Topic: Proposal to Address Dormant Bitcoin:Recycling Lost Coins into the Mining Process (Read 748 times)

But the example (RSK) is Bitcoin sidechain though, where you can "convert" between BTC and RBTC whenever you want.


You read the data wrong though. Total BTC from TX fee is only 21.92BTC (about $638.639 when i write this post) or $1.4 per TX on average.

They're equally important. Arbitrarily altering the inflation schedule, and collecting a "storage tax" from every Bitcoin address will have the same effect. De-valuating the currency. Collecting "storage tax" only from "lost coins" doesn't hold water, because besides being incapable of distinguishing lost coins, they are pretty much finite, and once collected, you'll quickly run out of incentives.

What one government does, isn't necessarily in favor of the rest of the governments. Quite the opposite. Whenever some government tries to ban bitcoin mining, there appear mining paradises somewhere else.

What kind of attack can one perform to own 10 trillion worth of BTC? The only feasible attack would be double-spend, to perform a 3 billion $ attack you would really want to reverse a transaction/ series of transactions that is worth much more, a double spend attack is not feasible now or with a market cap of 10 trillion as long as:

1- The attack is very expensive.
2- The profit of playing fair is high.


A government carrying out different attacks just to damage bitcoin is something different, you could argue that if needs be, it won't matter much how much hashrate is securing the network, if they label mining bitcoin as a crime worldwide, 90% of miners will shutdown and then it will cost them little to nothing to attack it.

Several Swiss banks tried just such a scam with "unclaimed" Jewish assets from the time of the Holocaust. Didn't end well for them.

One issue with this:
3 BTC at $60k will guarantee you the safety we have now.
0.3 BTC at $600k will guarantee the same safety.

The problem is that you're guarding in both cases with the same hashrate or miner cost to be more precise an ecosystem worth 500 billion and one worth 10 trillion. So if 3 billion might sound like a lot to attack a coin with a market cap of 500 billion it doesn't sound that excessive when taking down one that rivals the GDP of the USA.


We had a glimpse of that a few weeks ago when the fee paid nearly exceeded the reward for a few blocks!
Was that sustainable the long run, obviously not!

Now there comes the problem with the rising BTC price and the fees that have to prop them up, for sure people like to talk about prices in BTC, that the fee is not in cents but in sat/b but in reality, nobody gives a damn how many satoshi that is but how much $ you have to pay.
With fixed blocksize the math is pretty simple:


So 450k tx that need to cough up 28 million, that's 62$ per tx on average!

But what if the BTC price doubles every 4 years to compensate?
As I said above, you're just having the same number of security guards while doubling the area they need to patrol and twice the merchadise!

Which one is more important remains the question, which feature is more valuable is also a matter of question, is it the 21M cap, or the free storage of coins, hard to tell which one to sacrifice when the time comes.

The same argument could be made when developers start injecting more coins that what you thought possible, we can reuse every argument against the two different methods, they both are "bad results" we just have to debate which is worse.    



Work as in (work to solve the problem of mining incentives) i am aware of merged mining, got a dozen of those useless coins, all fees extracted by all the different merged coins throughout history are not close enough to being worth half the block reward, they are essentially useless to bitcoin, and I don't see how that would change.

Equally important to bitcoin is "be your own bank" and that you have completely sovereignty over your own wealth. This ceases to the case if a small group of developers decide to start siphoning off some of your coins against your will.

Why is that very likely? The majority of blocks which are currently being mined already take part in merged mining via the likes of RSK.

The outcome is identical - I can now purchase fewer good or services with my holdings. It doesn't matter if you take away 1% of my holdings as tax, or you devalue my holdings by 1% by printing more. Either way, the amount of goods and services I can purchase with my holdings has been decreased by 1%. Under both systems, the longer I hold my coins, the poorer I become.

Unrelated note, but Google's policy is not new at all, because they've been deleting dormant Gmail accounts for ages.

