Post
Topic
Board Development & Technical Discussion
Re: Funding network security in the future
by
Meni Rosenfeld
on 30/10/2014, 09:28:08 UTC
I believe that if people want a secure network, they will figure out a way of getting it.
I agree, for a sufficiently broad definition of "a way". I believe the way will be placing hardcoded block caps; and figuring it out is what we're doing right now.


Speaking of caps: I'd like to stress the point that there are two separate costs in the Bitcoin network, each should be addressed in its own way:
1. The marginal cost of propagating, verifying and storing transactions. Caps on the block data size and amount of ECDSA signatures help with funding this.
2. The amortized cost of hashing blocks to secure the network. This has nothing to do with data size, and using data size caps to fund this is misguided and creates perverse incentives.

Funding hashing is a pure bargaining game between miners and users; the miners can include a tx at no cost, but they are in a position to charge a fee for this because the user relies on them. Shapley value theory suggests the amount the user should pay is proportional to the value of the transaction for them. Knowing the value for the user is difficult; however, I believe a good proxy for this is the total number of coins transferred in the tx. Placing a cap on the total number of coins transferred in transactions in the block helps ensure that users pay fees proportional to the amount sent, which in turn is roughly proportional to the value of the tx to them.


I'm not convinced about the viability of assurance contracts as a solution. It works well when either:
1. You have a small number of players, each with a large stake in the outcome and a large influence on the chances of success (as in traditional infrastructure projects)
2. Players get perks for their pledges, and have additional complex motivation (as in Kickstarter)

Here, if there are players with a big stake, we have failed in creating a decentralized system. If there are a large number of small players, they don't get anything extra for pledging (and their chances of effecting the primary objective is low), and it doesn't seem like the kind of thing they'd do for personal satisfaction, so people will still prefer to hold off their pledges and wait for someone else to pledge.


30% -- Bitcoin sustained through charitable mining / donations
20% -- Creation of an inflationary Bitcoin2
15% -- It doesn't get solved, some other blockchain with better economics eventually replaces Bitcoin.
10% -- Things will work roughly as-is
5% -- Assurance contracts
I'd assign less weight to charity, more weight to a radical economic change (though I hope Bitcoin will itself morph into something new rather than being replaced).