Author: Erik Aronesty 2017-08-21 17:24:09
Published on: 2017-08-21T17:24:09+00:00
There have been several proposals to address the issue of unbounded UTXO growth in Bitcoin, which could lead to scalability issues. One proposal is to implement demurrage where old coins would gradually lose their value and eventually evaporate into mining rewards. Another option is to demand a minimum mining fee based on the age of an input, resulting in economically unspendable coins that can be archived. However, both of these proposals have potential downsides and limitations.Another use-case for demurrage is if quantum computing becomes more common, as computation power may grow rapidly. Bitcoin may have to change the public key format and POW used, requiring old coins to transact on the network to move their value to a new format with many more bits in the public key. Old coin demurrage can be timed based on quantum POW difficulty adjustments, and those with too few bits must drop off the network to ensure security. The rate of decay can be pegged to a number of years as long as the subsequent exponential rate of computation increase can be reasonably predicted.An alternative proposal suggests returning lost or stale coins to miners as a fee, rather than implementing demurrage. This would ensure that burnt or lost coins eventually get back into circulation, and reduce miners' reliance on actual transaction fees. To limit UTXO growth, a limit on UTXO age in block count could be implemented, with invalidation of UTXOs after a certain number of generations. Mined blocks can reclaim satoshis from an invalidated UTXO pool in addition to miner's reward and transaction fees. The value of each block's reclamation could be capped until the pool depletes, and the value of leftover blocks could be increased initially to avoid excessive miner reward.
Updated on: 2023-06-12T03:44:39.357046+00:00