25 BTC per block forever?

[BurtW]

We had a pretty good discussion going in another thread but I want to discuss my understanding of one specific scenario and get feedback.  Yes, I will moderate this thread but I promise I will only delete totally off topic post and personal insults.  All actual input is welcome.  Even AnonyMint is welcome.

Here is the exact scenario I want to discuss:

1) A cartel gains 50% of the hashing power
2) The same cartel controls about 50% of all the Bitcoin nodes.  These nodes act just like the standard nodes for the most part but the cartel controls the code and can therefore update them to change the rules as they see fit at any time.
3) The cartel decides that the block reward should remain at 25 BTC per block forever

Now the big day comes when the block reward is to go from 25 BTC to 12.5 BTC.  The cartel updates all of the nodes under their control to continue to accept 25 BTC blocks.

Assume the cartel get the first block of the 12.5 BTC era but, per their plan, they continue with the 25 BTC reward.

All of the Bitcoin nodes and miners under their control accept the block and start to build on it.  Let's call this chain the A chain and the nodes accepting the A chain the A network.

All the other Bitcoin nodes reject the block with the 25 BTC reward per the protocol.

Eventually a 12.5 BTC reward block is produced and accepted by the network and a chain is built from there.  Let's call this the B chain and all the nodes accepting this chain the B network.

Here is what I believe to be true, everyone please correct me if I am wrong anywhere:

1)  From then on every single block built on the A chain will be rejected by the B network.
2)  From then on every single block built on the B chain will be rejected by the A network.
3)  However, every single transaction that is considered valid by both networks will go into blocks in both chains.
4)  The BTC created by the block rewards in the A chain will not be considered valid by the B network and every single transaction touched by these coins will be dropped as invaid by the B network.
5)  The BTC created by the block rewards in the B chain will not be considered valid by the A network and every single transaction touched by these coins will be dropped as invaid by the A network.

[1715623361]

1715623361

[1715623361]

1715623361

[1715623361]

1715623361

[1715623361]

1715623361

[BurtW]

Questions come to mind:

I have a wallet and I go to spend pre split BTC I send them to an address and the transaction goes into both chains.  I am happy and don't really care, right?

But when I get BTC sent to me they could be from coins created after the split.  They could be from my network or the other network.  What would be the possible outcomes here?

Thinking out loud here let's say I buy some BTC from someone and give them my Bitcion address.  Assume further I am a B network node, the seller is on the A network and they are trying to send me some coins only valid on the A network.

I expect that my node would never even "see" the attempted transaction as it would not be able to find the coins that are trying to be sent to me anywhere in my blockchain.  Right?

[Remember remember the 5th of November]

50% of the hashing power is already impossible, but 50% of the nodes as well?

[theonewhowaskazu]

Just FYI even if the block reward didn't halve, Bitcoin would still work as the inflation % would still go to 0.

[BurtW]

50% of the hashing power is already impossible, but 50% of the nodes as well?

Yes, this is a hypothetical scenario.

Just FYI even if the block reward didn't halve, Bitcoin would still work as the inflation % would still go to 0.

I will take your word for that.  Personally, I am mostly interested in the technical and logistical issues caused by such a split but others may be interested in the economic aspects as well.

[eleuthria]

Just FYI even if the block reward didn't halve, Bitcoin would still work as the inflation % would still go to 0.

I will take your word for that.  Personally, I am mostly interested in the technical and logistical issues caused by such a split but others may be interested in the economic aspects as well.

It is true, at least in practice.  As more coins are out there, the inflation % decreases with each new block, even without the halving.  Additionally, coins can become permanently lost if they are sent/generated to an address where the private key has been lost (formatted or never existed).

Eventually, the rate of loss will equal the rate of inflation and establish equilibrium where the available money supply does not materially fluctuate in either direction.  You would not know with certainty the exact quantity of coins available, but you don't know that now either (nobody knows exactly how many BTC have been lost forever, but it's likely significant due to early day miners formatting machines).

[Blueberry408]

We had a pretty good discussion going in another thread but I want to discuss my understanding of one specific scenario and get feedback.  Yes, I will moderate this thread but I promise I will only delete totally off topic post and personal insults.  All actual input is welcome.  Even AnonyMint is welcome.

