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Topic: Bitcoin Issue That I Can't Wrap My Head Around (Read 283 times)

jordanlesson (OP)

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Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 06:48:50 PM

Merited by LFC_Bitcoin (1)

TLDR: Bitcoin will reach is cap of 21 Mil. Miners will have to resort to transaction fees as incentive for mining. Bitcoin community will ultimately agree to raise Bitcoin cap and inflation will become normalized for Bitcoin. This will solve high transaction fee issue but will lead to a slippery slope.

Recently, Ive been researching other block chains, particularly how they are able to reward miners and users. I came across Steemit, which is in the STEEM blockchain. Steemit is interesting because they reward users for posting and curating content that receive a lot of support (upvotes, comments, etc). They are able to pay the users the participate by inflating their own token.

This got me thinking about Bitcoin and what will happen when Bitcoin inflates to its limit of 21 million. When it reaches its supply limit, miners will stop receiving block rewards for mining transaction blocks which is their main incentive for mining and keeping the validity of the blockchain. Instead of block rewards, miners will mostly rely on transaction fees.

This is when I believe we run into a problem. This is because historically humans have a strong distaste for fees especially with simple actions on the Internet. If we want Bitcoin to become a global currency that is used for primarily every transaction, having fees is an easy way to deter new people from adopting Bitcoin as their main currency.

I think instinctively, adopters of Bitcoin will immediately turn to raising Bitcoins supply cap (probably by 2x) to solve this issue. Which will decrease the value of Bitcoin in circulation, but will increase incentives for miners and increase transactions since there will be less or no fees. Ultimately, this creates a new precedent that the infrastructure of Bitcoin can be changed whenever a problem arises, especially in regards to inflation. Additionally, this puts us in a similar situation as the US Government as they make efforts to inflate their own fiat currency without seeing any issue with it. I believe this will be a slippery slope if this occurs and eventually Bitcoins principles that made it appealing in the first place will erode.

One solution to this problem will be to make the amount of power used to mine blocks significantly lower as that will incentivize miners to mine blocks with lowers transaction fees.

I would love to hear you guys opinion about this issue because we should be prepared for when this happens.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 06:59:33 PM

Bitcoin will never have more inflation than planned.
Block rewards have nothing to do with transaction fees, see what happened to fees in 2017.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 07:02:51 PM

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

Exchanges and probably centralized wallets are give people the false sense that bitcoin fee is high, it is high but not high as withdrawal fee on exchanges. If the mempool has been so decongested for many months now, and now with 1 sat/vbyte that can get transaction confirmed, that is a small amount of fee, but exchanges will be charging 0.005 BTC or more when only 0.00005 BTC or less can be used as fee to get your transaction confirmed early..

I do not understand what you are trying to make comment about but I know it is absolutely not making sense. Never mind me. Everything about bitcoin since its creation has been working, I do not know what brought this up. Transaction fee has been drastically replacing block reward and it is working fine up till now.

There is not issue about this for now, so do not make wrong suggestion that will never be acceptable.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 07:03:37 PM

firstly

bitcoin won't 'cap-out' until the year 2140.
thats 120 years(so not your or my concern now. but out great-great grand kids issue)

so imagine it like this.

in the 1990's floppy disks were the only portable storage and a PC 'caped-out' at 4gb hard drive.
in 30 years. we now have fingernail sized portable storage that can hold 1million floppy disks
hard drives are 1000 times that of their 30year ancestor

we are no longer on dialup of 56kbs... its 2021, and average global internet speeds are 56mbs now.
internet has jumped 1000 times

so thinking that a block of ~ 2000 transactions is going to remain for the next 120 years is a fools narrative, or a narrative of those wanting to break bitcoin to advertise other networks

so instead of thinking that at the moment pools only make $2/tx = ~$4k a block. where by if pools want $400k then fee's need to be $200.. is another failed narrative

also thinking that blocks need to jump to 200,000tx a block right now is another fools narrative.

yes by 2140 where petahash hard drives and gbs fibre/cell internet is standard minimums there will be no problem of having blocks of 200,000 transactions.

much like in 1990 sending a single framed image took 30 seconds to buffer.
now we have HD livestreams of 60frames a second.
in the future people will laugh at the debates that "1-4mb is too much" "4200tx a block limit"

so its not going to be a case in 2140 of:
2000tx at $200 fee each ($400k pool income)
but instead
200,000tx at $2 fee each ($400k pool income)

again this leap to 200,000(in this example) is not something that has to happen now as a big leap. what should happen, and should have begun since 2015 in incremental adjustments to allow more transactions per block.
so far many deem its not worth incrementing up a little yet. but thats the debate right now.

though some groups preferring other networks as solutions to bitcoins tx limits, have hindered bitcoins scaling. .. but it will happen. and there is 120 years for it to happen. its not an 'if', but is a 'when'

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 07:09:11 PM

Merited by NotFuzzyWarm (2)

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

Instead of block rewards, miners will mostly rely on transaction fees.

