The question of how miners will be paid in the long run, after mining subsidy rewards disappear is a much debated topic in Bitcoin. For those who don’t know, mining rewards are set to half every year until they finally reach zero sometime in the year 2140. How the Bitcoin mining ecosystem will remain profitable (and thus healthy) is up in the air. Miners are important as they provide security to the Bitcoin network because they convert real world energy into network security to guard against attacks from malicious forces. Therefore, the more decentralized and diverse a mining ecosystem is, the better for Bitcoin.
So what will happen when mining rewards disappear? Well, some miners feel that transaction fees should rise up to fill up the shortfall. As Ang Li puts it from an excerpt of the a recent article at Bitcoin.com
The incentives that Satoshi Nakamoto designed in the Bitcoin whitepaper are not enough to sustain mining for long, Li feels, adding that as the block reward halves every four years, miners income will continue to decline. According to him, keeping the block size where it is now will not provide enough incentive and therefore has to be reconsidered. Li also believes that only a larger mining transaction fee will maintain the balance. “By increasing block size, and transaction numbers, the fees will gradually replace the block reward, providing enough incentive for the miners to defend the bitcoin hashrate. This is the fundamental way to achieve healthy development of the whole ecosystem.”
This is the fourth part of a multi-part series on the myths of decentralization. You can read the previous installments here:
Part 1 – Decentralization Redefined
Part 2 – Decentralization Myth
Part 3 – Decentralization comes with People
I’ve written quite a lot about the misconceptions and deliberate misdirection that some proponents in the Bitcoin community choose to spread around in order to shape the public perception of what makes Bitcoin valuable, and as a result change the fundamental value proposition of Bitcoin. As you all should know by now, “Value does not exist outside the consciousness of Man” – Carl Menger. So changing people’s consciousness by way of affecting their ideas, affects the value of Bitcoin. Thus it is important that we re-evaluate our notions of why Bitcoin is valuable every so often with a huge dose of skepticism.
In today’s article, I’d like to review what the fundamental security model of Bitcoin is, as intended by its mysterious creator, Satoshi Nakamoto, (at least in my interpretation of it) why that model is the best we can possibly hope for, and why any further attempts at adding extra layers of ‘security’ on top of this model just ends up making it less secure by making it more centralized.
One of the heated debates that has raged over the years in Bitcoin space is whether the idea of a developer team lead by a benevolent dictator is the appropriate model to employ for a network worth more than 15 billion dollars in market capitalization. Many have cited examples of how Satoshi, and then Gavin himself were benevolent dictators, and also how some well known projects have been successfully managed under the watchful eye of a wise and benevolent (though sometimes abrasive) dictator such as the Linux project. It is also true that most civilizations evolve from dictatorships, starting with the tribal chiefs, to feudal warrior kings, to aristocratic monarchs, to emperors. The transition to a democracy is not always a smooth one, and is mired by both slippages into oligarchies, totalitarian fascism to misguided experiments into socialism. It is important then, to keep in mind that while most organized groups start as dictatorships, they eventually evolve into a system that is more inclusive of the common people’s will.
Oh, Glorious Leader, shepherd for the weak, show us the way!
Firstly, let’s get the obvious out of the way. Dictatorships are vastly more efficient than a republic or democracy. This is due to the fact there is little bounds on the leaders power, and his followers will carry out his instructions in the most expedient fashion. Contrast this to a democracy where leaders are continually second guessed by their opposition, and their political opponents who are all vying for their own chance to run the show. In a dictatorship, the only way a change of regime is possible is through open and widespread revolution. This is why despotic Chinese emperors of old made it illegal to congregate in groups of 3 or more, restrict what can be discussed in public and on occasion just committed mass murders of all the academics and scholars for fear that they may spread seeds of dissent and dissatisfaction among the peasants with their pesky logic, philosophy, and ideals of morality. Continue reading
I’ll just say it. Small blockers are elitists who want to censor out Bitcoin users who cannot afford to transact on mainchain. I’ve lost count of how many times I’ve heard the old argument that scaling onchain damages decentralization, which in turn may damage the censorship resistance of Bitcoin.
Free as in Free speech and Free beer!
It is important to realize the hypocrisy in this line of reasoning. It is subtle, so I bet most of the proponents don’t even know that they are guilty of it.
Simply put, the fee market is a form of censorship. If you cannot pay for a bullet proof car in Mexico city, then you and your family is at risk. If you cannot afford to install a home alarm system, then you have been prevented, indirectly, from keeping your property safe from burglars. If you cannot afford insurance, then you are at risk of a fire, or an accident etc. Similarly, if you cannot afford to pay for the privilege of transacting when you wish in the Bitcoin network, then you must be delegated to 2nd layer networks like Lightning to do your payments. Which will have centralized payment hubs to service you and collect fees from you. How is this any different from the current banking system that we have now? Isn’t this form of slavery to debt one of the exact reason why Bitcoin was created in the first place to solve? Why then should Bitcoin treat those of means different from those without? Shouldn’t all the underserved be equal in the eyes of Bitcoin? Continue reading
Early this year, when the debate on how to manage the meta-consensus issue of hard fork management arose I wrote an article about emergent consensus. This basically outlined the idea behind Bitcoin Unlimited‘s proposal of letting the network decide when it is collectively ready to move the block limit higher, and by what amount. At the time, I wrote that the issue was lack of good UX tools which would be able to track network participants (whether mining node, or regular full-node) votes and show them in real time. After all, emergent consensus can only work if there is a sufficient feedback loop so that the collective group decision making process can be facilitated, and overestimates and underestimates can be corrected. This is much like how a liquid market of bid/asks facilitates price discovery in every financial market since the beginning of human commerce. It is only by repeated and constant dogmatization of the block size limit as a ‘sacrosanct’ part of the protocol, has the proponents of a smaller block restricted Bitcoin been able to convince everyone that the limit cannot be changed, lest the network be subject to catastrophic attacks or instability.