Tail Emissions Are A Terrible Idea \ stacker news ~bitcoin

11.5k sats \ 125 comments \ @josh 6 Sep 2023 bitcoin

I've been seeing some talk lately about the need to fork bitcoin in the future and implement tail emissions, as though Bitcoin will fail without a block reward. This has never made sense to me, and I think such a fork would be a terrible idea.

Bitcoin doesn't have a "security budget." It's a protocol to provide probabilistic finality to reduce / eliminate the risk of a double spend. With no block reward, for any type of large transaction with an untrusted party, there is a strong incentive to provide "free" bitcoin to the miners of subsequent blocks, to ensure finality. This will be less necessary for small transactions, since the base level of transaction fees will likely be sufficient.

What are your thoughts on this? Obviously, we're still decades away before this will be a "problem," but I think it's important to address. These "tail emission" arguments need to put to rest.

view all related items

3000 sats \ 3 replies \ @elvismercury 6 Sep 2023

The tail emission arguments can't be put to rest until we actually see, empirically, what the security budget turns out to be. Hashing out the possibilities in advance, and coming up with possible actions to mitigate catastrophe before it's actually on top of us, is the sensible response.

Faith-based assumptions that everything will be fine, because everything has been fine up till now, is about the stupidest possible approach to system engineering. I would have thought every bitcoiner would have this in their DNA, but it has not proved to be the case.

157 sats \ 0 replies \ @jk_14 6 Sep 2023

Faith-based assumptions that everything will be fine, because everything has been fine up till now, is about the stupidest possible approach to system engineering

1k sat for "annoying" Truth :)

0 sats \ 1 reply \ @faithandcredit 6 Sep 2023

As it stands the security budget is about 0.2 BTC per block.

50 sats \ 0 replies \ @rijndael 7 Sep 2023

The security budget includes the subsidy

1162 sats \ 15 replies \ @orthwyrm 6 Sep 2023

Let's wait and see.

Personally I think if Bitcoin isn't generating significant tx fees a decade from now, then something has gone wrong and it has failed to monetize. No degree of tail emission will help with this.

I also don't know how you pick an appropriate emission level. Too little, and it doesn't meaningfully improve security. Too much, and Bitcoin becomes diluted and less desirable to hold. Price falls, security falls. So where's the sweet spot? 1%? 0.1%?

Lastly, if we really wanted to hardfork to fix security, surely it would be better to instead add features that increase on-chain demand? Ethereum for example has no problem generating tx fees in large part due to stablecoin volume.

21 sats \ 0 replies \ @jk_14 6 Sep 2023

I also don't know how you pick an appropriate emission level.

that's so obvious... :) in case of four years long network difficulty regression - halving should be delayed by next 4 years (to not introduce further destruction to the network security)

this is the only way to set appropriate emission level - because determined by the free market between active and passive users

50 sats \ 0 replies \ @inverselarp 6 Sep 2023

I would and one more point to this already great answer: it is not about 21m or the actual tail emission. This is about protecting “changing the rules” attack vector. Once you change this you can start to question block-size, block-times, anything. If Bitcoin is still useful in those few halvings, security budget wont be a problem because fees will generate enough revenue. If not, bitcoin failed, but not because of security budget but because people dont use it.

50 sats \ 0 replies \ @inverselarp 6 Sep 2023

Perfect answer

0 sats \ 11 replies \ @iguano 6 Sep 2023

Bitcoin isn't generating significant tx fees a decade from now

Define significant. how much?

0 sats \ 0 replies \ @rijndael 7 Sep 2023

enough to compensate miners

0 sats \ 5 replies \ @orthwyrm 6 Sep 2023

I don't know, but I could amend that sentence to:

Personally I think if Bitcoin is operating unreliably due to a lack of on-chain demand a decade from now, then...

Where "unreliably" is taken to mean frequent double spends / very long confirmation times.

Whatever level the tail emission proponents are afraid of, I suppose.

0 sats \ 4 replies \ @iguano 6 Sep 2023

Personally I think if Bitcoin is operating unreliably due to a lack of on-chain demand a decade from now

Why do you think it will be a lack of onchain demand?

0 sats \ 3 replies \ @orthwyrm 6 Sep 2023

I think the point you are driving at based on other comments is that altcoins such as BCH manage to stay operational despite much lower miner revenue.

While true, this is missing two key points: a) Confirmation times are required to be way higher for these chains for final settlement, and b) They are seldom worth attacking because nobody uses them for very large transactions.

I doubt one would risk settling a $1B transaction on Bitcoin if the block reward amounted to $1k.

I'm not quite sure the onus is on me to answer this questions regardless; I'm not the one advocating for tail emission.

0 sats \ 0 replies \ @03014f425f 6 Sep 2023

I doubt one would risk settling a $1B transaction on Bitcoin if the block reward amounted to $1k.

Why not? You just wait longer. There is no such thing as final settlement in Bitcoin anyway.

