UTXO growth scaling solution proposal

Summary:

The author proposes a soft fork solution to address the UTXO growth problem in Bitcoin, stating that current scaling solutions like Segregated Witness, Lightning Network, and larger blocks do not solve this issue. The proposed solution is to consider any UTXO that is not spent within a set number of blocks as invalid, which means miners and nodes only have to store that set number of blocks, capping the size of the blockchain. However, this means that bitcoins that have not been spent for a long time are lost forever. To improve the solution, the author suggests adding a new mechanism called "luster," where UTXOs that are less than X blocks old retain their luster value of 1, but as they get older, the luster value continuously decreases until they become Z blocks old and lose all their luster with a value of 0. The luster value is then used to compute the amount of bitcoins that must be burned in order for a transaction with that UTXO to be included in a block. The idea is that coins that are continuously being used in the Bitcoin economy will never lose their luster, while old coins that are not circulating will start to lose their luster until all luster is lost and they become valueless, or they reenter the economy and regain their luster. The author suggests that coins should only start losing their luster after the lifespan of the average human, which is currently about 120 years old, and proposes storing the last 150 years of history in the blockchain. The question of how large blocks should be is simply a matter of what is the disk size requirement for a full node, and the author provides examples of calculating the blockchain size based on block size and years. The proposal being a soft fork is a big plus, and it also keeps the blockchain size finite even given an infinite amount of time. However, more thought would need to be put into how wallet software can handle this and how it can work with sidechains.

Updated on: 2023-06-12T03:45:15.170957+00:00