigans to be successful. So I actually think the worse BTC performs, the easier it becomes for nonsense to carry on.
I think your second point is really important, and I'm glad this thread has been quite civil because I know it can be a sensitive topic. I would really like to see discussions about contingency plans because I think these issues can be very "gradually and then suddenly" in how they manifest. Having a community consensus around possible ways to handle it and maybe some math/models and/or code skeletons to test/simulate would be really beneficial.
There are plenty of other factors I can think of, such as out-of-band payments, but they only serve to worsen the outlook. At the end of the day, miners are mining blocks to get BTC, and reducing the subsidy reduces their incentive to do that in the expected, orderly fashion.
If I'm missing something, please share so I can put my mind at ease. Until this is ironed out in my mind, I cannot be a 13%-er.
I would support this. At a minimum, I think we should at least be having the conversation and let the community come up with a contingency plan.
Profitability is immaterial, as is BTC price. All that matters is that less subsidy means increased incentive to reorg previous blocks rather than advance the chain in an orderly fashion.
If I can get 1 BTC to advance the chain or 5 BTC to reorg the last block with the most expensive transactions already there plus the most expensive ones in the mempool since then, then the game theory securing orderly advancement starts to deteriorate.
Miners cannot afford the luxury of low time preference - their bills occur monthly. They will likely be unaware their hashrate is undermining the chain. Once the subsidy is low, a great deal of hashrate will find its way to hashrate markets so that they can have significantly higher payouts from MEV. These markets tend to be commanded by low time preference actors.
After thousands of hours of study, I agree. I cannot imagine how Bitcoin can have both product market fit and orderly chain advancement without a significant block subsidy. At the end of the day, fiat price of BTC does not matter. As a miner, if you can net more sats by reorging the last block than you can get from advancing the chain, then the game theory starts breaking.
The knee jerk response that users will simply pay greater fees strikes me as naïve. Aside from destroying product market fit, more fees relative to an already too meager block subsidy only increases the incentive to competitively reorg blocks instead of advancing the chain in an orderly way.
21M hard cap will result in disaster, and we need tail emission to bolster orderly chain progression.
21 sats \ 1 reply \ @03393ec3a3 7 Sep 2023 \ parent \ on: Tail Emissions Are A Terrible Idea bitcoin
I apologize if I was offensive; that was not my intent. This issue is my most significant concern about Bitcoin, and actively prevents me from being a “13%er,” so anything that can help me verify rather than trust long term safety will have a significant impact on my dedication to the ecosystem.
100 sats \ 1 reply \ @03393ec3a3 7 Sep 2023 \ parent \ on: Tail Emissions Are A Terrible Idea bitcoin
I respectfully disagree on both points. The point of Bitcoin is a disintermediated system of rules without rulers where users cannot be debanked - a peer-to-peer electronic cash system, as it is called in the whitepaper. This remains intact as long as we can reliably advance the chain and include transactions with credible neutrality.
The tweet and discussion about "security budget" is a concern regarding exogenous attacks - non-interested players looking to sell proceeds. Instead a fee-heavy operating paradigm results in internal threats from miners squabbling over the highest transaction fees - vested players looking to accumulate BTC. I'm not sure what the answer is, but MEV is a very real threat we need to think about and consider mitigations for. Within a few halvings, it will likely be rather problematic.
1000 sats \ 0 replies \ @03393ec3a3 7 Sep 2023 \ parent \ on: Tail Emissions Are A Terrible Idea bitcoin
It could start out that way, but what is the value of something that starts losing its ability to be spent? I'm not saying I have an answer, but we should think about how this plays out because these conditions could start transpiring within a few halvings.
Is this true? Was the hard cap in place from the beginning? I never read anything about these promises in the whitepaper.
Would you please provide some mathematical proof that the security model is “fine the way it is?” Much has changed since the whitepaper, and most of the security assumptions there have been invalidated.
I respectfully disagree on this point. The hard cap is only one facet of a broad set of differentiation versus fiat. Digital scarcity exists even in the presence of tail emissions (supply is still perfectly inelastic), and “rules not rulers” is the key feature that makes Bitcoin desirable versus any alternative. If I’m not mistaken, the hard cap was not an original design choice, nor was the 21M number.
It is a question of incentives. Subsidies incentivize honest mining.
As subsidies erode, the incentive for basic transactional block inclusion starts being eclipsed by exogenous incentives for shenanigans (a.k.a., MEV). Anything a miner can do to get sats (or fiat/altcoin bribes) starts to add up relative to the simple process of advancing the chain in an honest way (block subsidy).
As fees increase, there is more incentive to reorg the last block and/or start mining a second new block before broadcasting a new block. Why? Because side-channel bribes and greedy fee capture maximization start to overshadow the basic incentive to advance the chain (a.k.a., the block subsidy).
The reason you may see increasing discussion on this matter is that the whitepaper does not account for value accrual outside of the block reward, and it assumes all blockspace only exists to facilitate transactions. Inscriptions, OP_RETURN, mempool.space Accelerator, and other forms of side-channel value extraction seem to invalidate the security assumptions discussed in the whitepaper, IMO.
I think until new maths and new models are formulated to explicitly prove security under modern operational timechain conditions, the legitimate concerns about future finality will continue to increase.