Background

In the long run, Bitcoin has some uncertainty around the security of the network. Fees need to replace the block subsidy. If they don't, and the price drops (even temporarily, from some new ATH in the future), the network could be at risk. We're talking about an 12 to 18 year horizon here.

10 Billion Eggs

The current value necessary to spend, in order to secure the network, is roughly 20 Billion Midwest Grade A Eggs (that's approximately $7B USD). To be honest, the network is probably actually more secure than it needs to be. So, lets say Bitcoin needs to consume the value of at least 10 Billion Eggs or $3.5B USD. We would be fine, even with half the security of today (all else equal, eg. no nation states attacking). All bets are off, for this analysis, if nation states attack.

Ignoring population growth, there isn't 10B people on the planet. And only a tiny fraction of those are wealthy enough to consider an egg a rounding error in their household budget.

If...

If you measure $3.5B, as a fraction of total global wealth ($463T - source), and all wealth was denominated in bitcoin, and 10% of it changed hands once per year, on chain, we're talking about less than a basis point of value flowing to the security budget. I don't think it's reasonable to think we'll get there in 12 to 18 years.

If the "market cap" of Bitcoin, changed hands once per year, we're talking about 0.87% in fees to afford half of today's security.

If you spread out 10B eggs, over 100M users, we're talking about 100 eggs in value per person, to afford enough of a security budget. That's kind of high, and would feel like a waste to a household, that would be 200 eggs -- if the house had just 2 people. Imagine 17 dozen eggs.

Now, what if every time you ate food, that recipe needed an extra tenth of an egg -- for some reason. Over the span of a year that would be roughly 200 eggs for a 2-person household.

How?

We need to figure out a way, to increase the demand for block-space, while keeping enough economic activity on chain, such that the value of that consumption dwarfs the cost of the fee. Example: An app that does something novel, but uses bitcoin to deliver value or coordinate incentives. The value of that app, combined with the value necessary to spend on the fee, is greater than the cost of the fee. Either the user or the company will end up paying the on-chain fee, because the value of that app dwarfs the value of the chain fees. Stacker.News is an example (the lightning network on-chain fees are required to make SN work).

You can achieve this economic scenario with compliments.

If we could figure out a good, or more likely a service, that complimented the use of block space the economics of using the chain start to improve.

What would that look like?

I think it's some small (think 20 to 200) businesses, or even ~2000 apps, using the chain to deliver value, where usage of blockchain space was a compliment, than the value those businesses deliver would justify the fees involved to keep the network secure because demand for both the service they provided complimented the block-chain space. This is different, but related, to COGS.

We don't just need "bitcoin-only" businesses, we need "blockchain-native" companies.

How do we accelerate the development of finding new apps and uses cases that create a compliment to blockchain space?

Build businesses for non-bitcoiners, that use the timechain and Bitcoin.
Build businesses in every single major industry...not just, payments (Eg. Food, Energy, Automotive, Media, Health, etc.)
Give constructive feedback to businesses to help them find product market fit (faster). I actually think we should self-organize volunteer focus-groups, to help de-risk product development cycles where Bitcoin is involved, even if indirectly.
Help founders connect with resources or people who could help them grow. Could even be introductions.
Don't dismiss what might sound like a silly idea, right away. Most likely, the businesses that create a compliment for the chain, don't exist yet, so they might seem foreign or rough at the start. Bolt.Fun already has many being bootstrapped right now, but some of those are Bitcoin-only solutions. These are needed, but their target-market will only ever be existing bitcoiners.
If you do build a business, assume your costs to use the chain will climb in your business planning. It has to, or Bitcoin won't work in the long-run. You're wasting your time if you build a business model that relies on cheap on-chain fees.
Don't just build for bitcoiners (SN is a great example. IMHO, we need subs, that interest other topics, to pull in pre-coiners.)

I'd like critical feedback as I sharpen the thesis and call-to-action(s). What do you think?

I'm taking many of the above actions myself already. I have an example app, and I've entered it into Bolt.Fun, with the above altruistic goal in mind - to increase the net-usage of block-space by providing a complimentary good to it.

We have 12 to 18 years, to do this. Lets go.

