Post-2140 Mining Incentives \ stacker news ~bitcoin

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5016 sats \ 7 comments \ @Majjin 22 Apr 2022 bitcoin

Occasionally I hear people worrying about how mining will be incentivized after the mining subsidy reaches zero in 2140. Its a valuable discussion and shows extremely low time preference thinking. We want to make sure that Bitcoin survives and available for future generations to use. However, I also think that this worry is a result of the Keynesian/MMT world we currently live in. "If there's not at least a little bit of inflation, how do miners get reimbursed for their work?"

Miners will earn sats from fees is the typical answer. Then the conversation becomes a debate on whether there will be enough fee pressure and transaction volume on the main chain to sustain miners. Some people aren't convinced that fees will be enough. Monero fell to this line of thinking and implemented "tail emissions" (aka permanent inflation) into their monetary policy.

I think that most people in this space that are concerned with this issue don't think allowing more than 21 million coin is the answer. It would not longer be Bitcoin if we made that change. Some advocate for more general smart contracts on the main chain. Others are developing other use cases for transactions on the network. I believe that ensuring future fee pressure is one of the reasons why the folks over at Suredbits are developing their DLC product.

I recently listened to the "Beyond Bitcoin Maximalism" episode of the What Bitcoin Did podcast. This is one of the issues raised by the guest in the show. I want to give my take on this issue. I think that mining incentives post-2140 will be taken care of for the following reasons:

Purchasing power of the fees earned by miners will be much higher than it is today - If Bitcoin survives 100+ years, it will be because we found it valuable enough to keep it around and continue using it. No network stays in continuous use for that long and doesn't have a sizable effect on the economy. For this reason, I believe that a single satoshi will have significantly higher purchasing power than it does today. People will spend their sats. No one's time preference is zero.
The main chain will act as a base layer - Layers built on top of Bitcoin does remove transactions from the main chain. However, in order to have a reliable, relatively trustless secondary layer, it must interact with the base layer through transactions. Lightning currently uses two transactions to offload volume from the main chain. Federated Chaumian mints require at least one transaction to mint e-cash. There will be fee pressure and transaction volume coming from these secondary layers interacting with the main chain.
Other use cases for transactions and the timechain will be used - The main chain has amazing properties that will encourage other types of transactions. This will especially be the case if the bulk of monetary transactions happen off-chain. Its an amazing, decentralized time keeper and permanent record that leverages cryptographic primitives. The possibilities are endless! Here are a couple of ideas off the top of my head:

Using a series of Taro transactions as a sort of decentralized, authoritative DNS
Transactions for property and large purchases could be done on the main chain so that the properties of the house or piece of land could be encoded into the transaction itself (either via a taproot tree or OP return). Essentially you have a cryptographically provable land deed or house title.

Miners are a flexible, portable energy buyer of last resort - We are just beginning to scratch the surface of what miners could do for the energy industry. Paying energy generators for wasted power and fuel, subsidizing large energy projects in a voluntary manner, and making use of stranded energy sources are just a few ways miners and energy produces can work together. I believe that Bitcoin mining will become an essential part of the energy industry in the next couple decades. The two industries may even fuse. I think that what little value energy companies get from fees will be better than getting nothing for resources that would otherwise be wasted. So this answers the question of "who will mine in a low fee environment?".
Soft forks unlock new use cases for on-chain transactions - The Taproot upgrade has proven to be more flexible than I thought. Taro and DLCs are probably just the tip of the iceberg. Segwit alone enabled the lightning network. If we get another significant soft fork within the next hundred years, it could enable new use cases and transaction types for the main chain that are worth using.

Let me know if I've gotten anything wrong or how my assumptions are faulty. If anyone has additional reasons why mining past 2140 will continue, don't hesitate to comment!

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101 sats \ 1 reply \ @shyfire 22 Apr 2022

Hmm, not sure I agree with your first point. There is a timeline where Bitcoin adoption is only marginal AND it's still around 100+ years. In this scenario mempool is not sufficiently congested and a 51% attack becomes trivial. There are multiple possible scenarios in this timeline, but for example there could be widespread regulation that prevents using Bitcoin as money, for example. So only authorized entities could buy and sell and that's all you could do with it. However I'm doing my absolute best to minimize the probably of this outcome and it's a worst case of sorts.