0 sats \ 1 reply \ @iguano 6 Sep 2023

altcoins such as BCH manage to stay operational despite much lower miner revenue.

I used the altcoin example to show how the miners adapt to the environment, no need of protocol change to maintain security.

I believe the BCH example is bad as is a minority hash chain (SHA256). making it more insecure of what bitcoin will be in the future when we do not have the subsidy. I used this example to make a point of how the miners will behave. In the future, Miners will use the best technology increasing their efficiency and increase the hashrate even more of what we have today.

I doubt one would risk settling a $1B transaction on Bitcoin if the block reward amounted to $1k.

Today (09-06-2023) the last block reward was 8600$

I don't understand why you think is going to be less in the future.

0 sats \ 0 replies \ @rijndael 7 Sep 2023

I dont think the question is whether fees will be more, the question is whether fees will be enough

0 sats \ 3 replies \ @elvismercury 6 Sep 2023

Enough to provide enough mining security to be robust to attack from a state-level actor.

40 sats \ 2 replies \ @iguano 6 Sep 2023

How much is that?

Go and check hashrates of BCH, BSV, LTC, DOGE, etc.

The game theory on bitcoin is that the miners will adapt, the ones who cannot operate with the margins of each epoch, will left the network allowing the ones who stay to make more money.

110 sats \ 1 reply \ @elvismercury 6 Sep 2023

Nobody knows how much it is. That's the point. And if you're drawing your comps for btc's desired security budget from a bunch of shitcoins, I don't know what to tell you.

Game theory isn't magic -- all of these parameters are bound together to produce the complex system that emerges. You can't solve it in closed form and predict what will happen.

40 sats \ 0 replies \ @iguano 6 Sep 2023

Nobody knows how much it is. That's the point. And if you're drawing your comps for btc's desired security budget from a bunch of shitcoins, I don't know what to tell you.

If nobody knows why you think is needed? who will impose this variable?

I gave you an example of shitcoins to make you think.

2622 sats \ 3 replies \ @03393ec3a3 6 Sep 2023

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.

0 sats \ 1 reply \ @03014f425f 6 Sep 2023

Finally an actual good argument being made in favor of tail emission. But just like any other "attack", users won't know or care why their transactions aren't being confirmed, they will just increase their fees until their transactions get confirmed.

1000 sats \ 0 replies \ @03393ec3a3 7 Sep 2023

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.

0 sats \ 0 replies \ @jk_14 6 Sep 2023

1k sat for being farsighted ;)

1807 sats \ 2 replies \ @lightwalker 6 Sep 2023

"Adding tail emission to Bitcoin would be a hard fork: an incompatible rule change that existing Bitcoin nodes would reject as invalid. While Monero was able to get sufficiently broad consensus in the community to implement tail emission, it’s unclear at best if it would ever be possible to achieve that for the much larger Bitcoin. Additionally, Monero has a culture of frequent hard forks that simply does not exist in Bitcoin. Ultimately, as long as a substantial fraction of the Bitcoin community continue to run full nodes, the only way tail emission could ever be added to Bitcoin is by convincing that same community that it is a good idea."

416 sats \ 1 reply \ @jk_14 6 Sep 2023

The network destruction is convincing situation, am I right

If we would have four years long network difficulty regression - then it's emergency, and new code handling such danger - should delay halving to the next halving, until difficulty will recover

if there is no such emergency situation - there is no trigger, and old and new code would work together like a charm = so there is no hard fork at all

beautiful solution, imo :)

21 sats \ 0 replies \ @lightwalker 7 Sep 2023

Some recent mining difficulty worth considering.

On Tuesday, September 5, 2023, Bitcoin’s mining difficulty experienced a 2.65% dip at block height 806,400, offering a slight reprieve for miners. This marks the first decline since July 26, when a 2.94% slide was recorded at block height 802,368.

Bitcoin Miners See Relief With 2.65% Difficulty Drop and Rising Hash Price As of Tuesday evening, bitcoin (BTC) miners are finding the going a tad smoother. The network’s mining difficulty decreased by 2.65% on Tuesday evening at block height 806,400. This adjustment comes after the difficulty peaked at an impressive 55.62 trillion, holding steady for 2,016 blocks, or roughly two weeks. Jamie Redman, Bitcoin.com

1474 sats \ 1 reply \ @janowitz 6 Sep 2023

Tbh providing "free" Bitcoin to subsequent blocks doesn't play out if some major entity will only mine if it's profitable, since a reorg of the original transaction will also give them fees of the subsequent ones. In fact, it gives even a stronger incentive to try a reorg and suck up all the high fees.

I don't think we are decades away, just think of Bitcoin crashing by "only" 50% in price while the next halving kicks in you can't argue it hasn't been like that before, since 14 years of history and few halvings are not a very accurate statistic - suddenly the reward would be only 25% of what it is now, probably causing shutting down more than 50% of HR which would be available for potential reorgs.

