235 sats \ 12 replies \ @elvismercury 16 Mar \ on: Bitcoin is completely changing how people remit money. (And that's a good thing) bitcoin
From time to time I wonder if we'll get to a point where miners will form cartels and charge a percentage of tx to include them in blocks. This seems absurd right now -- even paying any fees at all seems unnatural to many. And economic theory would seem to preclude it ('mining is a race to the bottom.')
But of course economic theory has profoundly failed to describe what happens in the real world for as long as economic theories have existed. And so I continue to wonder. I expect this will seem not absurd at all when a) the block reward has become negligible, and if b) real btc economic activity becomes substantial.
Economic theory says that collusion or cartels are temporary because one member will cheat
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And this is what usually happens. However, OPEC has been around for a pretty long time now. I'm sure some cheating goes on, but it hasn't been enough to dissolve the cartel.
With respect to bitcoin miners, it's so decentralized and relatively easy to enter that I don't see cartels being feasible.
If anything, I'd expect to see many operating at a net loss much of the time.
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OPEC today has more members yet is less powerful than in 1973 or 1979.
A big reason is greater oil production in non OPEC countries such as USA.
China tried to ban bitcoin mining ⛏️ in 2021 but miners relocated elsewhere.
A similar attempt to ban mining in USA with a 30 percent energy tax proposal.
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The US ramping up production is the other reason cartels tend to fail: an inability to prevent outside competition.
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When we assume the block reward will become negligible what we're actually doing is projecting out today's purchasing power of the reward and concluding it's tiny.
I think that's the wrong way to think about it. Even though the reward will eventually be measured in sats. Those sats should be worth a lot more in purchasing power terms.
Currently the reward is 6.25 BTC. Using the fiat price as a proxy for purchasing power we can conclude that's worth about $400k. Compare that to the cost of electricity and we get the purchasing power.
What happens in a few halvings when the block reward is only 0.78 BTC? If we assume the purchasing power remains the same we conclude the reward is negligible. But it's a different story if 0.78 BTC can still buy the same $400k worth of electricity (in today's terms)
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Agreed, this is a crucial question.
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Genius. Although this doesn't solve the problem of, "it's cheaper to buy spot than to mine", but still good to remember
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Not sure I understand. There are already fees to get your transaction into a block. That's how the system works.
It's not percentage though. Also that would be considered an attack on the network.
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You can imagine a miner saying "Oh, you want to move a billion dollars? That's going to cost you more than $3." If there aren't many miners, collusion to enforce price floors does not seem infeasible. It occurs in other industries, like oil and pharmaceuticals, for instance.
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Just like you could imagine whoever needs to move 1 billion dollars would have a decent hashrate so as to not being taken hostage.
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It's an imaginable thing; but having to own your own hashrate to transmit money would be a wholly new paradigm, and is nearly isomorphic to simply paying the ransom.
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Agreed, this is a new paradigm. My prediction is that nation states, corporations, central banks, high net worth individuals etc will all participate in mining, in order to avoid censorship or attacks on consensus rules. Increasing decentralisation further as a result. Like clockwork.
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