The advantage that Monero currently has over virtually every POW coin and this includes Bitcoin, is that Monero has a current working solution to the scaling of blocksize question. One needs two things 1) Adaptive limits 2) A tail emission. Solving this problem without a tail emission is far from obvious, In fact I am not even convinced one can even create a viable fee market in the absence of an emission. There is a reason why there is so little progress with the blocksize debate in Bitcoin.
It sounds like you're saying that it's impossible to solve the blocksize limit without having a tail emission. If that is what you're saying, will you elaborate please?
I do understand that both of those are advantages that Monero has to bitcoin and I think they will play more of a factor going forward.
Also, do you think that Satoshi believed bitcoin could work with transaction-fee only mining and as a deflationary asset... or was it intentionally crippled from the beginning?
I will elaborate on this.
The first question one needs to ask before even considering adaptive blocksize limits is: Can a fee market actually work in the absence of a base emission?
1) We first consider a blocksize large enough (or effectively infinite). In this scenario competition among miners will drive fees towards zero since there is no scarcity. This will in turn cause the difficulty and consequently the security of the crypto currency to collapse. We must keep in mind that orphan block based arguments will also fail since these are based on the presence of a base emission. This is in fact the very legitimate fear of the small block proponents.
2) In the second case we consider a fixed blocksize, where the blocksize is small enough to impact fees. In this scenario we have a potentially infinite demand with a fixed supply. In theory fees therefore would go to infinity. We must keep in mind that as the legitimate demand rises towards the fixed limit, It becomes economically attractive for miners with a even small percentage of the hash rate to spam the network in order to profit by raising the overall fees. At this point only external competitive factors can stop the fees from rising to infinity. These take the form of fiat payment methods and
other crypto currencies with the latter being not affected by a fixed blocksize limit. The impact of these external competitive factors is to reduce demand by devaluing the entire crypto currency. This will be delayed by miner spam, as miners will increase the spam in order to preserve the dwindling purchasing power of their fees until the system collapses to little or no transaction demand leading the first case above.
The problem as I see it is that the system is
inherently unstable. Either the mining revenue collapses first or the purchasing power of the mining revenue collapses first. We now come to the next question. Can one create an adaptive blocksize limit formula that does not converge as time increases towards (1) or (2) above? My instinct tells me no, particularly since the network has no way to measure the key parameter namely the amount of fees collected per block due to out of bound payments to miners. Furthermore there have been many brilliant minds looking at this issue and they have not come up with a solution. Proving this negative, in a rigorous mathematical sense, is of course another matter entirely.
What the tail emission in Monero does is provide a stable anchor outside of the control of the miners on top of which an adaptive blocksize limit and a fee market can actually develop, by avoiding the instability above.
One final note. Why is this posted in the Monero speculation thread? The answer is very simple: Monero is the
other crypto currency with the latter being not affected by a fixed blocksize limit above. In the collapsing valuation of (2) the valuation has to go somewhere and there a good possibility that Monero will capture some of this valuation.