0 sats \ 0 replies \ @jk_14 6 Sep 2023

10 sats \ 0 replies \ @knorozov 7 Sep 2023 freebie

It's not taken serious by anyone important I think.

Theoretically, the only way to do it is to make the current block rewards smaller, to pay for the tail emission, so the total amount of bitcoin will still never exceed 21M.

110 sats \ 2 replies \ @k00b 6 Sep 2023

If you don't like the security budget idea, I think there might be a psychological one where people will fork because they feel a lack of emission favors early adopters. I'm not saying that's a valid pov, but money requires social consensus.

140 sats \ 1 reply \ @josh OP 6 Sep 2023

That sort of argument would open an ugly can of worms. I hope to never see it.

Money is most definitely a social construct, but what makes Bitcoin special I think is the degree to which it takes "social" out of money. If we allow Bitcoin's monetary policy to be changed by social consensus, who's to say it won't be changed again?

Any type of uncertainty reduces the value of Bitcoin in the present. Besides, who benefits from tail emissions? It's the whales who would otherwise need to give away bitcoin in subsequent blocks to guarantee finality, whenever they do decide to spend their bitcoin. Small transactions will be protected from the risk of double spends by the base fee load.

In short, tail emissions subsidize whales at the expense of smaller holders. Not the other way around.

50 sats \ 0 replies \ @tnuts420 6 Sep 2023

i'm not sure i agree that bitcoin takes "social" out of money. the whole point is that monetary policy can only be changed with social consensus, that's what makes it decentralized.

i personally agree that tail emissions are a bad idea. i'm also not a fan of drivechains. but if a majority of nodes say that's a valid block, then that's a valid block, full stop. if that's not the definition of monetary policy controlled by social consensus, then i don't know what is.

30 sats \ 0 replies \ @nullama 6 Sep 2023

"Tail Emission" sounds like a fart

50 sats \ 4 replies \ @eduardopro 6 Sep 2023

Bitcoin is nothing without the 21 million cap.

0 sats \ 3 replies \ @03393ec3a3 6 Sep 2023

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.

0 sats \ 2 replies \ @eduardopro 6 Sep 2023

If the monetary policy changes, the bitcoin experiment fails.

Plus, this --> https://twitter.com/GhostofWhitman/status/1699487298222461242

100 sats \ 1 reply \ @03393ec3a3 7 Sep 2023

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.

0 sats \ 0 replies \ @jk_14 7 Sep 2023

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.

Lack of free market in Bitcoin is most problematic. As a side note - noone here was able to deny to this obvious statement:

There is no free market between active users (wanting stakeholders to pay for the network security) and passive users (wanting transacting users to pay for the network security)

But MEV is cancer too, if would only appear in Bitcoin, like it already has appeared as _ pure pathology _ in Ethereum.

30 sats \ 5 replies \ @anon 6 Sep 2023

Tail emissions are a really bad idea.

A large part of bitcoin's value comes from not changing its monetary policy.
As adoption grows, tx fees & BTC price in $ will rise. This will be enough.

Bitcoin's security model is fine the way it is. There is no need to change it.

0 sats \ 0 replies \ @jk_14 6 Sep 2023

calculate hipotetical $ price increase by factor 2^30, without inflation in first approximation LOL

0 sats \ 3 replies \ @03393ec3a3 6 Sep 2023

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.

0 sats \ 2 replies \ @03014f425f 6 Sep 2023

fork your mother if you want fork

21 sats \ 1 reply \ @03393ec3a3 7 Sep 2023

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.

0 sats \ 0 replies \ @jk_14 7 Sep 2023

You were not offiensive and now you are uniquely patient, smh :) There are only two crucial issues:

lack of free market between active and passive users
quantum threat

After wise preparition against these two - the road is clean to evergreen, magic Internet Money :)

5 sats \ 33 replies \ @TheBTCManual 6 Sep 2023

I don't know why miners are so butt hurt, they first were pushing ordinals, now drivechains and now again the return of tail immissions debate? If you need extra revenue why not merge mine some shitcoin, RSK or pick up some of the other POW coins and stop making your profitably issues our problem?

Miners need to get rekt regularly if they sink too much capital into opps upfront or they have a high costing energy source, thats what they signed up for, and what if they are public miners thats the risk the equity holders took (FYI they could have raised capital through equity too) so even more reason why I couldn't care about big miners going tits up, you had advantages over smaller miners and you mis calculated its okay

Those ASICS will just move to people who can afford to run it profitably and distribute the hash rate

The network might have some rough patches here and there but it will find an equilibrium and adding keynsean policies isn't going to help. Mining is meant to be hard otherwise everyone would do it and not spend time focusing on value added goods and services we actually need.

You already see that in the fiat system with infiniate tail emissions

290 sats \ 17 replies \ @netstatic 6 Sep 2023

Their financial problems are our problems. Bitcoin relies on miners providing enough hashrate to make attacks (via reorgs and empty blocks) infeasible by those who'd like to see Bitcoin fail. If there's a way to maintain hashrate without compromising too much of Bitcoin's monetary policy, that would be good for all of us and should be encouraged.