But this idea is a whole new level of silly, because Bitcoin is not an account which you can lose access to and recover, it is currency, and the consequences of "reintroducing into circulation" currency that may not be even lost can harm Bitcoin's financial stability.

Its Google new politics about Gmail accounts entering in the head of some of our guys? WTF man, stop that of stole money from dormant wallets, we CANT know who its really dormant or not.

Entering to move something from time to time make you a lot more insecure against all. The risk increase a lot for only have to made a transaction to confirm you are still on charge on that wallet. No way.

I was reading the thread and i saw someguy said something like in 100 years that BTC from dormant are gonna be released bla bla.....

Man in 100 years or much less BTC its gonna be dead or upgraded or whatever, the velocity of development in the world its huge, think in this way, we are not so far from when the gold patron was taken down, and the time between changes only shorten.....

We don't know much gold is left to be mined even on the very planet we live on, let alone other planets, limited and capped are two different things, precious metals are limited by what can be found, and cash is also limited by how much ink and papers we can produce, everything we know of is limited, nothing is created completely out of thin air, so those metals being limited don't make them equal to Bitcoin in that regards, BTC inherently is not limited by physics or code either, it's limited, finite and caped by consensus.


Only about 10% of Gold is used in industry, the rest is all just stored for its scarcity, in fact, long before people discovered how to use gold in any industry, they used it as a  medium of exchange, for daily payments, that evolved to being store of value against government currencies, if we discover something else to use instead of gold in all industries it's being used in, it wouldn't have any major impact on the value of Gold.

Yes, finding a use for something that is already a good store of value is going to increase it's value, but that doesn't mean it has to have a use to actually have value.


Which is the same. If you were to compare it by the usage of purchasing power parity, you would arrive at the same conclusion. The amount of Bitcoin that you have in the future is less than what you have now. Your purchasing power in terms of Bitcoin has decreased, which has the same effect as an inflation.


Nobody can prove that there are any lost coins, can you? if you can't prove it, you can't count it, burned coins are not lost coins, and burned coins won't be subject to fees because they are not there so not sure why you brought that up as an argument, and again, no matter how many "lost" coins are there, introducing new supply will result in more coins in circulation, even if we were to believe that there are 2M "lost" coins, and the actual supply is only 19M and not 21M, it's only a matter of time before we re-generate those 2M coins and above.



That article is B.S to be honest, it's based on a lot of assumption that you can't control or predict accurately.


Oh really, how? it's fine if you want to argue for the sake of conversation that many people lose their coins, but since you can't know how many coins are or will be lost, you can't even prove they are lost, then the whole argument is flawed.

We did go off-topic a little, but speaking of "lost coins" which OP wants to re-use, I want someone to prove that there is indeed something called lost coins, they don't have to be someone else's coins, they could be your coins, what would be solid evidence that you indeed lost said coins? it's possible to prove that you have something, but it's impossible to prove that you don't.

All coins that are technically spendable are existing coins and are NOT lost, I can't take seriously someone telling a story of how his grandmother threw away his laptop that had 100k BTC, or that Satoshi is dead and can longer access his coins, I could make the same claim that I lost access to my coins, I just can't prove it.

Actually, most precious metals are limited. You're relating your percentage holdings to the circulation, not the total supply. Scarcity is present everywhere in the real world. Bitcoin mining is essentially mining gold, just that we are aware of the exact number. Your resources are 100% limited and there will be a day where gold cannot be found in the ground any more. That is akin to Bitcoin mining and the whole idea behind Bitcoin. That is why we call it digital gold.

It does. The whole point of its worth is because people think of it as something of use. Platinum are on catalytic converters because they are good catalysts, gold is expensive because it is used on chips and contacts, etc. Speculative assets are not currency or good store of value, and is not what P2P Electronic Cash is defined as. I certainly hope people are willing to spend Bitcoin, zero use of Bitcoin also means zero value. The value of Bitcoin is its potential to one day replace fiat, which is why companies are investing and building tech ontop of it.