Here is the exact scenario I want to discuss:

1) A cartel gains 50% of the hashing power
2) The same cartel controls about 50% of all the Bitcoin nodes.  These nodes act just like the standard nodes for the most part but the cartel controls the code and can therefore update them to change the rules as they see fit at any time.
3) The cartel decides that the block reward should remain at 25 BTC per block forever

.........

Here is what I believe to be true, everyone please correct me if I am wrong anywhere:

1)  From then on every single block built on the A chain will be rejected by the B network.
2)  From then on every single block built on the B chain will be rejected by the A network.
3)  However, every single transaction that is considered valid by both networks will go into blocks in both chains.
4)  The BTC created by the block rewards in the A chain will not be considered valid by the B network and every single transaction touched by these coins will be dropped as invaid by the B network.
5)  The BTC created by the block rewards in the B chain will not be considered valid by the A network and every single transaction touched by these coins will be dropped as invaid by the A network.

This seems to affect mining reward validity, and then everything spent from it, in a mutually exclusive divided market. Majority runs off with Bitcoin until such nonsense turns into btc trading chaos.

[farfiman]

...  
 Even AnonyMint is welcome.
...

 

[BurtW]

Thinking about this some more this would create three classes of Bitcions:

BTCA     Those coins created on the A branch after the split
BTCB     Those coins created on the B branch after the split
BTCC     Those coins created before the split

Note that there is a finite number of BTCC coins, a growing but capped number of BTCB coins and a steadily growing number of BTCA coins.  Eventually there will be more BTCA coins than BTCC+BTCB coins.

Now BTCA coins can only be used on the A network and BTCB coins can only be used on the B network but BTCC coins can be used on either network.

If you wanted to buy something from a vendor and you have BTCC coins it is no problem.  However, lets say you have BTCA coins and you want to buy from the B network.  You will have to go to an exchange market and sell your BTCA coins for either BTCB or BTCC coins.

I wonder what the exchange rates for these various coins would be.  Would BTCC coins become the most valuable due to the fact they can easily be used on both networks?

In the long run when the number of BTCA coins far exceeds the number of BTCC+BTCB coins would they be less valued than the BTCC or BTCB coins?

One more thing to note:  the split would cause the need to be able to track which coins are which since there is no way to know just by looking at the Bitcion address.  This would mean lists of coins, BTCA<->BTCB<->BTCC exchanges, wallets that could handle the various coins, etc.  I could see a wallet with a balance like this:

BTCA:  100
BTCB:  123
BTCC:  1,234

[BurtW]

If this happened then the number of BTCC coins would be set at the time it happened, there could never be any more BTCC coins.  Not sure, but I am thinking by doing this the cartel has just made all the BTCC holders very happy as the value of the BTCC coins should rise due to the fact they are the only coins that can be used on both networks.

[BurtW]

Confirmations are now tricky.  If you spend a BTCC coin you have to make sure it gets confirmed on both the A and B chains.  

BTCA coins will only confirm on the A chain.
BTCB coins will only confirm on the B chain.

[crazy_rabbit]

It's an interesting thought game, but why would any cartel do this? If they have 50% of the hash power they are earning 50% of the bitcoin, the value of which would only be devalued if they were to try and mint bitcoin forever.

Not to say a government wouldn't do it.....

I've been thinking lately how maybe it's worth making a protocol change to allow nodes to profit slightly from propagating transactions. To give everyone an incentive to keep supporting the network, versus using lite clients.

[casascius]

I believe this thread is running wild into fantasy territory based on some incorrect assumptions.

It is not possible to change the mining reward by miner consensus alone, period. 100% of nodes would also have to switch to new software with the change.

If the cartel takes its 50% hash power and mines blocks the rest of the network considers invalid, their blocks will be ignored. It will be like the cartel now has 0% of the hash power. The cartel will have created an alt coin recognized by nobody but the cartel's own nodes, which just happens to have a premine equal to everyone's BTC balances when they stopped following the BTC rules.  Cartelcoins won't even show up for Bitcoin users let alone confirm.

