In order for the asic runtime on one chain (bitcoin), to be worth some other asic runtime on some other chain (presumably grin), the two chains would probably have nearly distinct utility.
Whoever this was, great answer.
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It was written by a very cool community member (not me, lol) and I very much appreciate their willingness to articulate this so well across many platforms.
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Bitcointalk (Development & Technical Discussion) discussion on dwindling block reward:
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This way of grin is a good choice.
I never understood the “implications a “low” reward would have on security”.
There is less total bitcoin being rewarded to miners now than 10 years ago, but miners are now rewarded about a thousand times more value for their participation in the network.
It is almost a certainty that half a bitcoin 10 years from now is going to be worth more than 1 bitcoin today.
It is all about the ratio between Bitcoin paid for security and the total value of transactions in a block.
Something like security = (fees+mining reward)/(total value in a block).
You are right that the price of Bitcoin increases and as such even a small mining reward is a lot of payment for security, but the value of the transactions in a block also increases proportionally.
It becomes very obvious if you start calculating in Bitcoin instead of calculating in fiat value.
The current block reward is 6.25 BTC/block since the last halving 11th of May 2020, meaning that at that time the cost for securing a block was halved, but the value of all Bitcoins transacted in a block did roughly stay the same after 11th of May 2020.
This means that the transaction costs have to go up to secure the transactions in a block. Especially at times there are few transactions, this means that security might be outright to low to secure a high end transaction. Hence, a supply model like grin is much more secure on the long run. Other alternatives exist such as spreading the transaction feest over multiple blocks. But in all cases spending is not stimulated since transaction costs will be high. What is needed is a balance, meaning not to much supply to avoid inflation, not to low supply that security is weakened. Grin aims to strike that balance and stay future proof. This quote from Tromp explains it perfectly:
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Halvings divide the reward by 2 every 4 years. This means it will divide the reward by 2^5 = 32 In 20 years. Let’s assume block reward is the biggest income for miners. This means that in 20 years, the price would need to be 35000 * 32 = 1200000. Let’s say it’s possible Bitcoin gets over 1 million. But let’s now add 20 more years. Bitcoin would need to get over 35 million per coin to retain the same security. Very unlikely. But the reward will divide by 1024 in 40 years regardless of the price. This means that the reward will not be enough to secure the network and fees will eventually need to provide the security. Even if there will be advances that will make much bigger blocks very doable, you’ll still need to have enough transaction competition to get in the block, such that the sum of fees is enough to keep the network secure. Another thing that comes from relying on fees is that since the fees may have a big variance, the security of the network will also have this same variance because it’s the same function. This probably not the best thing and you want to minimize variance.
I wasn’t really following the debates around this so it’s possible most of what I wrote above has been rebutted. If that’s the case, let me know.
Btw, Grin is not completely resilient to this issue, it just approaches this “reward apocalypse” MUCH slower. In fact, so slow, that it won’t matter for us.
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This means that the transaction costs have to go up to secure the transactions in a block.
May be true for a while, and not sure if it even results in higher transaction costs in that short period of time in practice(haven’t checked).
this means that security might be outright to low to secure a high end transaction
I’m 99% sure this does not happen in practice, at least for Bitcoin.
But in all cases spending is not stimulated since transaction costs will be high.
But I do think the lightning network is going to fix this in a couple of years.
And on that point, the thing about not encouraging spending because of deflation.
This may be true now, because Bitcoin is still on price discovery mode, and not that much widespread. But once(if) it becomes the worlds global currency I suspect the “appreciation” would stabilize around the world population growth rate right?
This means that the reward will not be enough to secure the network and fees will eventually need to provide the security.
Not if the price of Bitcoin continues to rise at the pace it has been rising during the last decade.
It can’t continue doing this for 40 years. Even if it could, it could not continue for another 20 years after that. This is because it requires the price to go up exponentially. This is doable at the start of the exponential function (we are just getting started), but the price won’t be able to follow up sooner or later. The mathematics behind it is the same as why folding a newspaper 45 times gets us to the moon.
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It can’t continue doing this for 40 years.
Yes I think I agree that not at the exact same pace, but maybe at a pace fast enough to make the network secure enough.