Some more comments around this you might find useful: #18569

1 sat \ 0 replies \ @Majjin OP 22 Apr 2022

That was a great thread, thanks!

I think that the opponents of Bitcoin are definitely trying to make it a zombified, neutered version of itself.

I'm sure we're past the point of most western nations outlawing it barring some extreme circumstances. Too many people have their bread and butter in Bitcoin. The crypto industry utterly depends on Bitcoin. However, a viable attack vector would be to regulate it into irrelevance and unprofitability. Once that happens, you're right that a 51% attack can become a very real concern.

A couple things need to happen in order to neutralize this attack vector.

One has to do with point #4 in my post. If mining can manage to become a staple in the energy sector, there can be enough mining in a low fee environment to prevent any serious 51% attacks. Governments would also become incentivized to protect Bitcoin because protecting Bitcoin protects the energy sector, and by extension the economy. Then again, regulators can always try to stop miners from collaborating with energy producers. This can happen even if the benefits of mining are clear and evident. There's a lot of moving pieces and incentives to this.

The other thing adherence to the cypherpunk ethos. Building more easy to use privacy tools, making sensible defaults, encouraging self-custody, and more will all be required. Even civil disobedience will be required from Bitcoiners at some point. A lot of this is social layer, messaging stuff which can be tricky. I think we're doing a decent job so far, but we need to up our game. Especially when it comes to privacy, anonymity, and self-custody.

100 sats \ 1 reply \ @AncapHodl 22 Apr 2022

Good write up. I just had to make one small point on your opening paragraph. I don't consider this discussion in itself to necessarily show low time preference thinking. If this is a problem, it needs to be solved or discussed for today and tomorrow just as much as 2140, the logic is simple and as follows. If for whatever reason Bitcoin stopped being viable in 2140 for a reason that we can predict today, then it stops being viable at 2140 - x year too. No one is going to want a coin if we can show that the network will stop working at some point in future, so if people can see what's going to happen then they won't want it the day before the final bitcoin is mined, which means that people the day before that day will also not want it, which continues until we get back to the day we're at today.

0 sats \ 0 replies \ @Majjin OP 22 Apr 2022

Very good point. The whole reason why Bitcoin was even invented was because our current system is unsustainable. If we present an alternative, we need to be sure it will last. So it is as much a problem for today as it is for people in 2140.

10 sats \ 1 reply \ @02d10975a1 22 Apr 2022

This question becomes relevant way before 2140. If bitcoin price doesn't double between halvings, it means that total hash power will begin to decrease, if there aren't enough tx fees to cover the difference.

Let's see, $100k -> $200k -> $400k -> $800k -> $1600k -> $3200k -> $6400k -> $12800k. That's 7 halvings = 28 years. It's not possible to predict the price, but it won't double every 4 years forever.

1 sat \ 0 replies \ @Majjin OP 22 Apr 2022

I 100% agree with you on this becoming relevant before 2140. @AncapHodl made a great point about this.

You're also right that the fiat price can't double every halving forever. This is my pet theory but I think the market cap will rise until it reaches a significant portion of the world's economic value, then it will stop increasing exponentially and just grow proportionally with the economy.

However, I don't think that the price needs to double every halving in order to maintain or increase the hash rate. It may not even be the case that it must outpace the economy to be worth mining. That's like saying the price of gold needs to grow exponentially in order to continue to be worth mining. The purchasing power simply needs to be enough to pay for the miner's expenses with at least a little profit left over.

0 sats \ 0 replies \ @02174b3c39_lntxbot 24 Apr 2022

Bitcoin needs mining, anyone can do it, it doesn't need specialised large scale miners.

By 2140 the value of bitcoin and its dissemination will be such that everyone will mine as part of their participation in the network. Governments, utilities, churches, and individuals will mine, and it will be provided as a public good, because it is.