To your point, miners mining at an unsustainable loss by depending on a potential future change is also bad since it provides a false sense of security and artificially inflates the hashrate, to a point that discourages potential profitable miners from jumping in.

60 sats \ 1 reply \ @TwoLargePizzas 6 Sep 2023

Bitcoin is designed to handle fluctuations in hash rate. If the hash rate falls due to some miners going out of business the difficulty adjustment will kick in and it will become more profitable for the other miners. As the fiat price goes up, more miners will re-enter the market. We don't need to change a system that's already working.

0 sats \ 0 replies \ @jk_14 6 Sep 2023

System is working only because of NGU in the "early" phase. Overtaxed active users will not pay endlessly for the whole network security, i.e. for "free lunches" for passive parasites :)

30 sats \ 2 replies \ @btcthinker 6 Sep 2023

I totally disagree, saving incompetent miners is not everyone's task, if miners can't make money, they should quit mining and let more efficient ones mine.

According to my guess, this is actually a problem with BCH. After the next round of halving, BCH may enter a mining death spiral.

So they hope that Bitcoin will be tail emission first, so that BCH can follow.

21 sats \ 1 reply \ @netstatic 7 Sep 2023

There's external risks to miners quitting. ASICS are a limiting factor in terms of entering the mining arena, and if a significant amount of miners failed around the same time, it could be scooped up by a state-actor to gain a temporary majority of the hashrate. I believe Bitcoin wouldn't die from this, assuming new miners would spin up to challenge this eventually, but I think it could definitely hurt Bitcoin in the short-term and slow adoption.

0 sats \ 0 replies \ @TheBTCManual 7 Sep 2023

Thats definately a possibe scenario but everyone can paint one look at the comments, and none of us can acount for the variables, like lets say an entity picks up all these miners, doesn't mean the energy is available at a reasonable cost to go out and attack the network

50 sats \ 0 replies \ @TheBTCManual 6 Sep 2023

I don't subscribe to the mining doom loop that takes down the miners in a systematic way, I think that like fiat miners theres always a price that brings in participants that have free cash flows and access to resources.

The Bitcoin network has to adjust from time to time, if it gets to a point where it makes sense for me to mine, you know im going to do it, we all want cheap sats

0 sats \ 2 replies \ @sudonaka 6 Sep 2023

Disagree

0 sats \ 1 reply \ @TheBTCManual 6 Sep 2023

How do you see it? Keen to hear the full take! Come on don't leave me on a cliff hanger

0 sats \ 0 replies \ @sudonaka 7 Sep 2023

We don’t share financial problems

0 sats \ 7 replies \ @iguano 6 Sep 2023

Their financial problems are our problems.

No they are not, there is hundreds or thousands of shitcoins making less fee than bitcoin fee alone. I don't see many hacks or 51% attack on them.

Go and check hashrates of BCH, BSV, LTC, DOGE, etc.

The miners will addapt, the ones who cannot operate with the margins of each epoch, will left the network allowing the ones who stay to make more money.

0 sats \ 6 replies \ @jk_14 6 Sep 2023

yeah, and this number of "who stay" will gradually decrease, like it or not :)

0 sats \ 5 replies \ @iguano 6 Sep 2023

Yep, the rules are the rules…

0 sats \ 4 replies \ @jk_14 6 Sep 2023

and where is the Store-of-Value then? (on the floor)

0 sats \ 3 replies \ @iguano 6 Sep 2023

On the rules. If you change them, what’s the point ?

0 sats \ 2 replies \ @jk_14 6 Sep 2023

Free market is above all the rules for me.

Unfortunately, Satoshi forgot to implement free market between active and passive users, and this mistake was not danger in early phase when "number goes up" but it will be extremely danger in the deep post-subsidy era.

Then, I will say: I told you so (and Peter maybe even: I todd you so :)

view replies

40 sats \ 9 replies \ @rkfg 6 Sep 2023

Miners want guarantees in this probabilistic system where nothing is 100% guaranteed. Even PoW is probabilistic though the probability is as close to 100% as you can get. They want to be able to make money at everyone else's expense because tail emission = perpetual inflation = global universal taxation. Miners want to be another branch of government that gets paid no matter the circumstances, just because it exists, even if their services aren't needed.

10 sats \ 0 replies \ @TheBTCManual 6 Sep 2023

Exactly, i thought this is a commodity, there is no assurances just because issuance is known and the ledger is open, doesn't make it any less of a gamble, sinking resources into an operation.

