Author: John Carvalho 2022-07-08 07:26:06
Published on: 2022-07-08T07:26:06+00:00
The Bitcoin developers are discussing the relationship between block size and fees. There are differing opinions on whether smaller blocks provide better security for the network in terms of validation and fees. The difficulty adjustment function only adjusts for changes in observable non-51%-attacking hashing power, and does nothing against a 51% attacker or censor. A falling hash rate due to an ongoing 51% attack can lower the difficulty, but as difficulty falls, so does the cost of countering the censor. The tradeoff between censorship resistance and double-spend security is a concern, and phasing out subsidy marks the transition from a censorable to a censorship-resistant money. Arguments for inflation are considered absurd and forced since proof of work and the difficulty adjustment scheme already solve all issues. When blockspace demand increases, fees increase, more miners mine, and security goes up. Thus, any theoretical supply increase would have the opposite effect.The discussion on the Bitcoin-dev mailing list revolves around the security of Bitcoin and how much security would be enough for it. Some argue that Bitcoin does not need active economic governance by developers or meddlers as it would be an exploitable mechanism. However, the present amount of security is about 1.7% of the total coin supply/year, and Bitcoin seems to be functioning well. An amount low enough to be easily affordable but non-zero would be fine, with suggestions ranging from 1% to 0.1%. Over a lifetime, a 0.5% yearly inflation works out to be a 31% tax on savings while 0.1% works out to be 7.2%. However, these amounts are likely to be dwarfed by economic shifts.It is important to generate consensus on the optimum amount of security long before the block subsidy becomes too small, probably in the next 10-15 years. The status quo of the block reward eventually going away entirely is a risky state change too. Therefore, it is crucial to find a balance between the amount of security needed and the cost of achieving that security. If people are using Bitcoin, miners will mine. However, if all Bitcoin users are hodling only, then demand is gone, and miners will leave. The discussion highlights the need for ongoing conversation and consensus building on these issues.
Updated on: 2023-06-15T21:21:16.091620+00:00