Which is the same. If you were to compare it by the usage of purchasing power parity, you would arrive at the same conclusion. The amount of Bitcoin that you have in the future is less than what you have now. Your purchasing power in terms of Bitcoin has decreased, which has the same effect as an inflation.

That is a very bold claim. It is more than likely that there are "lost" coins, I guarantee that. People are likely to misplace their backups, destroy their PC by accident, intentionally burn those, etc. That is where tail emission can be useful, and how Ethereum manages their supply, albeit in a different manner. Burned coins are arguably lost, coins sent to OP_Return are permanently lost. Regardless, it is irrefutable that coins are being lost.

Exactly, they are the same. I would argue that a tail emission scheme would work better than a flat tax on all the UTXOs available at a certain snapshot.

Here's a post on tail emissions: https://petertodd.org/2022/surprisingly-tail-emission-is-not-inflationary.

Yes, but precious metals are ever increasing in supply, the % of the precious metal you own is always going to decrease, this is why BTC is superior to gold for an example, because we assume that the max supply will be capped by 21M, and ya of course, no fees on storage so your 1 BTC is always 1 BTC and thus the % you own is always constant (unless you decide to increase it or reduce it yourself).

But that is the perfect scenario when we have enough transactions to maintain the network, if we don't, there is no perfect way out of it, you either put fees on storage or lift the cap and make bitcoin's supply infinite, assuming the other other ideas like merged mining don't work, which would be very likely anyway.


Ok this is going to be a different topic, but not sure why you think BTC was not designed to be a store of value, the P2P ecash system doesn't mean you have to spend it every day, it simply means that you can own it, use it, and send it without the approval of a centralized authority, wether you use it to buy coffee or store it for 50 years it makes no difference to the main concept of BTC.

In reality and since "good money drives bad money out of circulation", the less people spend BTC the more value they think it has, ultimately, we get to a point where nobody would want to spend dear BTC unless they are forced to, there is nothing wrong with that IMO. 



That is not very accurate, your store of value will not be worth "less", you would have "less" of it, and there is no inflation in the proposed scheme, inflation is present in the other method which is injecting new BTC into the circulation.


We have no proof that there are any "lost" coins, we don't know how much there is, and we don't even know if such a thing exists, to begin with, aside from the small incidents where people lost their PK (which they may recover at some point). The advertised "lost coins" in the media could be unrealistic, does anyone know for sure that Satoshi's coins won't be spent at some point in the future? we don't.

Besides, when you start creating more supply, it's only a matter of time before you create more coins into the system than those "lost coins".


wealth will be redistributed whether it's via fee/tax or creating a new supply, if all you have and can afford to buy is 1 BTC, your wealth will decrease with every block that is mined.

There are many forms of taxation, when you increase the supply by 1% you are simply taxing everyone who owns the currency by 1%, taxation done by the government is bad because they tax you twice when you make money they tax you a good %, and then their ever printing is also another form of taxation, but BTC taxation will be done only once, either by increasing the supply as you said you prefer or by paying fees/tax to store your coins, looking at the numbers it's exactly the same.

Regardless of the mechanism or the wording we put around it increasing the supply and extracting fee is the same in terms of simple math, my argument is that the psychological/economical effect of lifting the 21M cap is worse than charging a storage a tiny fee, but of course, I could be wrong.

With that in mind, as I said again, given my age, I will most certainly not be there to witness all the potential future arguments in regard to this subject when and if it happens, I hope that transaction fees will be good enough to maintain a good level of security so that Bitcoin community won't have to have these arguments and debates, it's an interesting discussion, to say the least.
 

