Received: from sog-mx-2.v43.ch3.sourceforge.com ([172.29.43.192] helo=mx.sourceforge.net) by sfs-ml-2.v29.ch3.sourceforge.com with esmtp (Exim 4.76) (envelope-from ) id 1YrqZa-0002Ki-6F for bitcoin-development@lists.sourceforge.net; Mon, 11 May 2015 16:28:54 +0000 X-ACL-Warn: Received: from relay5-d.mail.gandi.net ([217.70.183.197]) by sog-mx-2.v43.ch3.sourceforge.com with esmtps (TLSv1:AES256-SHA:256) (Exim 4.76) id 1YrqZY-0002wH-Ly for bitcoin-development@lists.sourceforge.net; Mon, 11 May 2015 16:28:54 +0000 Received: from mfilter42-d.gandi.net (mfilter42-d.gandi.net [217.70.178.172]) by relay5-d.mail.gandi.net (Postfix) with ESMTP id 92B5141C0A5 for ; Mon, 11 May 2015 18:28:46 +0200 (CEST) X-Virus-Scanned: Debian amavisd-new at mfilter42-d.gandi.net Received: from relay5-d.mail.gandi.net ([IPv6:::ffff:217.70.183.197]) by mfilter42-d.gandi.net (mfilter42-d.gandi.net [::ffff:10.0.15.180]) (amavisd-new, port 10024) with ESMTP id x0NhDIJOz5YT for ; Mon, 11 May 2015 18:28:45 +0200 (CEST) X-Originating-IP: 85.180.163.88 Received: from [192.168.1.3] (x55b4a358.dyn.telefonica.de [85.180.163.88]) (Authenticated sender: thomasv@electrum.org) by relay5-d.mail.gandi.net (Postfix) with ESMTPSA id 137DB41C0A9 for ; Mon, 11 May 2015 18:28:44 +0200 (CEST) Message-ID: <5550D8BE.6070207@electrum.org> Date: Mon, 11 May 2015 18:28:46 +0200 From: Thomas Voegtlin User-Agent: Mozilla/5.0 (X11; Linux x86_64; rv:31.0) Gecko/20100101 Thunderbird/31.6.0 MIME-Version: 1.0 To: Bitcoin Development Content-Type: text/plain; charset=utf-8 Content-Transfer-Encoding: quoted-printable X-Spam-Score: 0.0 (/) X-Spam-Report: Spam Filtering performed by mx.sourceforge.net. See http://spamassassin.org/tag/ for more details. X-Headers-End: 1YrqZY-0002wH-Ly Subject: [Bitcoin-development] Long-term mining incentives X-BeenThere: bitcoin-development@lists.sourceforge.net X-Mailman-Version: 2.1.9 Precedence: list List-Id: List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Mon, 11 May 2015 16:28:54 -0000 The discussion on block size increase has brought some attention to the other elephant in the room: Long-term mining incentives. Bitcoin derives its current market value from the assumption that a stable, steady-state regime will be reached in the future, where miners have an incentive to keep mining to protect the network. Such a steady state regime does not exist today, because miners get most of their reward from the block subsidy, which will progressively be removed. Thus, today's 3 billion USD question is the following: Will a steady state regime be reached in the future? Can such a regime exist? What are the necessary conditions for its existence? Satoshi's paper suggests that this may be achieved through miner fees. Quite a few people seem to take this for granted, and are working to make it happen (developing cpfp and replace-by-fee). This explains part of the opposition to raising the block size limit; some people would like to see some fee pressure building up first, in order to get closer to a regime where miners are incentivised by transaction fees instead of block subsidy. Indeed, the emergence of a working fee market would be extremely reassuring for the long-term viability of bitcoin. So, the thinking goes, by raising the block size limit, we would be postponing a crucial reality check. We would be buying time, at the expenses of Bitcoin's decentralization. OTOH, proponents of a block size increase have a very good point: if the block size is not raised soon, Bitcoin is going to enter a new, unknown and potentially harmful regime. In the current regime, almost all transaction get confirmed quickly, and fee pressure does not exist. Mike Hearn suggested that, when blocks reach full capacity and users start to experience confirmation delays and confirmation uncertainty, users will simply go away and stop using Bitcoin. To me, that outcome sounds very plausible indeed. Thus, proponents of the block size increase are conservative; they are trying to preserve the current regime, which is known to work, instead of letting the network enter uncharted territory. My problem is that this seems to lacks a vision. If the maximal block size is increased only to buy time, or because some people think that 7 tps is not enough to compete with VISA, then I guess it would be healthier to try and develop off-chain infrastructure first, such as the Lightning network. OTOH, I also fail to see evidence that a limited block capacity will lead to a functional fee market, able to sustain a steady state. A functional market requires well-informed participants who make rational choices and accept the outcomes of their choices. That is not the case today, and to believe that it will magically happen because blocks start to reach full capacity sounds a lot like like wishful thinking. So here is my question, to both proponents and opponents of a block size increase: What steady-state regime do you envision for Bitcoin, and what is is your plan to get there? More specifically, how will the steady-state regime look like? Will users experience fee pressure and delays, or will it look more like a scaled up version of what we enjoy today? Should fee pressure be increased jointly with subsidy decrease, or as soon as possible, or never? What incentives will exist for miners once the subsidy is gone? Will miners have an incentive to permanently fork off the last block and capture its fees? Do you expect Bitcoin to work because miners are altruistic/selfish/honest/caring? A clear vision would be welcome.