Return-Path: Received: from smtp3.osuosl.org (smtp3.osuosl.org [140.211.166.136]) by lists.linuxfoundation.org (Postfix) with ESMTP id B9256C0011 for ; Thu, 30 Jun 2022 15:26:09 +0000 (UTC) Received: from localhost (localhost [127.0.0.1]) by smtp3.osuosl.org (Postfix) with ESMTP id 91F2560F37 for ; Thu, 30 Jun 2022 15:26:09 +0000 (UTC) DKIM-Filter: OpenDKIM Filter v2.11.0 smtp3.osuosl.org 91F2560F37 Authentication-Results: smtp3.osuosl.org; dkim=pass (2048-bit key) header.d=gmail.com header.i=@gmail.com header.a=rsa-sha256 header.s=20210112 header.b=l1/7+km9 X-Virus-Scanned: amavisd-new at osuosl.org X-Spam-Flag: NO X-Spam-Score: -2.098 X-Spam-Level: X-Spam-Status: No, score=-2.098 tagged_above=-999 required=5 tests=[BAYES_00=-1.9, DKIM_SIGNED=0.1, DKIM_VALID=-0.1, DKIM_VALID_AU=-0.1, DKIM_VALID_EF=-0.1, FREEMAIL_FROM=0.001, HTML_MESSAGE=0.001, RCVD_IN_DNSWL_NONE=-0.0001, SPF_HELO_NONE=0.001, SPF_PASS=-0.001] autolearn=ham autolearn_force=no Received: from smtp3.osuosl.org ([127.0.0.1]) by localhost (smtp3.osuosl.org [127.0.0.1]) (amavisd-new, port 10024) with ESMTP id qVV1hObk-cOw for ; Thu, 30 Jun 2022 15:26:08 +0000 (UTC) X-Greylist: whitelisted by SQLgrey-1.8.0 DKIM-Filter: OpenDKIM Filter v2.11.0 smtp3.osuosl.org E5C8660F31 Received: from mail-ua1-x92a.google.com (mail-ua1-x92a.google.com [IPv6:2607:f8b0:4864:20::92a]) by smtp3.osuosl.org (Postfix) with ESMTPS id E5C8660F31 for ; Thu, 30 Jun 2022 15:26:07 +0000 (UTC) Received: by mail-ua1-x92a.google.com with SMTP id n16so7073537ual.12 for ; Thu, 30 Jun 2022 08:26:07 -0700 (PDT) DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=gmail.com; s=20210112; h=mime-version:references:in-reply-to:from:date:message-id:subject:to :cc; bh=FI5YW2n1lbelccmlPBXlQ0+MXuPNWg2QE/JiSIeeLoU=; b=l1/7+km9oXLw1HxjPkvaSVSzOmxeq3n1vpxa2JFtG2cJVzVTI1EXuOJiJ5IONBV6uT l/eCxIaJbWJqLd02cMIpvDnZFV2fmgNJU8RD1T+k/dnxD4PXY0bAo6vfc2EhY/23N/p5 EE6X/1q03mYKRw9DohNkbW+jeR5PGn3BmgzbM57vKOvMs7NG4khY9Bjpu1TsyNjs5T5O QQkCmOVG02DLTDl4BAbnFGgy4+S/fGrpwaxcm53lrKYjFMfp3PUBrfrfLrrMz44kdo0X T2yC6Vy2UJ/lk6IH6yIyx14A1aqjNL3LelVWZXQiLhXEi15Ef87hr8uzZJVpiH2rGfKS X/HQ== X-Google-DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=1e100.net; s=20210112; h=x-gm-message-state:mime-version:references:in-reply-to:from:date :message-id:subject:to:cc; bh=FI5YW2n1lbelccmlPBXlQ0+MXuPNWg2QE/JiSIeeLoU=; b=X2LNeHcoI/LQS6O6FMPxIGcOtRB5TDrz6MvLfT/v72sWdwZHPe80UdBMJDatLPdtg5 2c3glCacKskd2PB0oqDU/StiLwJo3tzNHzj2G1b4mNJ2bJS0fGVfMbuO6mYYr4zRfRIR XfD/Zf4fWmBx8qjcFDTiDgFA4j2FgSewyGwE49BpXm3UyP6EoOAtsgOgHATokbE34djf s99NLUqWKs3bXIDNl9dSM7M2KL44o6pG0fFK5/oKXHYljBLWTo7cyAXunQT4VJiqODPa 1xGE5VtW8r4M9/cq19TIOdQ7lGn4aN3KKGwnRaKiqtKABZWHn8p+0FmPQJSgotE9zPQh 3+0A== X-Gm-Message-State: AJIora8uvH8MG29xhmMJWrUd+t15tPS6nKk8DGNSIPJL0fBv4S1zmxwT NDqLsZZJ6xcCdPHmqRt5v3tUFWUMFMJsWiMx9ggvyh/MN7g= X-Google-Smtp-Source: AGRyM1u144KJzOpN3M2kbxt6ohAd19sYKv1R2k+Ogq2KdcKGW8lugexTPR6r9EPWuwZg6DCzNu7YYoBiya0s5TIf58g= X-Received: by 2002:ab0:77d1:0:b0:381:c2f9:cd73 with SMTP id y17-20020ab077d1000000b00381c2f9cd73mr5150244uar.48.1656602766549; Thu, 30 Jun 2022 08:26:06 -0700 (PDT) MIME-Version: 1.0 References: In-Reply-To: From: Billy Tetrud Date: Thu, 30 Jun 2022 08:25:47 -0700 Message-ID: To: Kate Salazar Content-Type: multipart/alternative; boundary="0000000000006f29c505e2abe326" X-Mailman-Approved-At: Fri, 01 Jul 2022 12:42:05 +0000 Cc: Bitcoin Protocol Discussion Subject: Re: [bitcoin-dev] Bitcoin covenants are inevitable X-BeenThere: bitcoin-dev@lists.linuxfoundation.org X-Mailman-Version: 2.1.15 Precedence: list List-Id: Bitcoin Protocol Discussion List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Thu, 30 Jun 2022 15:26:09 -0000 --0000000000006f29c505e2abe326 Content-Type: text/plain; charset="UTF-8" @Alex > The person who obtained greater economic utility from their two transactions. That is not the case. The economic utility gained by their two transactions is probably almost entirely related to something other than bitcoin - the nature of the specific transactions themselves. The value they got from using bitcoin is the value