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Hmmm, interesting take on how it plays out. My view has been the same problem you describe, but that there's no solution, that network security reduces as it becomes less profitable and with it, value of the network and therefore the price of coins. But, if a consensus can form as that happens to incentivize use of the network for transacting, you're right. I think though that that consensus will be difficult to accomplish, you'd need bigger blocks for that, you'd need an uncapped supply for that and you'd need all the stakeholders betting on second layer solutions to get screwed. Seems like a long shot to me, that's an understatement.

Eric FJ 🪬⚡️ 11mo ago

Very difficult to achieve yes. Not likely to succeed in early iterations. Maybe even an impossible balance to strike… nobody knows.

However bigger blocks not necessary. Layer 2s have base layer settlement needs from time to time which ultimately drive transaction value on the base chain up as they are used more.

Uncapped supply wouldn’t help… I think. Firstly I don’t think that it ever gets out of the first part of the game. Then also miners are never totally forced to coordinate economic activity and they are likely the biggest player in the endgame.

It might be an intractable problem. Just some faithful thoughts.

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mister_monster 11mo ago

My thoughts on the supply cap are basically that hodlers are free riders and so as long as that remains network security will trend downward after some threshold is reached. Haven't done the math on that threshold, so I couldn't give you an estimate of when.

nostr:nevent1qqswuw0sxp59ar2x2hs77dq2gx32wmdarjx7dmv2gxxfe94wxyzakuqpz4mhxue69uhhyetvv9ujuerpd46hxtnfduhsygxaypt42mug5ex2e5r46qrlr0jgp72fey0ad5xy6kfm4nxm924augpsgqqqqqqs99y3hz

I'm not the only person that thinks this, and in fact this was a well studied problem well before I came to understand it. Usually it's framed as "the miners need to be paid" and as a block size problem but actually it's more a problem with who pays and the incentives that emerge from that.

As far as layer 2s handling settlement, that could suffice, but the problem then is, a miner needs to be paid whether from a thousand small transactions or one big one. If everyone is settling on lightning or something those close transaction fees need to be large, which means channels need to be large, which is a centralizing force in lightning. We already see most users using lightning with large liquidity channel prividers, increased fees to open and close channels will make that problem worse, and would apply to any layer 2 architecture whereas the centralizing trend we see on lightning is specific to it's architecture.

I'm happy to see a die hard Bitcoiner willing to talk about these things, usually but not always I get dismissed when I bring this stuff up. It is a real problem that needs a solution if Bitcoin is to succeed.

Eric FJ 🪬⚡️ 11mo ago

Blabbing responses from mobile:

Yeah it’s unfortunate more Bitcoiners won’t talk about it, because debate/discussion around it is really the only way to get to solutions. Better than burying heads in the NGU sand, but maybe less cozy.

My left curve approach to the problem is to build something that increases transaction demand.

Really interesting point around Lightning centralization. That’s a tough one. The write up you attached is also great- I’m going to look more into XMR to educate myself.

Other things I’ve seen brought into the conversation are the many ways the BTC block space might be valuable long term, like for example the concept of an open+immutable time-chain is interesting. Then there’s innovations that might happen thru a soft fork but I’m not counting on that ha ha…

I’ll maintain the naive belief for now that there’s a possible sustainable path to global BTC adoption but it requires a lot of chaos and compromise to get there. Using energy as money brings so many awesome hopeful possibilities into play… maybe this works with other PoW chains too who knows.

The people trying to corner the market are dumb, and will see they’ve shot themselves in the foot eventually.

On the whole these are all chaotic technologies which are going to rip a new one into the current system. All attempts to control it without building something useful for others seem to be stupid- which I love about these protocol designs. Can’t put these genies back.

My base case is at least some chaos before whatever stable era comes next. Maybe I need to hedge more? We’ll see. Thx for the insights.