Hello everyone,

here is an idea that may be worth discussing, and could improve some of the Bitcoin features, it is pretty straight forward and would be interesting to hear your opinion on the subject:
    • Only a portion of transaction fees is burned (coinbase transaction output includes block subsidy and transaction fees minus the transaction fees burned);
    • Burn rate is set between 10% (lower) and 90% (upper) thresholds (90% constant burn rate is used in e.g. Bitgesell project https://bitcointalk.org/index.php?topic=5238559);
    • The change of burn rate is proportional to difficulty change (the network congestion/concurrency is regulated by the fee sizes, while if difficulty rises (more miners or more advanced hardware, more electricity used) -- the burn amount is raised to balance this (to keep the burn rate changes more dynamic in comparison to difficulty changes, it is calculated using constant multiplier);

the main idea is described here:
https://github.com/bitcoin/bips/pull/1237
https://github.com/wu-emma/bips/blob/draft/bip-burn/bip-burn.mediawiki

some prototype implementation just for a draft reference:
https://github.com/wu-emma/bitcoin/pull/2/files

Best regards,
Emma

1. Is there any benefit to an explicitly deflationary currency beyond increasing the wealth of holders? In my view, as a unit of account its value would ideally remain constant. Deflation is no better than inflation.

2. Why is the burn rate variable? Is the intention to discourage a rise in the total hash rate?

3. How would the proposal effect the business of mining? A variable burn rate between 10% and 90% would make it very dificult to predict revenue.

4. The security of the network against 51% attack is determined by the value of the block reward. Burning a portion of the block reward would therefore lower the security. Is that acceptable?

Which features? The only thing fee burning mechanism brings is escalation of deflation. This mechanism should be implemented on cryptocurrencies that don't have a constant supply cap such as Ethereum, so there can be a handle of exaggeration.

Isn't this subjective? One may say that, economically-wisely, its deflationary properties are more significant than the security and therefore, we should burn a proportion of the block reward. Another who thinks oppositely, may support increase in the block reward making it inflationary, but increasing the security alongside.

Isn't that also subjective? Doesn't it depend solely on which side of the political compass you're in?

I don't think it is subjective. The value of the block reward determines the cost of a 51% attack, which is what provides the economic security against such an attack.


I guess some political goals might be aided by inflation or deflation, but in my view, inflation and deflation are the same but opposite -- inflation is negative deflation and deflation is negative inflation. Both are equally disruptive by reducing the efficiency of an economy.

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If the goal is really only to enrich holders, then the proposal would transform Bitcoin into an explicit pyramid scheme. Currently, Bitcoin is kind of a pyramid scheme because of the "store of value" narratives, but I hope that it will outlive those narratives and eventually become real money.

You are comparing apples and oranges and want to apply a strategy that works for apples to oranges!

The coins you named (or their tokens) have terrible designs for their total supply and/or have unlimited supplies. From time to time they burn their useless shitcoins to hype the project up and try to prevent the price from crashing hard.
This is not true about bitcoin with a capped supply that offers a great utility and isn't threatened by some massive crash due to uselessness as altcoins do.

Essentially your proposal fails to provide convincing reasons for its existence.

The value of the block reward compared with the rest of the supply is what determines the cost of a 51% attack. If bitcoin had tail emission and the block reward was constant after a while, its value would slightly drop (ceteris paribus), but the percentage change of this drop would be much lower than the percentage change in the security.

Yes, that's a way to define them, but they hide sociopolitical phenomena. For instance, with inflation, overconsumption is promoted. And I wonder, how can we deal with consensus if there are people among us who understand the value system differently.

Those 'losses/burns' and non-systematic, and more mature wallet software now performs more and more checks to help user not to lose funds due to typo in fee, address, etc. Those non-systematic events are not changing the model to deflationary, they are side effects that just exist (but they do exist, yes).
This proposal is for introducing this into a consensus, making it 'deterministically deflationary', especially when transaction fees would be larger than the block reward.


1. Price is subject to supply and demand, we only adjust the demand. If Bitcoin does not make some adjustment, it raises the risk of it to be overrun by some other asset (for example, Eth, don't throw rocks, I know).

2. Burn rate is variable not to punish hash rate that is effective, but it could prevent too much 'horizontal scaling' of inefficient mining.

3. BTC price increase leads to difficulty increase, but as burn would also increase, it would serve as a feedback loop to regulate this. Miners won't get extra profit from BTC price increase, but would continue operate normally. Currently, the fees are less than block reward, and the change would be pretty gradual. The rate boundaries, and even the rules of altering the burn rate are very much open to discussion. More effective mines would earn more.

4. Block subsidy is not burned, this would provide a base for security still for a significant time, if difficulty is lowered, the burn is lowered too. At this current moment, the computational power used for Bitcoin security is so vast, that it is redundant (raising also environmental questions), and even if the difficulty goes lower to some value, it still would be sufficient to ensure the security of the network. The hardware would keep evolving and difficulty would go up because of this factor.



This mechanism (using fiscal/monetary measures to regulate supply) was introduced since Austrian school. I would not personally call Ethereum a shitcoin (BSC too, but that has different opinions).


From one point of view a coin with capped supply and deflation is a better store of value than a coin with just capped supply. Bitcoin with deflation could stay attractive as an long-term investment tool for holders having the supply very gradually decrease over time. This would increase probability for Bitcoin to stay as #1 coin. Being on top is important for continued adoption and expansion of Bitcoin.

The pools could claim they received the "fake" transactions "privately" and could even offer a service to privately confirm transactions without them being broadcast. Or they could argue the transactions were broadcast, and it would be difficult to prove them wrong unless someone is actively watching their node's mempool.

These pools would probably not be the types of pools that are common today. It would be likely that they compromise of private entities holding a large amount of hashpower.

you're damn right about that. the concept of "burning" never made any sense to me. what it means is you overprinted your money supply in the first freaking place. enough said.