they get from the properties of bitcoin when compared against other competing things in the market (other currencies or payment systems). Bitcoin's ability to finalize quickly, have no counterparty risk, reduced 3rd party middleman fees, and the willingness of that person to transact using bitcoin vs something else, to name a few. My example was intended to make it very clear that the person who held bitcoin over 10 years got more value from bitcoin itself, regardless of who received more economic utility from their chosen transactions. > Billy appeared to be indicating that the frequent movement of coins in itself somehow produced utility I was actually saying the opposite of that. My point, and the point of my example I explained above, was that holders gain quite a bit of value from bitcoin, and so bitcoin's value to its users is not derived solely from transacting. @Kate > Pool operators are free to request larger fees from older utxos You're absolutely right that whoever creates their block template can decide how to include transactions. However, by doing such non-standard things, they would lose money, so they are not incentivized to do that. Keagan's point was about who pays for bitcoin's security. Right now it is only transactors. And yet transactors are not the only actors who gain value from the use of bitcoin. As such, the payment for bitcoin's security is not spread proportionally to those who get value from the use of bitcoin. It would certainly be ideal if bitcoin's security was paid for by each actor proportionally to how much value they get from using bitcoin. Worth it? Questionable. But ideal, certainly. You aren't going to get to that ideal by expecting individual miners to altruistically lose money to enact that ideal. On Wed, Jun 29, 2022 at 3:44 AM Kate Salazar < mercedes.catherine.salazar@gmail.com> wrote: > Hey > > On Tue, Jun 28, 2022 at 10:43 AM Billy Tetrud via bitcoin-dev < > bitcoin-dev@lists.linuxfoundation.org> wrote: > >> @Eric >> > People who transact are realizing the benefit of money - the avoidance >> of barter costs. >> >> I'm very confident you're incorrect that holders don't receive any >> benefit and you're certainly not correct that every spend is receiving the >> same benefit. As I'm sure you're aware, one of the primary components of a >> currency's value and purpose is as a store of value. Storing value happens >> while you're holding it, not while you're spending it. Consider the >> following two scenarios: one person holds onto 10 bitcoin for 10 years and >> then spends those 10 bitcoins in some way in 2 transactions. Another person >> spends 4 bitcoins to buy something, then sells it for 6 bitcoins, and then >> buys something else for that 6 bitcoins and then never acquires any bitcoin >> for 10 years. >> >> Both people spent 10 bitcoins over 2 transactions. Over that 10 year >> period, only one of those people utilized bitcoin's utility as a store of >> value. Who benefited more from their use of bitcoin? >> >> > Those who never transact, never realize any benefit. >> >> While that's true, its not relevant and basically a red herring. You need >> to compare those who transact often and rarely hold, to those who hold a >> lot but rarely transact. Its not helpful to consider those who throw their >> bitcoin into a bottomless pit and never retrieve them. >> >> On an idealistic level, I agree with Keagan that it would make sense to >> have "a balance of fees to that effect". I think doing that would be >> technically/economically optimal. However, I think there is an enormous >> benefit to having a cultural aversion to monetary inflation and the >> consequences of convincing the bitcoin community that inflation is ok could >> have unintended negative consequences (not to mention how difficult >> convincing the community would be in the first place). There's also the >> economic distortion that inflation causes that has a negative effect which >> should also be considered. The idea of decaying utxo value is interesting >> to consider, but it would not solve the