This is when I believe we run into a problem. This is because historically humans have a strong distaste for fees especially with simple actions on the Internet. If we want Bitcoin to become a global currency that is used for primarily every transaction, having fees is an easy way to deter new people from adopting Bitcoin as their main currency.

Where this kind of assumptions come from? Did you make any bitcoin transaction ever?
Even now people pay transaction fees. Last 4 blocks came with 0.15, 0.08, 0.03 or 0.1 BTC for the miners from fees. When the network is more crowded, the fees increase greatly.
So.. one error in the logic is about the fees. People do pay fees already for the transactions and bitcoin didn't stop existing.

Even more, although you don't seem to know, but you also pay transaction fees in the fiat world, when you pay with your card. Just nobody cares to tell you that the merchant included that into the price you see for the product/service you buy and he's paying that fee to Visa/Mastercard (or keeps the difference if you pay with fiat).

Also, another problem I see is that the last halving will be around 2140. So you are trying to find the fix for a problem that might happen in more than 100 years. I think that too many things will change until then, hence it's too early for arguing about it.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 07:14:51 PM

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

When it reaches its supply limit, miners will stop receiving block rewards for mining transaction blocks which is their main incentive for mining and keeping the validity of the blockchain.

The main incentive is currently the block reward. Over time it'll stop being the main incentive. I suspect they'll earn much more in fees than now which is ~0.1 BTC.

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

If we want Bitcoin to become a global currency that is used for primarily every transaction, having fees is an easy way to deter new people from adopting Bitcoin as their main currency.

The speed of a confirmation may also discourage them from using it. That's why we have the Lightning Network. To make everyday micro-payments instantly and with a nearly zero fee.

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

I think instinctively, adopters of Bitcoin will immediately turn to raising Bitcoins supply cap (probably by 2x) to solve this issue

This will never happen but answer me this: Why would this solve the issue? Won't they also need more incentive after it reaches 42 million? Sounds like a paper over the cracks.

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

One solution to this problem will be to make the amount of power used to mine blocks significantly lower as that will incentivize miners to mine blocks with lowers transaction fees.

The amount of power is calculated by the difficulty. The difficulty is calculated by the frequency of the block generation. If it becomes more frequent than 10 minutes, difficulty increases. The opposite happens correspondingly. This frequency is determined by the law of demand and supply. If the equilibrium market value of bitcoin increases then the miners have a greater incentive to use more power, because they earn more money.

You can't determine the power required, that's a result of free market.

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

I would love to hear you guys opinion about this issue because we should be prepared for when this happens.

I'd recommend you to start making questions regarding this as you have definitely misunderstood tons of things.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 07:59:43 PM

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

It's a double edged sword and the way you think that the max cap would be increased so flippantly shows a lack of understanding on your part. One of the foundations for Bitcoins success is the fact that for the last 13 years pretty much every participant has known that there will only ever be 21 million to exist. Now, it has flexibility to utilize more decimal places if necessary for functionality, but that doesn't require lifting the maximum available unit quantity. If in some unforeseen turn of events the developers hijacked the process and made more available somehow, then it will possibly destroy the trust that has been built into it over many year and devalue it to the point of worthlessness - it's not going to happen.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 08:46:07 PM

I am sure at some point in time far in the future a bitcoin clone will fork with some inflation. Whether people follow the fork and the almost certain lowering of value inflation would create is unknown. If transaction fees are too low to mine profitably, AND no one wants to mine the original btc chain at a loss voluntarily, AND those with a great financial interest in the main chain thriving don't want to subsidize mining at a loss as a cost of business, then maybe a majority will move over to the forked btc+inflation coin. Far. far far in the future though. But yeah, the chances of the current btc chain hard forking to include inflation is about as close to zero as it gets.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 10:11:52 PM

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

I think instinctively, adopters of Bitcoin will immediately turn to raising Bitcoins supply cap (probably by 2x) to solve this issue.

As already said by others, this will never happen.
If you want a coin with 2x supply, that's no longer bitcoin. That would be an altcoin which can be a fork of bitcoin.

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

One solution to this problem will be to make the amount of power used to mine blocks significantly lower as that will incentivize miners to mine blocks with lowers transaction fees.

