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I was just reflecting on Peter Todd's argument in [1] and thinking what are the realistic possible endstates for Bitcoin in these terms.

The first is along the lines of what Peter is implicitly advocating: adding a tail emission with, asymptotically, a fluctuating supply (because loss rates will fluctuate, for whatever reason). Note "fluctuating" does actually mean it will sometimes go down as well as sometimes go up (though that won't be measurable). Read the article carefully to get the point; if you're not comfortable with first order differential equations, no worries, he explains the point after writing the math. And if you still don't get it, ask me, I can explain.

The second possible endstate is "fuck that" and supply endlessly goes down, *but* we have a mechanism to hard/soft fork such that we divide sats into smaller and smaller units. I think this is what a lot of people hope will happen.

The third one is the funny one: all software changes end (ossification) but supply keeps going down. Sats are worth 10 squillion dollars, but at some point, nobody has any any more.

(of course in reality a fourth option, which we can't envisage, is what will actually happen, but where's the fun in that).

[1] https://petertodd.org/2022/surprisingly-tail-emission-is-not-inflationary

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Discussion

VOLKER - Voice Of Logic Knowledge Experience & Responsibility 7mo ago

I don't see how the third scenario could ever to happen. If Sats are extremely valuable, people are going to be proportionately careful with their keys.

waxwing 7mo ago

Agree partially, but there has to be a limit to how careful people can be. Entropy eventually wins, even if it's 1 million years.

VOLKER - Voice Of Logic Knowledge Experience & Responsibility 7mo ago

Hmm, true. Even the one "my precioussss" ring was destroyed in the end…

waxwing 6mo ago

Heh, that's a great example.

bogdnk ⚡️ 7mo ago

So having 21 million btc for all eternity is actually a shaky statement!

waxwing 7mo ago

I think, no, it will remain that way. But I'm not 100% sure, maybe 95%. Peter clearly has a different opinion.

bogdnk ⚡️ 7mo ago

This clearly changes the way people and especially beginners view Bitcoin. Also the motivation that hodlers have might also be wrong. People have to be warned about this!

waxwing 7mo ago

I mean I'm with you in that it's a promise that the system should keep. But we are talking about 100yrs++ here, it's impossible to be sure about the distant future.

YODL 7mo ago

Zaps busted? Tried fwiw.

Will have a close read soon, been on my mind lately

Peter Todd 7mo ago

Lolwut?

Dividing the block reward into smaller amounts doesn't fix the problem. It becomes insignificant long before it actually gets to zero.

waxwing 7mo ago

I think you misread or misunderstood me. I wasn't talking about changing emission, only talking about infinitely dividing sats so that in a world where 99.9% of the supply is lost, people could still trade with each other using microsats or whatever.

Peter Todd 7mo ago

Ah.

Though that's still bizarre. The chance of a sat getting lost is inversely proportional to its value. As more supply is lost, the rate of loss per sat will decrease.

We've got plenty of precision. Especially with L2's.

waxwing 7mo ago

Inverse correlation seems plausible, literal inverse proportion seems a bit too specific a claim. I guess that's the biggest problem with your analysis here generally; it's basically impossible to know loss rate, and any assumptions about it are just that. I certainly agree it's interesting to think it through, though, starting from the simplest possible model.

Peter Todd 7mo ago

Obviously loss rate is a function of value. Not some absolute number. That's why we can be sure that the absolute rate of sats loss will diminish over time.

waxwing 7mo ago

It's not completely obvious that the function doesn't have some floor/minimum (I don't think I can get to 10^-9 loss per year even if my life depends on it ... or whatever). But generally I'd cede the point that you're mostly right on that.

Peter Todd 7mo ago

Sats don't just magically decay. If you have a seed phrase that secures 100 sats, the chance of you losing that seed phrase is no different than a seed phrase securing 1,000,000sats _if_ the price is different enough that both seed phrases represent the same value to you.

...and lightning already supports milisats. So precision isn't a big deal.

waxwing 6mo ago

Yes the loss rate is not dependent on the numerical sat value, and *is* dependent (inversely) on the economic value. I agree that my message was blurring and confusing these two clearly correct points.