Gold miners don't sit around complaining, they go bust and others come in find new deposits or smaller ones come in and mine with lower capex in the same spot. If you can't cash flow, piss off find another job

0 sats \ 7 replies \ @jk_14 6 Sep 2023

so, the solution is: let's overtax active users by taxation in case of being active participant and let passive parasites will be free of taxation cool AF, and honest :)

0 sats \ 6 replies \ @rkfg 6 Sep 2023

There's no "overtax", you pay for the service. Need your tx to get into a block? Pay for it. Don't need it? Don't pay. It's that simple.

0 sats \ 5 replies \ @jk_14 6 Sep 2023

as a passive stakeholder you also pay for the service, then and the service name is: providing robust security to the Bitcoin network

Don't need it, my passive parasite in post-subsidy era? So, you will pay it anyway, in decreasing price of Bitcoin, clear as crystal... :)

0 sats \ 4 replies \ @rkfg 6 Sep 2023

I will pay it anyway because I'd need to use bitcoin to pay for goods and services. But I will do it voluntarily and in a way that I prefer. The difference is consent and actual need. If I only need one tx in a month I will pay once a month, if someone needs it more often they will pay accordingly. Rather worry about the insufficient block space to accommodate all of humanity, I'm sure you'll be arguing for increasing the block size next.

0 sats \ 3 replies \ @jk_14 6 Sep 2023

I'm sure you'll be arguing for increasing the block size next.

I dumped all my brand new b-cash almost instantly and in a hurry. that's just your prediction "quality" in its finest, lol

0 sats \ 2 replies \ @rkfg 6 Sep 2023

What stops you from returning to it? Prediction is about the future, not the past that already happened. I'm not sure you understand what "prediction" is, probably mistaking it for "postdiction" or something.

view replies

0 sats \ 4 replies \ @patrick1 6 Sep 2023

How is RSK a shitcoin? The base token is just BTC. It's a federated sidechain with HSMs, just like Liquid.

0 sats \ 3 replies \ @TheBTCManual 6 Sep 2023

Lol is that really what you took from that comment?

0 sats \ 2 replies \ @patrick1 6 Sep 2023

Just responding to one part of it. Are you not open to criticism?

0 sats \ 1 reply \ @TheBTCManual 6 Sep 2023

Of course I am, always happy to learn I'm not! My view of RSK is that if you're going EVM the idea is to have 3rd party assets on your rail, I know they do some Money on chain stablecoins and other defi stuff which is shitcoiny and as for miners they can enjoy the merge mining returns and the possible MEV ops no?

2 sats \ 0 replies \ @patrick1 6 Sep 2023

Yeah, you can implement shitcoins on it. That's mostly not what's happening, though. Same with Liquid. My objection was just referring to RSK itself as a "shitcoin".

20 sats \ 1 reply \ @jgbtc 6 Sep 2023

Every bitcoin transaction is a promise to the recipient that they will receive a percentage of the total supply that can never be diluted. Tail emissions would invalidate every single one of these promises, about 890 million so far, and completely destroy the integrity of Bitcoin.

0 sats \ 0 replies \ @03393ec3a3 6 Sep 2023

Is this true? Was the hard cap in place from the beginning? I never read anything about these promises in the whitepaper.

12 sats \ 7 replies \ @grayruby 6 Sep 2023

If fees are not high enough, I will happily mine at a loss to help secure the network. Similar to paying for insurance for your house. It's similar to a tail emission but more palatable than changing the supply of the fixed supply global reserve asset.

Get a couple hundred million people, some large institutional holders, maybe even governments across the world willing to insure their most valued asset by protecting the network, add in block reward until 2140, fees, and whatever other revenue large scale mining can generate (grid balancing, methane capture etc) and you are good to go until humans find a way to screw it up.

10 sats \ 0 replies \ @TwoLargePizzas 9 Sep 2023

I think about this too and I don't think it should be dismissed as a possibility.

But rather than thinking of it as "mining at a loss" it might be better to go back to first principles and think of it as spending energy to secure the monetary network.

Thinking of it outside the fiat price helps to ground the conversation in terms of what's actually happening rather than trying to speculate on some future price in dollars.

On our path to hyperbitcoinization I expect one of the first things to get repriced in Bitcoin will be energy. Energy companies are the backbone of the economy and there's a direct relationship between energy producers and Bitcoin miners.

When energy producers mine Bitcoin it's not a "cost". It's actually an additional source of revenue and reduces their marginal cost making them more profitable and more competitive. They have a way to monetize excess energy and stabalize the grid.

10 sats \ 4 replies \ @SpaceHodler 23 Sep 2023

Your mining at a loss may not be enough if others don't. We have a collective goal to secure the network, but the individual incentives don't align with it, because whoever mines at a loss secures the network not only for themselves but also for those who don't mine at a loss. Why would I make an individual contribution of $100 to a greater common good to get an individual benefit of $0.0000001?

0 sats \ 3 replies \ @grayruby 23 Sep 2023

This is fair but I go back to the insurance example. I buy insurance on my house and buying that insurance also insures others houses, as does their purchase of insurance help to insure mine. It's hard for me to believe that people will have large portions of their wealth tied into bitcoin because of it's scarcity and fixed supply and will a) accept tail emissions b) not be willing to insure their wealth.

