I don't think doubling the natural fee equilibrium will eliminate micropayments.
I don't think doubling the natural fee will be anywhere near enough to create the necessary hashing rate. My guess for a sensible hashing budget to ensure security would be somewhere around two hundred times the transaction fees. Remember, we are assuming a world where transaction fees are no longer dictated by the client developers. They would be much lower than what they are now - an ECDSA verification does not cost 0.005 BTC, not even close.
The point is, arbitrary
rules like this will result in hashing revenue that is too high (wasting money, electricity, etc.) or too low.
There are lots of impossible to predict factors such as the likelihood of government intervention that algorithms can't predict or incorporate. Therefore they will need changing from time to time. Miners will seek to influence this process. Gavin might be all idealistic now, but opinions change, invitations to exclusive sporting events get made, you know how it is. Certainly a little bit higher security wouldn't hurt, would it? There have been some double spends recently, haven't there? I mean we're not talking about a major change here, we'll just tweak this knob a little. See? This wasn't so bad was it!
I'm not sure if the lobbying of Bitcoin developers can be prevented in the long run, but in the short run let's at least not give ourselves outright control
over miner income.
I'll use the rest of this post to explain why I think that users will be able to solve this problem quite efficiently themselves, without developers having to intervene at all.
transactions have wildly varying tolerances to risk.
This is exactly why I suggested an insurance model. It covers these differences - if you are a merchant who has a low rate of double spends because your customers are all very honest, you can get lower insurance premiums. If you're sending money to grandma, you don't need to pay insurance at all.
The problem with a single chain is it sets a single speed and security level for everyone
Sorry, but you're looking at it backwards. The security is additive. The chain security is the sum
of what everyone using it is willing to spend on security. So if you send money to your grandma using Bitcoin and you don't get insurance, you don't contribute
to the security level, but you don't detract from it either. (Note that even if you don't pay insurance you still carry the cost of hashing, because you still carry the risk of your transaction not getting confirmed. In other words, you benefit from insurance company's attempts at improving security. But, the risk you carry is a cost worth roughly1
what you would've paid for insurance so it's not like you're leeching of of anybody or whatever.)
If someone transfers billions of dollars worth of coins at a time where Bitcoin's security is fairly low, he will have to pay high premiums. The insurance firm will try and figure out if it's better to raise the hashing rate or just shoulder a higher risk of an attack happening. If the risk is too great for whatever reason to use Bitcoin for such a transfer, the premium will be prohibitive and the transfer won't take place. If you think that's a bad thing and you advocate some minimum fee or other artificial way of raising the hashing level - what you're essentially advocating is my grandma and me subsidizing other people who do other kinds of transactions. Personally I think all types of transactions will be easily insurable in practice, but who knows. It's better to have a system where some extreme edge case transactions are too risky and uninsurable than a system where everyone else has to carry the cost for the riskiest transactions.
In a world with Bitcoin transaction insurance, the amount of money available for hashing at any given time is the total amount of money being transferred with insurance
. In the short run, insurance companies will be willing to spend up to 100% of a transaction's amount in order to get it confirmed. For example they may do a contract with a render farm or super computing center to provide extra hashing in case of a large-scale surprise attack. They will contract with each other to coordinate such efforts - because that means lower risk from large attacks and that means lower costs.
A long-term attack like a government trying to shut Bitcoin down would cause them to raise premiums and at that point it's a matter of who is willing to spend more money overall: the global Bitcoin user base or the attacker. However, "more hashing" is not always the best defense. Imagine the US government attacking Bitcoin. Insurance companies could hire lobbying firms to stop that practice. They could advertise to get public support. They could help mobilize and fund Bitcoin's grassroots supporters and stakeholders.
In the event of a private company like a competing payment processor attacking Bitcoin, they might seek help from law enforcement. Hashing for the purpose of blocking all transactions or otherwise interfering with Bitcoin would likely be considered criminal hacking in most countries. Even if legal prosecution doesn't succeed, such practices if exposed would do tremendous damage to a company's image. So if you can find out who recently bought ten thousand high performance graphics cards, they would be in a lot of trouble.
Insurance is the tried and true way of dealing with risk. Whether it's a Bitcoin transaction or a money truck, if you want to be covered in case it doesn't make it, get insured. And the nice thing with Bitcoin is that money in transfer can't actually be stolen, only stopped/reversed. So Bitcoin transfers between trusted parties at least will be a lot cheaper to insure than any money truck.
And once again, I'm not advocating for doing anything. All I'm saying is that Satoshi's design will hold up as is. Regulation of the hashing level does not have to and SHOULD NOT
be included in the protocol. Because doing so would be much less flexible and fair than letting people create suitable institutions themselves.
1 Reality is a bit messy - the person getting insurance would pay a little bit more than the pure risk due to administrative overhead. But as the existance of other insurance companies proves, people are willing to pay that little bit extra in order to have certainty. It is likely that many transactions, if not most, would be insured. Convenience goes a long way.