But that dependence on economic value can't be assumed to be some very simple formula such as inverse linear (l.r. = k/value say), albeit that's a sound starting point. It's true that this has a nice asymptote at l.r. = 0 but we don't know if there is some other asymptote/floor; also, we might *think* that twice as much effort expended (because twice as much value) leads to half the loss rate, but .. does it? i wouldn't be surprised to see some exponential component there. it's fascinating to analyze, but it's hard to do more than theorize, because we have a tremendous and, likely, impossible challenge in trying to measure or predict loss rates.

frphank 7mo ago

> adding a tail emission

Merge PR 29788

https://github.com/bitcoin/bitcoin/pull/29778

YODL 7mo ago

Am I the only person surprised by the conclusion that far enough out, with reasonable assumptions, supply is independent of starting amount and only a function of emission and average loss rate? Not arguing with the math, just surprised.

Of course, I'm sure people have debated the assumption that lambda is constant. I could imagine an argument for it shrinking over time, maybe more careful custodians become the norm, who knows?

Also I guess we're ignoring the related topic of mining environment/incentives between scenarios 1 and 2. Option 2 feels nicer to me, but could be my bias for upholding the spirit of original code.

waxwing 7mo ago

It's definitely not *obvious* that final supply is independent of starting amount, but it makes sense on reflection. If you have a continuous source and sink (imagine a container of water with a inflow and outflow), the end state (level of water) will obviously not depend on the starting amount of water.

For the rest, sure, agreed.

YODL 7mo ago

Oh yeah, i believe i followed intuition as well as math there, just hadn't thought it through before.

Another even more theoretical concern, correct me if I'm wrong, is that utxo set goes to infinity with emissions. No matter how good your storage (assuming atomic encoding is the limit , i guess) number gets unwieldy in a squillion years.

waxwing 6mo ago

Hmm, id guess long term utxo set size doesn't depend on whether emissions continue, but mostly just on number of users and their usage patterns.

I guess you're right in 1 specific scenario, which is already interesting: imagine nobody uses bitcoin at all and we just mine empty blocks. Then it's clearly true.

YODL 6mo ago

Good point, hadn't considered finite population of users. Darn, i really liked having this (admittedly theory-only) leg up on the emission people

YODL 7mo ago

One small nitpick with the analogy, not to be annoying, is that the inflow is constant size while the outflow is proportional to total amount. More like a water balloon with a hole that stretches as you fill up more, and a constant hose filling it up

YODL 7mo ago

Ignore comment 🤦‍♂️

Didn't account for pressure on rate of outflow. Container analogy works i guess 😅

davesoma 7mo ago

The end game will be as depicted by nostr:nprofile1qqsve2jcud7fnjzmchn4gq52wx9agey9uhfukv69dy0v4wpuw4w53nqpz4mhxue69uhkummnw3ezummcw3ezuer9wchssmgd97; we have a few decades to let people swallow the pill about breaking the mindshare narrative of the 21 million cap.

Every religion has been able to change its dogmas over time.

waxwing 6mo ago

I see 3 problems with this pov: (1) since the very earliest days people have constructed apparently watertight arguments as to why bitcoin was guaranteed to fall over and die because of e.g. the halving event (all the first 3 halvings had massive discussions around this). And plenty of others like Emin Gun Sirer "proving" that bitcoin's consensus mechanism was broken and you had to *urgently* sell all your bitcoin (Peter will certainly remember that one! lol). And several others. All of this leads one to be at least *leery* of arguments as to why Bitcoin "has to change its rules".

(2) The second problem is more prosaic: you mention a few decades for this to become a problem, I've seen people arguing it's much more imminent, but in reality anything more than a few years out is almost impossible to predict well. Too many unknowns for now.

(3) On your "religious dogma" angle, this becomes more a matter of opinion, but I suspect it's too deeply embedded in what Bitcoin is (or has become, over many years), to change. Sometimes the "rational" analysis is actually too superficial. Bitcoin's value is intimately tied to its unchangeability and verifiability on multiple angles: cleartext amounts (dumb from a "ecash" perspective, as many old guard cypherpunks and cryptographers agree), fixed supply (dumb from an economic analysis), slow and small data throughput (dumb from a businessman's perspective). All of these serve to create a very heavy but very pristine kind of thing. I suspect choosing a tail emission based on Peter's/monero's line of thinking, and acting on it, will not be viable consensus-wise, even decades in the future, but as per (2), who the fuck knows :)