Again, we would need a hard fork. The new coin would be an altcoin with a very insecure network.
To decrease the energy consumption, we should reduce the difficulty. In the case difficulty is reduced much, it would be easy to perform a 51% attack.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 11:09:49 PM

#10

Quote from: hosseinimr93 on January 11, 2022, 10:11:52 PM

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

One solution to this problem will be to make the amount of power used to mine blocks significantly lower as that will incentivize miners to mine blocks with lowers transaction fees.

To decrease the energy consumption, we should reduce the difficulty. In the case difficulty is reduced much, it would be easy to perform a 51% attack.

to reduce the consumption, we should avoid having (for 165exahash)
11,785,714,285,714 miners CPU mining at 14mhash each. using 325watt per PC
(note of sarcasm)
and instead find something more efficient like asics where
1,500,000 mining asics at 110thash using 3250watt per asic
..
......
oh wait its 2022 not 2012. and look we do have asics.. wow amazing, we have more energy efficiency/hash than 2012
cpu vs asic= 7,857,143x efficiency gain
.. ok job done.

as for any possible discussion about 'carbon footprint' of 1.5mil asics.
well 'guestimates' are that atleast 1m of the 1.5m were using electric from hydro power, not coal, numbers have increased to be more greener in recent year-months

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 11, 2022, 11:53:21 PM
Last edit: January 12, 2022, 12:03:32 AM by hosseinimr93

#11

Quote from: franky1 on January 11, 2022, 11:09:49 PM

----------

I feel my wording was not good.
With reducing the difficulty, we don't really decrease the total energy consumption. Because all miners are still working and the total hash rate of the network wouldn't change. As you mentioned, for decreasing the energy consumption, we need more efficient miners.

To make my previous statement more accurate:
For decreasing the energy needed for mining a block, one way is to decrease the difficulty and the problem is that it can lead to a 51% attack.

OP suggested to make the amount of power used to mine blocks lower, so miners are encouraged to mine blocks with low transaction fees.
My point was that to do so, we would need a hard fork decreasing the difficulty. I know how this can make the network insecure and I'm not saying that's a good solution.

Making more efficient miners is another solution. But that's responsibility of ASIC manufacturers, not bitcoin developers.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 12:32:25 AM

#12

reducing the difficulty. just makes it cheaper for miners to find blocks. this just results in more miners jumping in.. which ends up increasing the difficulty again.

trying to break the code law of difficulty, does not result in anything permanent. it just means within 2 weeks the difficulty shifts up after everyone takes advantage of the brutalised difficulty drop rule break

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 12:48:49 AM
Last edit: January 12, 2022, 01:02:31 AM by hosseinimr93

#13

Quote from: franky1 on January 12, 2022, 12:32:25 AM

reducing the difficulty. just makes it cheaper for miners to find blocks. this just results in more miners jumping in.. which ends up increasing the difficulty again.

Reducing the difficulty in a way the average block time decreases to less than 10 minutes.

Assume that we decrease the average block time to 2 minutus. The difficulty will increase with the increase in the total hashrate, but the average block time will still remain 2 minutes.This will lead to a less congested network and lower transaction fees.

Again, I'm not saying this is a good solution. It would make the network insecure. We don't need it all.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 12:51:26 AM

#14

I think this is not for us to prepare really. We can discuss sufficiently about this so that the future generation may know our ideas, and refer to them perhaps, but since the last Satoshi to be mined will still be around the year 2140, this problem is not ours to solve so to speak.

Anyway, if we do the math, there is really no point inflating the supply if the result will be the decrease in value. It would become a zero-sum game in which the increase of one side would mean the decrease of the other. Wed rather resort to the use of Satoshi. After all, Bitcoin is divisible.

And also, one of the selling point of Bitcoin is its scarcity, its hard-coded fix supply. Thats in direct contrast to fiat. Tinkering this feature would mean its fall. Well, it cant really be changed without resorting to the creation of an altcoin.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 12:54:25 AM

#15

Quote from: Charles-Tim on January 11, 2022, 07:02:51 PM

Most, if not all, exchanges are known mainly for their profits, hence why they don't care when the memory pool is reduced to 1 sat/vbyte. It's actually an advantage for them because of the constant value of withdrawal fees, but the downside is that when the mempool becomes overcrowded with transactions, it can take hours to get from wallet to wallet, and they sometimes have to disable withdrawals by limiting transactions. After all, they are centralized prisoners right!

Quote from: Itty Bitty on January 11, 2022, 08:46:07 PM

I am sure at some point in time far in the future a bitcoin clone will fork with some inflation.

