Nostr Web Client

If it becomes too expensive to transact on chain, and it becomes too expensive to transact on chain in sufficient fashion to run a censorship resistant L2 network, then bitcoin literally becomes digital gold: totally centralized.

Bitcoin is far from condemned to such a future. But it needs work. And balance to keep a network running…miners need a reason to mine and users need to be able to transact at prices reasonable for the value onchain transactions provide. But new software needs to be written to make the best use of block space and that work is under way.

Reply to this note

Please Login to reply.

Discussion

Neal 8mo ago

I wonder if late stage adoption of bitcoin makes our current understanding of mining incentives look stupid.

right now there are big centralized mining companies trying to make profit. say there are no more block rewards and fees are so low u can’t make profit.

does that mean there is no incentive to mine? no

you mine so you still have a functional network, so your economic energy doesn’t just evaporate into the ether.

i’d rather have 4 billion bit axes than a handful of for profit mining companies.

i think mining completely decentralizes to match the decentealIation of nodes

nicnym 8mo ago

None of these arguments ever consider the difficulty adjustment. Why?

It is literally impossible for Bitcoin to be “unprofitable” to mine.

Tauri 8mo ago

Bitcoin can be unprofitable in the window between difficulty adjustments (~ 2 weeks). Miners know that and may choose to mine at a loss while anticipating correction to the upside or appreciation of their coins.

Neal 8mo ago

I hear you on the importance of the difficulty adjustment. Nothing in btc works without it.

I think the reason it doesn’t warrant much attention here is there are no guarantees.

A company could hit a bad streak and not get a block for a long while, and the demand for the space on any particular block could be higher or lower. There is no fundamental principle within mining to leverage other than decentralization.

Asics get old, cheaper stranded energy gets pushed out. Mining might be the most competitive industry ever. it’s blood sport, and there will be casualties who can’t make bottom line

₿oniz23⚡️🏴‍☠️🇮🇹 8mo ago

Let's hope it's like that 🤷‍♂️

MethFred 8mo ago

a high fee environment in Bitcoin isn't sustainable. we're talking 100 sat/vB or more. that's about 30k sats for simple txs.

Dr. Bitcoin, MD 8mo ago

I totally agree. Except high is relative to the number of payments a single on chain transaction represents. $1000 tx fee is totally fine if it represents 10,000 decentralized censorship transactions on an L2.

I do think the old days of individuals using on chain bitcoin for P2P transactions will never scale to incentivize mining while remaining censorship resistant and decentralized. But this has been recognized by the smart kids since like day 2 of bitcoin. Hal instantly saw this and suggested something like banks to solve the scaling problem, but I think lightning and other L2s will make on chain transactions worth the cost because they compress many payments into a single bitcoin transaction.

MethFred 8mo ago

a simple rule of thumb i use: if there's spam, it's cheap