10 sats \ 2 replies \ @SpaceHodler 23 Sep 2023

Sorry, how does your insurance insure others' houses? My insurance only insures mine. Even if yours covers others' houses, it insures yours more than others. And you're not insuring the entire world.

0 sats \ 1 reply \ @grayruby 23 Sep 2023

When I pay into an insurance product I am paying into a pool of capital that pays out when the 1/10000th house burns down. My capital is insuring that if that house is mine I am covered but if it's yours, you are covered as well even if mine didn't burn down. If I had to pay to insure only my own home, even if a catastrophic outcome is unlikely the premiums and deductibles would be 10x what I currently pay.

0 sats \ 0 replies \ @grayruby 23 Sep 2023

I am not suggesting this is a perfect analogy but I think looking at a framework that is similar to an insurance product is more palatable than tail emissions. No one knows what the revenue profile of miners looks like far into the future, are they getting paid to balance grids, capture methane, what are fees, what has happened with integration into appliances and industrial machinery where no excess energy needs to be used to mine etc.

I am not speculating on any of this just on the idea if what comes out of all of that is insufficient at securing the network then paying to mine like you pay to insure your house is more palatable than tail emissions even if they are effectively the same.

10 sats \ 0 replies \ @jk_14 6 Sep 2023

maybe even governments across the world willing...

...to mine at loss :) Read about Prisoner's Dilemma, then :)

10 sats \ 3 replies \ @SimpleStacker 6 Sep 2023

In equilibrium, tx fees plus subsidy should equal the energy cost of mining a block plus opportunity cost.

If subsidies go down, then either:

The amount of tx fees goes up (measured in BTC)
The resource price of bitcoin goes up (measured in real resources per BTC)
The cost of mining goes down

#2 seems to be what has happened most often historically, while #1 should continue to go up if adoption increases. I don't support ordinals, but new sources of on-chain demand like ordinals can also drive up #1.

#3 can occur one of two ways:

3a) Cost of energy goes down;
3b) Difficulty goes down.

3A is likely to continue happening into the future as block subsidies continue to reduce.

3B is probably the least desirable outcome as it undermines bitcoin's security against 51% attacks. But compared to 3B there are three other potential sources to counteract a decline in block reward.

Moreover, it's not obvious to me that a decline in difficulty would be so bad. A 51% attack would most likely still be out of reach, even with a decline in difficulty, and a lower difficulty would allow more people to benefit from mining.

0 sats \ 1 reply \ @jk_14 6 Sep 2023

asking for decline in difficulty - is an obvious attack on famous Store-of-Value property of Bitcoin, attack on Bitcoin price in fact

21 sats \ 0 replies \ @SpaceHodler 23 Sep 2023

And my intuition tells me that, asymptotically speaking, if something declines in Bitcoin, it's probably not to some fixed magic 'equilibrium constant', but to zero.

0 sats \ 0 replies \ @netstatic 6 Sep 2023

#3 wouldn't fix anything in most cases.

If the cost of energy went down, why would they allocate less money to mining? They would still try to allocate the same amounts and reap the maximum reward they can. If all miners had access to cheap energy, then this would happen in tandem with all miners.

The difficulty going down would be a result of miners making the decision to go out of business or temporarily spend less. Over the long run, miners will always use all their allocated energy to mine unless they can predict a future drop in the hashrate where saving energy for a more opportune time makes sense. This would probably only happen if they pay a predictable price for energy rather than generate it themselves since producing and storing energy for later is expensive.

2 sats \ 19 replies \ @south_korea_ln 6 Sep 2023

Peter Todd has done work in that direction: https://petertodd.org/2022/surprisingly-tail-emission-is-not-inflationary

You can also check the bitcoin-dev mailing list discussion https://www.mail-archive.com/bitcoin-dev@lists.linuxfoundation.org/msg11681.html and another post on bitcointalk https://bitcointalk.org/index.php?topic=5405755.0 for further discussion of his blog post. I don't know what his current stance is on the topic.

10 sats \ 13 replies \ @netstatic 6 Sep 2023

I've never read that post but I think it's pretty dumb. He solved a differential equation to show that the supply will always be a proportion of growth divided by loss, but implicit to his calculation is the loss of Bitcoin continuing until the supply reaches 0.

It's obvious that if the loss of Bitcoin continues every year at a non-zero rate, it will eventually hit 0. The differential equation wasn't needed at all, and I feel like inserting math where it isn't needed makes someone look too desperate to seem smart lol.

The fact is, economic volatility dwarfs the effect of small amounts of inflation. Even a 0.5% inflation rate over 50 years only leads to a 22% drop. Meanwhile at the time of writing, Bitcoin has dropped 36% in the past year, and gained 993% over the past 5 years. While this discussion is a nice excuse to use some mildly interesting math, in the end it’s totally pedantic.

