Post
Topic
Board Development & Technical Discussion
Merits 8 from 2 users
Re: Proposal to Address Dormant Bitcoin:Recycling Lost Coins into the Mining Process
by
ranochigo
on 02/08/2023, 08:58:57 UTC
⭐ Merited by o_e_l_e_o (4) ,mikeywith (4)
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.
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. 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.