Check other bitcoin forks over the years, they were hyped and hoped to meet other demands but all woefully died. Bitcoin will continue to exist in its current form. The inflation has been one of the key role in it price and that is why many miners hasn't sell some of their holdings.
Worry about now and leave 2140 worries to BIPs to come.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 01:28:46 AM

Merited by ABCbits (1)

#16

Quote from: hosseinimr93 on January 12, 2022, 12:48:49 AM

Quote from: franky1 on January 12, 2022, 12:32:25 AM

reducing the difficulty. just makes it cheaper for miners to find blocks. this just results in more miners jumping in.. which ends up increasing the difficulty again.

reducing the average blocktime also requires messing with the reward (at byte level) which also changes when and how many times the block halving's happen and many other nasty messy implications that then also need to be fixed as a consequence..

but even if done, and all consequential bugs fixed. again it just produces a temporary result. because mining pools(human emotion/greed) will just again increase asic hashpower if they can start making more money because of cheaper hashpower.

one thing topic creator and others need to learn.
ASIC's have no hard drive or ram to process transaction data. they dont see nor care about how much transaction data there is. the ASIC 'work' is not dependant on transaction data. it can be 0 transactions, 1800transactions or 10,000 transactions.. ASICS are not bothered. hindered or tied to the transaction count or the fee of said transactions.

humans. paying electric bills want the money. and they want to find ways to make more money. humans. are the deciding factor of efficiency or greed.. not code or hardware

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 01:47:59 AM
Last edit: January 12, 2022, 02:01:04 AM by NotFuzzyWarm

#17

Quote from: NeuroticFish on January 11, 2022, 07:09:11 PM

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

re folks paying fees and specifically, ccard fees - at least in the US, the one place where it is obvious how much of a fee you pay for the convenience of using a credit/debit card vs paying cash is buying gas. Most gas stations charge (and are required to advertise it on their signs) around 10-cents more per gallon vs paying cash. In my area that is currently about a 3.25% fee for the 'convenience' of using a card. A lot of small stores and restaurants will have a minimum you owe to use a card and often give a few % discount when paying cash.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 06:46:14 AM

#18

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

You can't even predict what will happen 100 days from now, how can you even begin to predict more than a 100 years from now?
In any case I always like to refer people to the history which will continue at least for the foreseeable future. Back when miners were earning 50 bitcoins per block that were barely $1 but today they are earning a small amount of 6.25 bitcoins per block but that is worth more than $250,000. I'd say miners are receiving way more higher incentive than they need to start looking for fees.

Bottom line is that we can not predict something that is too far away in the future. When the time comes, we will assess the situation and decide what the best course of action is.

Quote

I came across Steemit, which is in the STEEM blockchain. Steemit is interesting because they reward users for posting and curating content that receive a lot of support (upvotes, comments, etc…). They are able to pay the users the participate by inflating their own token.

That's not on steem blockchain, that is all happening on a 100% centralized website that could pay users in a semi-centralized token on steem blockchain.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 12:15:30 PM

#19

The "problem" (if it is indeed one) will have appeared long before 2140.
After 3 more halvings, the block reward will be less than 1 btc, and after another 3, it will be less than 0.1.
So in the next 20-25 years, it will be comparable to current transaction fees.

It's an unpopular opinion, but I don't think having a constant block reward of, say 1 btc after sufficient halvings would have been a bad idea. Inflation would be minimal and predictable.
But I do think it's too late now to implement it as it would do more harm than good, due to FUD as it would be painted as a betrayal to the golden initial rules. So It's a moot point.

Still, after 20 years I expect most daily transactions to have crossed over to the lightning network, leaving layer 1 just for settlements, opening and closing channels, or exceptional, large and costly transactions.
I think it's totally sustainable if the ecosystem is strong.

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Re: Bitcoin Issue That I Can't Wrap My Head Around

January 12, 2022, 12:27:58 PM

#20

Quote from: jordanlesson on January 11, 2022, 06:48:50 PM

I would love to hear you guys opinion about this issue because we should be prepared for when this happens.

I don't feel like raising the marketcap of Bitcoins to circumvent the 21 million problem is what the crypto community really wants. We all are aware that the huge energy consumption for crypto mining is a problem. But the rest of the world is also constantly increasing its energy needs. Its just a matter of time that we become more efficient in the harvesting of energy. That's why we can't look to far into the future based on our current technology at hand. Technology advancements are going to help solve the energy problem.
The attractiveness of Bitcoins is the hard cap of 21 million, it stops inflation reducing the value of the existing coins. For me this also means the bitcoin price is going to stay on a upwards trend. While the price for 1 bitcoins keeps going up we can trade in even smaller amounts going forward.

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