economic distortion that >> monetary inflation causes, because that distortion is a result of monetary >> devaluation (which decaying utxos would be a form of). Then again, maybe in >> this case the distortion of inflation would actually be a correction - >> correcting for the externality of benefit received by holders. I'm >> stream-of-consciousnessing a bit, but anyways, I suspect its not worth the >> trouble to perfect the distribution of bitcoin blockchain security costs to >> include holders. Tho, if I were to go back in time and influence how >> bitcoin was designed, I might advocate for it. >> > > Pool operators are free to request larger fees from older utxos, or from > all utxos, or from newer utxos, at their judgement, looking at the > blockspace demand census and at what the other pool operators are doing. > This is not consensus, it's policy. It's not a technology problem, it's > solved above in the social layer. > > If this kind of problem torments anyone, maybe miner decentralization hard > forks are worth looking at, some already exist. > > >> >> @Peter >> > demurrage and inflation have identical economic properties. >> >> The distortion of incentives is identical, however there is also the >> effect it has on a currency's property as a useful unit of account. >> Decaying utxos would mean that it would contribute substantially less to >> market prices needing to change. I suspect this effect would be bordering >> on negligible tho. >> >> On Thu, Jun 23, 2022 at 2:17 PM Peter Todd via bitcoin-dev < >> bitcoin-dev@lists.linuxfoundation.org> wrote: >> >>> On Tue, Jun 21, 2022 at 01:00:07PM -0600, Keagan McClelland via >>> bitcoin-dev wrote: >>> > > The PoW security of Bitcoin benefits all Bitcoin users, proportional >>> to >>> > the >>> > value of BTC they hold; if Bitcoin blocks aren't reliably created the >>> value >>> > of >>> > *all* BTC goes down. It doesn't make sense for the entire cost of that >>> > security >>> > to be paid for on a per-tx basis. And there's a high chance paying for >>> it >>> > on a >>> > per-tx basis won't work anyway due to lack of consistent demand. >>> > >>> > FWIW I prefer the demurrage route. Having something with finite supply >>> as a >>> > means of measuring economic activity is unprecedented and I believe >>> deeply >>> > important. I'm sympathetic to the argument that the security of the >>> chain >>> > should not be solely the responsibility of transactors. We realize the >>> > value of money on receipt, hold *and* spend and it would be >>> appropriate for >>> > there to be a balance of fees to that effect. While inflation may be >>> > simpler to implement (just chop off the last few halvings), I think it >>> > would be superior (on the assumption that such a hodl tax was >>> necessary) to >>> > keep the supply fixed and have people's utxo balances decay, at least >>> at >>> > the level of the UX. >>> >>> Demurrage makes protocols like Lightning much more complex, and isn't >>> compatible with existing implementations. While demurrage could in >>> theory be >>> implemented in a soft-fork by forcing txs to contain an output with the >>> demurrage-taxed amount, spending to a pool of future mining fees, I >>> really >>> don't think it's practical to actually do that. >>> >>> Anyway, demurrage and inflation have identical economic properties. >>> They're >>> both a tax on savings. The only difference is the way that tax is >>> implemented. >>> >>> -- >>> https://petertodd.org 'peter'[:-1]@petertodd.org >>> _______________________________________________ >>> bitcoin-dev mailing list >>> bitcoin-dev@lists.linuxfoundation.org >>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev >>> >> _______________________________________________ >> bitcoin-dev mailing list >> bitcoin-dev@lists.linuxfoundation.org >> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev >> > --0000000000006f29c505e2abe326 Content-Type: text/html; charset="UTF-8" Content-Transfer-Encoding: quoted-printable
@Alex
> The person who obtained greater economi= c utility from their two transactions.