So because Bitcoin's fiat value has historically fluctuated mostly up, and because Bitcoiners are okay with double digit down swings today, we should be okay with whatever double digit inflation rate tail emissions might incur?

0 sats \ 12 replies \ @SpaceHodler 23 Sep 2023

It's obvious that if the loss of Bitcoin continues every year at a non-zero rate, it will eventually hit 0

What do you mean? 0.5^n approaches zero, but never reaches it.

0 sats \ 11 replies \ @netstatic 23 Sep 2023

The amount of money someone holds is not continuous and in the context of losing Bitcoin, you either lose Bitcoin or you don’t. If there was only 1 utxo with 1 sat (which is impossible with today’s policy rules), and I said there was a non-zero rate of loss that year, then that means that person has lost that utxo.

When working with discrete everyday things, constant values like .5^n as n approaches infinity just doesn’t make sense as there will always be a point where subdivision is impossible.

It’s the same reason why the dichotomy paradox’s thought experiment can’t actually be done. There gets to a point where it’s impractical/impossible to move half of a set distance.

0 sats \ 10 replies \ @SpaceHodler 23 Sep 2023

Bitcoin is not gold, which you can't divide beyond the individual atom, making it discrete at the micro scale. Bitcoin is code. By the time Bitcoin's supply is a miniscule fraction of what it is now due to lost coins, we'll have forked it to divide 1 sat into micro- or nano-sats. Also, when the supply is that small, tx fees will be denominated in nano or pico sats.

0 sats \ 9 replies \ @netstatic 24 Sep 2023

Forking to make sats more divisible is almost like raising the 21 million cap and equally distributing the new coins. Either way you shouldn't assume either is the direction the project will go.

0 sats \ 7 replies \ @south_korea_ln 24 Sep 2023

More divisible is nothing like raising the 21m cap. Going from one to two pizzas is different from cutting your one pizza into 4 pieces instead of 2.

0 sats \ 6 replies \ @netstatic 24 Sep 2023

Comparing pizzas to Bitcoin doesn't make much sense because pizza is not money and its economic mechanics don't work the same.

Let's take the simplest example of a world with only 2 sats, one held by you and one held by me. We both valued our respective sats at some defined value X. If both you and I decided to make a rule that allowed the doubling in value of all utxos, we would now have 2 sats respectively.

This would be an instance of inflation, but because both of us received sats according to our existing distribution it acts as a halving of value among all sats. Since each of us now have a monetary unit worth X/2 we can effectively treat that as a division of sats. In wallet interfaces, I can even halve the display value of sats such that when someone sends 1 sat, it shows .5 sats instead.

Going back to the pizza analogy, it doesn't make sense in this context because the value of pizza isn't in its usefulness as money. Pizza is typically seen as useful because it provides calories/nutrients/etc. If I were to double everyone's amount of pizza then they would double their value in calories/nutrients/etc. Applying this logic to money would mean everyone benefits from inflation, which we know is not the case.

view replies

0 sats \ 0 replies \ @SpaceHodler 24 Sep 2023

I thought it was widely accepted that's the direction the project would go. No controversy here at all.

0 sats \ 4 replies \ @jk_14 6 Sep 2023

demurrage but I think delay of halving is more sure and more robust solution, but harder to introduce not saying that aproval for demurrage would be a piece of cake :)

21 sats \ 3 replies \ @SpaceHodler 23 Sep 2023

The delay of halving breaks the 21M hard cap though, and doesn't even guarantee a finite supply, because the block reward might stay at a certain level forever. This introduces a variable that's hard to predict and completely redefines Bitcoin.

20 sats \ 2 replies \ @jk_14 26 Sep 2023

If bitcoin is dying due to lack of free market between active users and passive free-riders - what is the more important thing than to rescue Bitcoin from death?

Free market is more important than finite supply, and yes - this is the only way to reach equilibrium between active and passive users - by step-by-step iteration to the certain level and stay there forever (just to allow Bitcoin to stay here forever)

I'm glad finally someone understood the idea. Now you need to some time to admit, unpredictable variable is free market at its finest :)

21 sats \ 1 reply \ @SpaceHodler 26 Sep 2023

It makes sense. Something akin to what the central banks do by setting interest rates, but algorithmic, leading to a 'natural' (rather than manipulated) level of inflation. But different, because it's directly tied to security. I haven't thought whether it would be an issue if it works in one direction only (halvings, but no doublings), but it might.

When I was learning about Bitcoin, I heard "It costs you nothing to store your bitcoin (as opposed to, say, gold). You get security for free." and thought it sounded wonderful, but too good to be true. There is no free lunch and all that...

I understand a lack of inflation is aligned with Austrian economics, but the Austrians didn't know a monetary system whose security was tied to inflation. So it's a new concept to wrap one's head around.