It probably doesn’t have to. The last 5 block have had on average 0.5 btc from fees (maybe that’s not realistic over a longer period, i don’t know), which means miners get 6.75 *35k = ~236k income from one block - let’s say that’s the required income to have the current security. When blocks converge to 0, btc price would need to be 35k * (6.75 / 0.5) = ~472k → so that’s the btc price where, assuming each block has 0.5 btc fees, fees are enough to keep the current (today’s) security. Ofc ideally you would want to have a bigger security with bigger price, but imo there’s a diminishing value on that since to avoid 51% attacks people should just learn to wait for dynamic number of confirmations based on the amount sent
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That would indeed partially solve it. But you can also transact a large amount in many smaller transaction, in which case the fees would become rather expensive though. In any case as a result of the lower price paid for security, longer confirmation time before accepting transactions will most likely become the norm. This is not a problem as long as you treat Bitcoin as gold, but for day to day payments it is less ideal, meaning Bitcoin as cash payment systems is just sub-optimal.
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Lightning payments confirm instantly…
Could lightning transactions in theory be undone? .E.g. by a 51% attack, in which in the replacement block the attacker could close and cancels confirmed transactions or the other way around reverse undo closing of a channel? Not sure if this is possible, if it is, lower security of the Bitcoin blockchain would also affect LN transactions. In any case these attacks are difficult to pull off.
Some LN attacks, only the last one happens in combination with the blockchain:
In a simple payment channel, the only bad thing to happen is that one channel party posts an outdated close. This gives the other party like a week (or two) of time to notice and post the correct up-to-date close, possibly punishing the bad party. Rather than undoing this tx, an attack would need to censor it for a long enough time.
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Gresham’s law describes what happens when a government required the public to accept paper money or debased currency. People would save the Gold and spend the lower value legal tenders. Grin is floating freely against other currencies, and there is no question of enforcing a peg.
Bitcoin halving has contributed to its substantial market cap, which makes it a viable currency. It appears that Grin does will never get there if there is no halving supply shock driving up the value.
A supply halving shock is not needed to increase value.
If it was, Dogecoin would not have reached the $40 billion market cap.
Ethereum would not be the 2nd most valuable cryptocurrency in 2017.
Halving, decreasing supply, fixed supply is manipulation itself, and sooner or later anything that has it will perish.
People who accept this are not conscious people at the moment.
Real money, real store of value, must be in unlimited supply(If it wants to appeal to all people).
Most equitably, it should have constant incremental emissions or even, in the next step, incremental emissions over time.
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Dogecoin has governance inspired by animal spirits, not cognitive processes. I see the 40b market cap achieved as a accident. Satoshi N did not intend to manipulate the market, I am asking about linear vs finite issuance because they may lead to different market cap outcomes.
The question of fee-based security is a very serious question, fee amounts for BTC are discussed in practice: Bitcoin: Fee-Based Security Modeling - Lyn Alden and here in theory: https://www.cs.princeton.edu/~arvindn/publications/mining_CCS.pdf
I will first take a hyper-malthusian view of the earth as a closed vessel with a limited amount of resources,(fixed amount of Gold etc) and a limited number of humans at 1e10 (10 billions).
[edit done one day after posting, to correct the amounts with proper order of magnitude]
If a currency that becomes dominant has a current purchasing value of USD1e13 (10 trillions), and this happens with probability p1 in the next 20 years, p2 in the next 20 to 40 year… etc. The present value of a BTC should be 4.7e5 if the probabilities sum up to 1. The maximalist story generates an incentive for hoarding . It turns BTC into a store of value instead of means of exchange.
Grin issuance is linear at 3.1e7 (31 million) per year, if we reach a value USD1e13 by year 20, there are Gr6.2e8 which corresponds to a value of $1.6e4 per coin, $8e2 per coin after 40Y, $5.3e3 after 60Y and $4e3 after 80Y. A linear issuance means 100% inflation on year 1, 10% inflation at year 10, 1% inflation at year 100, and 0.1% inflation in a thousand year.
So the optimist bitcoiner would pay 476k per BTC. The optimist grinner wants to pay an amount between $16000 and $4000 per coin and he should sell his coins and buy scarce assets as soon as he meets this target.
In a world with linear (not exponential) real growth, linear monetary issuance makes sense. Saving in this currency is not consistent with the view of a finite world, although it is consistent with the past monetary practice which has been operative in an exponentially growing world for the past 400 hundred years.
Hence my point that finite issuance incentivizes use as store of value and higher market cap compared to Grin.