That is= not the case. The economic utility gained by their two transactions is pro= bably almost entirely related to something other than bitcoin - the nature = of the specific transactions themselves. The value they got from using bitc= oin is the value they get from the properties of bitcoin when compared agai= nst other competing things in the market (other currencies or payment syste= ms). Bitcoin's ability to finalize quickly, have no counterparty risk, = reduced 3rd party middleman fees, and the willingness of that person to tra= nsact using bitcoin vs something else, to name a few.=C2=A0

<= /div>
My example was intended to make it very clear that the person who= held bitcoin over 10 years got more value from bitcoin itself, regardless = of who received more economic utility from their chosen transactions.=C2=A0=

> Billy appeared to be indicating that th= e frequent movement of coins in itself somehow produced utility
<= br>
I was actually saying the opposite of that. My point, and the= point of my example I explained above, was that holders gain quite a bit o= f value from bitcoin, and so bitcoin's value to its users is not derive= d solely from transacting.=C2=A0

@Kate
> Pool operators are free to request larger fees from older utx= os

You're absolutely right that whoever create= s their block template can decide how to include transactions. However, by = doing such non-standard things, they would lose money, so they are not ince= ntivized to do that. Keagan's point was about who pays for bitcoin'= s security. Right now it is only transactors. And yet transactors are not t= he only actors who gain value from the use of bitcoin. As such, the payment= for bitcoin's security is not spread proportionally to those who get v= alue from the use of bitcoin. It would certainly be ideal if bitcoin's = security was paid for by each actor proportionally to how much value they g= et from using bitcoin. Worth it? Questionable. But ideal, certainly. You ar= en't going to get to that ideal by expecting individual miners to altru= istically lose money to enact that ideal.

On Wed, Jun 29, 2022 at 3:44= AM Kate Salazar <mercedes.catherine.salazar@gmail.com> wrote:
Hey=

= On Tue, Jun 28, 2022 at 10:43 AM Billy Tetrud via bitcoin-dev <bitcoin= -dev@lists.linuxfoundation.org> wrote:
@Eric
>=C2= =A0 People who transact are realizing the benefit of money - the avoidance of b= arter costs.=C2=A0

I'm very confident you're inc= orrect that=C2=A0holders=C2=A0don't receive any benefit and you're = certainly not correct that=C2=A0every=C2=A0spend is receiving the same bene= fit. As I'm sure you're aware, one of the primary components of a c= urrency's value and purpose is as a store of=C2=A0value. Storing value = happens while you're holding it, not while you're spending it. Cons= ider the following two scenarios: one person holds onto 10 bitcoin for 10 y= ears and then spends those 10 bitcoins in=C2=A0some way in 2 transactions. = Another person spends 4 bitcoins to buy something, then sells it for 6 bitc= oins, and then buys something else for that 6 bitcoins and then never acqui= res any bitcoin for 10 years.=C2=A0

Both people sp= ent 10 bitcoins over 2 transactions. Over that 10 year period, only one of = those people utilized bitcoin's utility as a store of value. Who benefi= ted more from their use of bitcoin?=C2=A0

> Tho= se who never transact, never realize any benefit.

= While that's true, its not relevant and basically a red herring. You ne= ed to compare those who transact often and rarely hold, to those who hold a= lot but rarely transact. Its=C2=A0not helpful to consider those who throw = their bitcoin into a bottomless pit and never retrieve them.