But then, I wonder (and again, I haven't thought about it much, it's just some loose thoughts), if Bitcoin's security relies on there being no single entity large enough to thwart it (likely a superpower nation state, like China or the US) and "large" is relative to the size of the population, and if Bitcoin successfully decentralizes power making nation states and corporations weaker (which it may or may not), then that alone may make a 51% attack increasingly harder, mitigating the effect of the falling block rewards.

It's hard to predict what will happen - we're trying to make sure a system whose behaviour is modelled by exponential functions will work well over timeframes that exceed our lifespan. It's not hard to imagine that even Satoshi may not have gotten it 100% right.

0 sats \ 0 replies \ @jk_14 27 Sep 2023

"I haven't thought whether it would be an issue if it works in one direction only (halvings, but no doublings), but it might."

Yes, I'm not brave enough to propose "doublings" yet... ;) frankly speaking - I'm unconfortable enough with undermining Holy Graal 21M I wouldn't do that without my sureness that something must be done sooner or later with this long-term embedded problem. Yes, there is no such thing as a free lunch - I'm a fan of Milton Friedman.

"It's not hard to imagine that even Satoshi may not have gotten it 100% right."

Very true. Satoshi forgot to implement free market between active and passive users, unfortunately.

When you realise that he started the system from one edge case - i.e. inflation starting from infinite in first block in fact, and stakeholders were able to survive this "early" phase with enormous annual inflation only because of "Numbers go up" (i.e. due to system expansion) - and system is simply going by design to the second edge case, i.e. with zero annual inflation.

I don't know if we could find any example of staying in the edge case - as a healthy state for any system. And we are trying to grass-root building of alternative financial system - maybe the biggest challenge I met in my life...

12 sats \ 0 replies \ @0330830bf9 6 Sep 2023

A chain with tail emissions isn't Bitcoin, just another forked shitcoin... so there's nothing to be concerned with.

10 sats \ 0 replies \ @iguano 6 Sep 2023

Fork your mother if you want to fork.

0 sats \ 1 reply \ @faithandcredit 6 Sep 2023

Tail emissions will trap bitcoin in a boom and bust cycle forever? Also seems like hypocrisy to pay for security with inflation but not anything else? What about food Healthcare and school :) let's have tail emissions for that too :)

0 sats \ 0 replies \ @jk_14 7 Sep 2023

Also seems like hypocrisy to pay for security with inflation but not anything else

exorbitant transactional taxation - is not: something else?

0 sats \ 0 replies \ @jk_14 6 Sep 2023

there is a strong incentive to provide "free" bitcoin to the miners

lol lol^2

If Satoshi would use altruism instead of greed as a base for Bitcoin expansion - there would be no Stacker News... because there would be no Bitcoin at all... :))

0 sats \ 0 replies \ @027067d654 6 Sep 2023

Tail emissions can help stabilize block production. Currently fees are very volatile, and going from almost no fees to very high fees and back doesn't lead to stable block production once the subsidy subsides. Will lead to reorgs and intermittent huge gaps between blocks. But we must keep the 21 million limit. So UTXOs should have an expiration date. UTXOs expire after 50 years, and they are added to the emissions schedule over the following 50 years. Thus the block reward doesn't go to zero and we stay under 21 million limit. You just have to move your BTC every 50 years.

0 sats \ 0 replies \ @btcthinker 6 Sep 2023

Miners are always worried about not making enough.

Understandably, mining machines are a sunk cost. So manufacturers of mining machines always give other miners wrong ideas.

0 sats \ 0 replies \ @birdeye21 6 Sep 2023

ppl just need to let bitcoin COOK. Let it cook!!

0 sats \ 0 replies \ @q 6 Sep 2023

A few years ago I saw a blog post or a solution/fork of Bitcoin which had a mechanism of rewarding miners with a small percent fee of older untouched UTXOs, or if it was on wallet level don't remember we talking about +10 years with a minimal fee every year if its not touched. That's kind of interesting idea because if we look at gold which is lost can be found.

0 sats \ 0 replies \ @wikparclones 6 Sep 2023

It's sound like 1 sats will be more valuable in the future ⚡⚡

0 sats \ 0 replies \ @2bithits 6 Sep 2023

Let's see what the fees are around the 2032 halving. There's no need to rush this one

0 sats \ 0 replies \ @mallardshead 6 Sep 2023

Awareness of bitcoin has scaled linearly with its price IMO. The higher the price, the more awareness, the less bitcoin lost. The higher the price, the more solutions to mitigate loss, the more incentives to innovate loss mitigation. We have innovation in scripting, hybrid custody, and discussions on vault BIPs now. Directionally, less bitcoin will be lost over time, if not, then FOSS has failed. So I disagree that emissions will converge on zero with lost BTC. I don't even think large natural disasters will matter, because we're closing in on some pretty epic recovery mitigation.

Then there's the issue of deep future quantum, where "lost" coins or pre-quantum cryptography wallets become an incentive for quantum computing competition itself, if there's not a trailing fork making those invalid.