That is because people have the perception that Bitcoin is capped at 21Million, and there is no tax. Your 1BTC today is 1BTC in 10 years, and Bitcoin is taken to be deflationary specifically because of that. A tax has an equivalent inflationary impact in that regard. The economics and the math would say otherwise, a generalization of the population would make any price movement inaccurate. I, for one wouldn't use a currency that has a tax, precious metal don't disappear when I keep them in the vault.
Then unfortunately that is not what Bitcoin is designed for. Bitcoin should be a medium for transaction, for which it was defined in the whitepaper and the progress that we've made with regards to scaling has pointed to that. Bitcoin is not a speculative asset and it would be dangerous for Bitcoin to go down that path.


It will definitely be very different, but both of it amounts to inflation. Inflation works in a very simple manner, which is what o_e_l_e_o described, for a store of value to be worth less than before. Injection of the funds actually is better, because you have to compensate for the lost coins that can never be recovered. However, if in the long run, you are always recovering the lost coins with your schemes, and thus inflation is always >0. The scarcity of Bitcoin if it is:

40 BTC generated but 50 BTC lost is better than
50 BTC recovered but 50 BTC lost per year.

That is what economist and quants are looking at when deciding on the viability of economies.

The issue is that the recirculation is infinite, which means the wealth is always being redistributed, which increases the inequality that you're already observing.

Actually, if you compare it to the actual tax that we have in the government. People who are holding less are affected deproportionately, and you end up in a scenario whereby miners are always far, far richer and we are always getting poorer. Counterproductive for what Bitcoin set out to do, taxation is crime.

I have to disagree, the main marketing point for BTC economy is it's capped 21M, nobody knows what is the current supply unless they google it, and nobody even cares about it, the same concept of the 21M max supply has been in play since bitcoin's inception, I have yet to see anyone who invests into bitcoin because it's current supply is 19.x M.


Ya pretty much as what ranochigo said, it depends on how you want to interpret it, you guys are looking at it from a personal perspective and the effect on the user individually, I look at it as a global effect on the whole currency, while the numbers are the same, the effect is likely to be a lot of different, especially if the fee is very low, say it's 0.1% a year on all coins, by doing this you maintain one of the most valuable aspects of BTC economics which is the finite supply, going beyond 21M even with 0.1% coins a year will take away the concept, so the difference between circulation 0.1% and injecting new 0.1% supply is pretty large, its the difference between finite and infinite.

When miners take 0.1% of your coins it doesn't make Bitcoin less scarce, the scarcity of bitcoin remains the same regardless of the fact that you now own a little less of it, when you create 0.1% out of thin air and give it to the miners, every block that passes affects the scarcity of the coin, the effect this could have on it's value is probably going to be more than fee which you could otherwise pay to the miners just to keep that 21M cap.

Paying transactions fees is vastly different to an endless emission.

I don't disagree, but that doesn't change any of the points I made above.

It is no different for the users. The whole point of a fixed supply is to stop your holdings being diluted by inflation and losing value. If you start taking x% from everyone, the same thing happens.

If I have $100 and you take 1% of it, my money is now only worth 99% of what it was worth.
If I have $100 and you inflate the supply by 1%, my money is now only worth 99% of what it was worth.

There are other options beyond taxing everyone one way or another, though, such as sufficient on chain fees or merged mining.

It depends on how you interpret it. The key thing about the value of a currency is the amount of currency in circulation, not the entire possible supply of the currency. For a currency that has a recirculating supply, there would be a fixed inflation rate of its equivalent in the fees. As compared to an endless emission, think a currency with its equivalent inflation, that would be the same. Though it can be argued that the real inflation of the former is constant, because they are always recovered and the effects of the burned coins are cushioned. If I had to choose between the two, having a stable inflation rate rather than a fixed tax is far less complex and less riddled with politics. It is very much a slippery slope to go into; miners would always want to earn more and users would always want to pay less. Tail emission might be a place to start in that regard.