=
On an idealistic level, I agree with Keagan that it would make s= ense to have "a balance of fees to that effect". I think doing th= at would be technically/economically optimal. However, I think there is an = enormous benefit to having a cultural aversion to monetary inflation and th= e consequences of convincing the bitcoin community that inflation is ok cou= ld have unintended negative consequences (not to mention how difficult conv= incing the community would be in the first place). There's also the eco= nomic distortion that inflation causes that has a negative effect which sho= uld also be considered. The idea of decaying utxo value is interesting to c= onsider, but it would not solve the economic distortion that monetary=C2=A0= inflation causes,=C2=A0because that=C2=A0distortion is a result of monetary= devaluation (which decaying=C2=A0utxos would be a form of). Then again, ma= ybe in this case the distortion of inflation would actually be a correction= - correcting for the externality of benefit received by holders. I'm s= tream-of-consciousnessing=C2=A0a bit, but anyways, I suspect its not worth = the trouble to perfect the distribution of bitcoin blockchain security cost= s to include holders. Tho, if I were to go back in time and influence how b= itcoin was designed, I might advocate for it.
=
Pool operators are free to request larger fees from older ut= xos, or from all utxos, or from newer utxos, at their judgement, looking at= the blockspace demand census and at what the other pool operators are doin= g. This is not consensus, it's policy. It's not a technology proble= m, it's solved above in the social layer.

If t= his kind of problem torments anyone, maybe miner decentralization hard fork= s are worth looking at, some already=C2=A0exist.
=C2=A0

@Peter
> demurrage and inflation have identical ec= onomic properties.=C2=A0

The distortion of incenti= ves is identical, however there is also the effect it has on a currency'= ;s property as a useful unit of account. Decaying utxos would mean that it = would contribute substantially less to market prices needing to change. I s= uspect this effect would be bordering on negligible tho.=C2=A0
<= br>
On Thu,= Jun 23, 2022 at 2:17 PM Peter Todd via bitcoin-dev <bitcoin-dev@lists.l= inuxfoundation.org> wrote:
On Tue, Jun 21, 2022 at 01:00:07PM -0600, Keagan McClella= nd via bitcoin-dev wrote:
> > The PoW security of Bitcoin benefits all Bitcoin users, proportio= nal to
> the
> value of BTC they hold; if Bitcoin blocks aren't reliably created = the value
> of
> *all* BTC goes down. It doesn't make sense for the entire cost of = that
> security
> to be paid for on a per-tx basis. And there's a high chance paying= for it
> on a
> per-tx basis won't work anyway due to lack of consistent demand. >
> FWIW I prefer the demurrage route. Having something with finite supply= as a
> means of measuring economic activity is unprecedented and I believe de= eply
> important. I'm sympathetic to the argument that the security of th= e chain
> should not be solely the responsibility of transactors. We realize the=
> value of money on receipt, hold *and* spend and it would be appropriat= e for
> there to be a balance of fees to that effect. While inflation may be > simpler to implement (just chop off the last few halvings), I think it=
> would be superior (on the assumption that such a hodl tax was necessar= y) to
> keep the supply fixed and have people's utxo balances decay, at le= ast at
> the level of the UX.

Demurrage makes protocols like Lightning much more complex, and isn't compatible with existing implementations. While demurrage could in theory b= e
implemented in a soft-fork by forcing txs to contain an output with the
demurrage-taxed amount, spending to a pool of future mining fees, I really<= br> don't think it's practical to actually do that.

Anyway, demurrage and inflation have identical economic properties. They= 9;re
both a tax on savings. The only difference is the way that tax is implement= ed.

--
http= s://petertodd.org 'peter'[:-1]@petertodd.org
_______________________________________________
bitcoin-dev mailing list
= bitcoin-dev@lists.linuxfoundation.org
https://lists.linuxfoundation.org/mail= man/listinfo/bitcoin-dev
_______________________________________________
bitcoin-dev mailing list
= bitcoin-dev@lists.linuxfoundation.org
https://lists.linuxfoundation.org/mail= man/listinfo/bitcoin-dev
--0000000000006f29c505e2abe326--