Thanks for the interesting analysis.

I agree with you that there's a counterbalancing force to censorship, that the economic value of sanctioned tx's go up, which eventually may incentivize someone to process those tx's.

Still, I would worry that it takes so long for that to happen, or the fees get so high, that Bitcoin becomes practically unusable for sanctioned addresses. Thus forcing sanctioned individuals to use another coin, or use fiat, to do conduct their business.

I think the solution to censoring is going to be some combination of legal/geographical decentralization, and privacy/anti-kyc tech.