Published on: 2020-03-31T02:06:32+00:00
Miners' behavior under a new ruleset is a concern raised by the author of the message. The author argues that miners, who benefit directly from increased inflation rates and have the power to decide which transactions are added to blocks, are likely to accept attempts to delete UTXOs (Unspent Transaction Outputs) that vote for lower inflation rates and create UTXOs that vote for higher inflation rates. This would result in miners strongly controlling the inflation rate of the coin. Additionally, as inflation grants more coins to miners, they would also have more control over the value of the coin used for voting.To avoid the moral hazard of beneficiaries of higher inflation rates being the ones who determine the inflation rate, Bitcoin has a fixed inflation rate schedule.The Bitcoin system introduces a competition for limited block space, forcing users to assess how much security they are willing to pay for. This ensures that individuals pay the market rate for block space, determined by supply and demand. However, this mechanism may lead to some individuals paying less than what is required to maintain network security.Off-chain mechanisms in Bitcoin do not eliminate on-chain fees but rather distribute them across multiple logical transactions, increasing effective capacity while still maintaining on-chain fees at a level that ensures healthy blockchain operation. However, the use of Lightning nodes, one such off-chain mechanism, is not a permanent solution as they will eventually close, leading to on-chain funds being in the slow and expensive on-chain domain. Therefore, there will always be a need for a block weight limit to ensure miners can be paid.The block weight limit in Bitcoin restricts the number of transactions that can be included in a block, ensuring miners receive payment. However, each individual only has an incentive to pay the market rate for block space based on supply and demand. This creates a collective action problem, where individuals aim to pay the minimum necessary to include their transaction in a block while relying on others to cover the cost of transaction security.Although off-chain mechanisms can increase effective capacity, reducing demand for block space and transaction fees, this could lead to a decrease in miner revenue below the level required to maintain network security. Finding a solution to this problem remains an ongoing challenge.
Updated on: 2023-08-02T02:01:20.755308+00:00