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104 sats \ 1 reply \ @chungkingexpress 30 Oct 2022

This is an interesting proposition. Am I reading this right, it is almost like a CSR initiative (without the B.S.) "Plant trees, save the planet" becomes "Use block space, keep bitcoin going" etc.

Random Ideas

Maybe the highest paying fee on each block can be identified by an OP_RETURN code as a sponsor / leaderboard? "This block's sponsor is company X!" Maybe there is a static address that people can bid for sending the highest amount to etc.
I wonder if a lottery system could be developed by miners. E.g. Users buy a ticket for 10,000 Sats through a miner lottery service on basechain and go into the draw to win 0.1BTC. Every 10 minutes the lottery transaction is posted to mempool and somebody "wins" 0.1BTC, but 10BTC+ worth of individual transactions have been accumulated in the block.

1 sat \ 0 replies \ @jeff OP 30 Oct 2022

You got it!

Your first bullet, would be kindof neat. Kindof like, "This company is doing it's part, they are helping the greater good (security wise)"

Your second bullet, would definitely be an interesting game too! It would probably require trust to setup, and therefore laws would kick in about gambling, but you get the idea.

1 sat \ 3 replies \ @cryptocoin 30 Oct 2022

The current value necessary to spend, in order to secure the network, is [approximately $7B USD].

This is where you are misunderstanding the bitcoin network's security.

It doesn't cost $7B to keep the bitcoin network secure (or even the $3.5B you suggest as the lower level).

The reason the bitcoin mining network is at the current level (~270 EH/s) is the result of exchange rate + block subsidy (currently 6.25 per block), which produces the $7B revenue to miners figure you mentioned. Double the price, that doubles the revenue, and will maybe nearly double the hashrate. Would that make the bitcoin network twice as secure as it is today?

Does a bank vault that has steel + cement walls made two feet thick cause it to be twice as secure as another bank vault with its walls just one foot thick? Probably not, if one foot thick is already secure, the added second foot in thickness does nothing further.

Or, let's look back the other direction. When bitcoin was down to 85 EH/s just sixteen months ago after China forced miners there to shut down, was the bitcoin network considered less secure than it is today? No, it was not.

So what is the hashrate needed to keep the bitcoin mining network secure? That will vary over time, as mining rig performance levels and efficiency improve over time, but we've reached a level that is maybe already an order of magnitude (or more) higher than what would actually have been needed for the bitcoin network to be at a level where it is prohibitively expensive to attack (e.g., for the purposes of successfully being able to carry out a double spend).

I can't calculate that but I would feel confident that if current hashrate were to decrease by half, corresponding with each of the halvings, (which could be expected if there there was no change to the BTC/USD exchange rate), that still the bitcoin network would be considered "secure enough" for the next ten years ... all else being equal. (That "all else being equal" part is crux though). We know looking back however, that hashrate rises much faster than the exchange rate (due to improvements in ASIC device efficiency), so there's even less chance of such a decrease in hashrate occurring.

26 sats \ 2 replies \ @jeff OP 30 Oct 2022

I can't calculate that but I would feel confident

That's why I can't take my calc one step further and use the actual hash rate. I have to use a proxy for value, which is imperfect, but helpful for the analysis above.

I think my conclusion and calls-to-action stand, no?

1 sat \ 1 reply \ @cryptocoin 30 Oct 2022

If the fees are not sufficient (and the subsidy drops from halvings such that miners become much more reliant on fees), the max block space can be reduced with a soft fork.

Miners would be onboard with that, so reaching 51% of hashrate willing to implement this would not be surprising if it were to happen. I don't expect it to happen though. At least not with the current trajectory of bitcoin adoption (rapid adoption on second layer, which results in some level of increased adoption on first layer as well, e.g. for channel open/close transactions for Lightning).

25 sats \ 0 replies \ @jeff OP 30 Oct 2022

the max block space can be reduced with a soft fork

That would drive up L1 fees from scarcity, not from adding more value. That's the equivalent of raising prices of a good, without providing more value.

My entire post is to suggest that finding a way to add more value, to compliment what a user gets from the "fees", is economically more sustainable than any other approach.

If a proposal ever landed to reduce block size, I imagine there would be an entire faction of people beating the drum of the message behind my post. The community would be divided, I'm sure.

1 sat \ 0 replies \ @faithandcredit 29 Oct 2022

I wonder what satoshis thoughts on this were.