The better retort would be to argue that the as the adoption increases, the price will rise so the fixed size (in coins) tail reward has an adaptive valuation.
But I will retort that the value of shorting also scales up accordingly.
Shorting can't erase the cost due to PoW (burning energy). It can only erase a cost from loss of value of a holdings (PoS and other methods that claim to turn holding coins into "virtual miners").
If attacking a coin causes its price to decline, shorting can return a profit. If that profit exceeds the cost due to PoW, then it erased it. Cover the short, stop the attack. Repeat if the price rises again.
Yes but if the attack doesn't succeed, the energy burn cost is still there (i.e. risk of failure)
Agreed, I also acknowledged that in the past, that the market might simply ignore the attack since it knows if the price doesn't drop there may be no way to sufficiently monetize the attack to offset the hashrate cost.
However there are other more certain ways to profit on an attack of PoW, and that is to do the attack on behalf of the world government and charge the cost to the collective (i.e. to the people of the world). This is essentially my greatest fear for the future of Satoshi's design if it doesn't otherwise fail due to being a cartel:
Regarding the future of Bitcoin and its Tragedy of the Commons economic design:
At best one would see the type of cartel that TPTB_need_war has suggested; however my take is that this kind of cartel would only last for a short time before collapsing. Just witness what is currently happening in the crude oil market.
Cartels form in power vacuums. They must align with the greater power vacuums in order to sustain their market inefficiency (top-down control can't anneal maximum fitness). So the only way such a cartel would not fail, would be to become a fiat of the world government and be sustained by the
Iron Law on Political Economics which is the perennial, inimitable power vacuum.
If, by contrast, you try to attack a coin almost costlessly via PoS exploits and if your attack doesn't succeed then your your coins nor your short loses value. Then you can just try again, until you succeed...
Agreed one of the major reasons PoS(hit) is insecure— there is no ongoing expenditure.
I agree that "coins will go down in value" does not enhance the security of PoW; that would attempting to impute a some sort of stake-based incentive to mining, as some do, and that is flat out wrong, or at best, very weak security.
Agreed.
Security of a coin will be very tied to its transaction rate × average transaction size, i.e. velocity adoption and wealth of the velocity. The problem I have with the fixed size tail reward as compared to the design I am contemplating is that tail reward only captures those metrics indirectly through exchange price appreciation. I am not sure if the two models are equally powerful. I will need to think more deeply about it. My design also has an orthogonal tail reward.
Edit: some aspects of Monero's tail reward and block size adjustment algorithm are analogous to aspects of my design. There are some other things I didn't mention. I will need to really take the time to distil this into a carefully written white paper. So I would caution readers not to form any concrete conclusions (either for or against any design mentioned here) from these vague discussions.
