>At present, all notable proof-of-work currencies reward miners with both a
>block reward, and transaction fees. With most currencies (including Bitcoin)
>phasing out block rewards over time. However in no currency have transaction
>fees consistently been more than 5% to 10% of the total mining
>reward[^fee-in-reward], with the exception of Ethereum, from June 2020 to Aug
>2021. To date no proof-of-work currency has ever operated solely on
>transaction fees[^pow-tweet], and academic analysis has found that in this
>condition block generation is unstable.[^instability-without-block-reward] To
>paraphrase Andrew Poelstra, it's a scary phase change that no other coin has
>gone through.[^apoelstra-quote]
We should consider that a fixed block reward doesn't guarantee that the value
of energy securing transactions is greater than the value being transacted in a
practical amount of blocks where practical is a certain amount of time
(currently 1 hour). If the energy expenditure is less than the value transacted
in a given amount of blocks those transactions are at risk of being double
spent. We have seen this failure with Ethereum Classic where any meaningful
amount of value would need 2 weeks of blocks to be deeply confirmed for
economic purposes.
We should also not assume that the Bitcoin emission curve implies there will be
zero block rewards for mining Bitcoin, let me explain. There's an ugly solution
that doesn't require a hard fork (I'm not advocating for this solution just
presenting it) where a new coin is launched to merge mine with Bitcoin and that
new coin (called BTail for discussion purposes) would enfranchise everyone who
is a Bitcoin UTXO holder at the moment of the real-time launch of BTail at a
well known block height. Using a technique we have seen with BCH to create an
arguably fair launch. BTail would have a floating exchange rate to Bitcoin and
its success or failure in terms of adoption would be determined by the market.
It would require the same network effect barriers as a hard fork (opt-in) but
would not put Bitcoin at risk while people can take time to install new
software (and write new integrations) as they would with a soft fork.
Regards
Peter Kroll
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