51% attacks cannot change the rules. All they can do is undo transactions (allowing double spending) and prevent transactions from confirming... Nothing more.

[BurtW]

Fantasy, agreed.  But assumption #2 is that the cartel also controls 50% of all nodes world wide.

[casascius]

Fantasy, agreed.  But assumption #2 is that the cartel also controls 50% of all nodes world wide.

This assumption doesn't change anything.  They could own 99% of the nodes. My node won't accept their invalid blocks neither will yours.

[Jace]

Hashing power != nodes, aka users, aka the vast majority of the Bitcoin network. And invalid blocks (according to the original protocol) will simply be ignored by all regular nodes.

[DeathAndTaxes]

Fantasy, agreed.  But assumption #2 is that the cartel also controls 50% of all nodes world wide.

Then the cartel created an alt-coin.  It is important to understand that in this scenario 50% has no special meaning.  It can be done with 1% or 99% of network hashrate and/or 1% or 99% of the nodes.  As long as each network has at least one node which is also mining (creating blocks) then both networks will continue to coexisting with some level of usage.

The A, B, C grouping of "coins" above is not the complete story.   Remember Bitcoin doesn't work on the concept of "coins" or balances it works on the concept on unspent outputs.    If someone on network "A" mines a new block this creates an output which exists on network A only, lets call this output A001.  Now lets also assume that miner has an unspent output which existed prior to the split, lets call that output C001.  Now this miner pays someone using both those outputs.

Transaction
Inputs:
A001
C001

Outputs
A002 - receiver
A003 - change

Since the tx is only valid on the "A" network (any tx with one or more "A" input will be seen as invalid on the "B" network), the outputs are also only valid on the "A" network.  The thing to note is that coins have been erased from the "C" category.  Even though a C input was used (lets say it was 10 BTC) the output is no only usable on the A network.  So it isn't just the newly created coins it is any future outputs which use any input which is only valid on one network.  Obviously the same effect applies on the "B" network as well.  

So if the fork occured right now, most txs would propogate on both networks however like a fork in the road the two networks will rapidly diverge.  This will happen organically but it can also be "forced".  If one wanted to ensure their tx only propagated on one network you could ensure (likely use a client that makes sure) that all created txs use at least one "A" (or "B") input thus the tx can't propagate on more than one network.  Since the change of any such tx is network specific you can ensure all future tx are restricted to a single network as well.

Also as casascius pointed out 50% of the nodes (or miners) doesn't matter.  This scenario (creating an alt-coin which uses Bitcoin's legacy history) can happen with any % of the network.  1%, 50%, 99% of nodes and/or miners there is no special significance to 50%.  Essentially you just have a new altcoin which lacks a unique genesis block and thus shares Bitcoin's history up to the point of the fork.  It will have to survive on its own merits.  If even some users remain on the original Bitcoin network it will continue to coexist.   Most (all?) altcoins today have thrown away Bitcoin's history using just the source code + modifications + new genesis block.  This creates a new incompatible blockchain from block zero, you can consider it a fork at the genesis block.  However this doesn't have to happen you can fork the history at any point in time.  The scenario you describe in the OP has always been possible.  It doesn't need any specific % of miners or any specific % of nodes.  You, yourself, alone could do it right now with a network of one.  Modify the Bitcoin source code (probably need to hardcode initial difficulty back to a lower level) and start a single mining node.  You now have an new altcoin which shares Bitcoin's history prior to the fork.
  

[BurtW]

Great point and the reason I started this thread!  So eventually all the BTCC will get used up and you would end up with only BTCA and BTCB coins.

[DeathAndTaxes]

Great point and the reason I started this thread!  So eventually all the BTCC will get used up and you would end up with only BTCA and BTCB coins.

Yes, eventually assuming all "c coins" were spent.  As long as outputs prior to the fork remain unspent they could continue to be spent on either (or both) networks.

[jubalix]

I have noticed a lot of recent alts have a minimum 1 coin per block in the long run, and also PeerCoin always had the 1% generation.

this may be a happy medium.....though for BTC to fork to this now would bring it all down like a house of cars as the story is $21 million ever.

Thus BTC may bootstrap another alt into supremacy, or in 75 years then it may fork to 1 coin per block