The economics of mining by and large follows the value of the coin, which is regulated partly by the difficulty. Our optimal outcome would be to have a network that has a high difficulty and thereby a high opportunity costs that comes with any attack. If we were to consider the deflationary nature of Bitcoin, it is more likely for the price to increase in tandem with the deflation rate. Whilst for one with an inflationary nature, we would have the price decreasing with the inflation rate.

Case in point, if we do not see high adoption rates by the time mining rewards dwindle even further, it would just be an indication that Bitcoin hasn't been a successful experiment. More likely than not, a replacement of Bitcoin would be readily available by then and it would provide more utility than what we have.

Bitcoin will have endless emission regadless, we do not know what the value of transaction fees is going to be, it could be greater than the current block rewards and thus more hashrate could be running at a profit then.

.

If the rewards from fees are not large enough to keep enough hashrate securing the network, then everyone who owns only Bitcoin will get 100% poorer.

The outcome is far from being the same, one main point of strength of Bitcoin is its finite supply, raising the supply past 21M even if it was 1 coin a year will make the supply infinite just like all the fiat currencies,  the economical difference between that and circulating a tiny portion of BTC from hodlers to miners is entirely different.

By rasing the supply Bitcoin is guaranteed to lose value, while with extracting fees you just distribute a small portion of that values between different addresses.

Ya I personally wouldn't want to pay fees just to store my coins, but it is also naive to expect that my coins will be secured enough when nobody has any motive to point hashrate at the network,  when a few dozen double spending attacks are done cheaply without an issue, everyone will be glad to pay a small fee.

The alternative to that would be random people mining at a loss just to maintain the network, that could work but difficult to guarantee.

Now all of that is probably not going to be needed given that in 60-80 years time you would expect the transactions will be a lot higher in number as well as value, but you can never be too sure.

Economically speaking, your proposal is really no different to raising the supply and having an endless emission of bitcoin.

In your proposal you take a fee of (for example) 0.5% from every coin every year. Each year, everyone loses 0.5% of their coins and gets 0.5% poorer.

Alternatively, by raising the supply and minting an additional 0.5% of the cap each year, then everyone owns the same amount of coins, but a smaller proportion of the overall supply. And so each year everyone gets 0.5% poorer.

The end outcome is the same regardless of which method you choose.

This proposal won't fix the problem, it would just delay it, also, whatever issue you are describing is probably going to happen way before 2140, in 50-60 years at best the block rewards will be next to nothing, and then the incentives to mine BTC would be different.

As it stands today, all mining is done for the incentive of profit, but at that point in time, if transaction fees are too low to keep a reasonable hashrate on the network, a new incentive will be created, something like mining to "protect your assets".

It could also be something like "blockchain fee" that everyone who owns BTC and wants to secure it, must pay a small fee to protect the blockchain and thus protect their own assets/transactions.

The way that would work is unknown, it could be as simple as people mining at a loss to maintain the network or a protocol change that takes a certain % of all bitcoins in circulation and put it back to block rewards.

An example:

21,000,000 coins in circulation, let's say the target is to keep block rewards at 3 BTC per block, it means we need 157,680 BTC  a year, we could charge 0.75% "blockchain fees" per year and keep the network as secure as it will be next year when the block reward drops to  3.125 BTC.

In fact, depending on the fiat value (or whatever the representation of the electricity bill then) we could get away with 1 BTC block reward or even less, and still keep a high enough hashrate that makes the network more secure than it is today or even better, so that suggested fee could drop to below 0.25% a year or so, and it could be adjustable based on some variables.

Notice the above proposal does not increase the supply of BTC, it treats all BTC the same regardless of it's history/owners, and it does maintain a very good incentive to mining.

I am not sure if anyone has ever thought of such a proposal before, but it shouldn't be so uncommon, there could be many other proposals on how to fix that potential issue should BTC stay treated as a store of value and rarely transacted, people will find a way to solve it (we are likely not going to be there to witness it).

At the moment, this is what I think.