Dropping the starting steps

We are in the midst of the «Great Construction», and fortunately, our rocket has some kind ofstarting steps that help to safely overcome the resistance of traditional ideas, while cipherpunk's bold dream of a perfect monetary system comes true.

the fee market reliably supporting the hash market is the signal that bitcoin is out of beta

— 7d5x9 (@7d5x9) December 30, 2019

the commission market, which serves as reliable support and a complete complement to the hashing market, will be a signal that Bitcoin is leaving the beta testing stage

- 7d5x9 (@ 7d5x9) December 30, 2019

This is quite poorly understood by the community andA fact that is probably worthy of much more attention is that Bitcoin is still in beta and should be treated as a project under development. If you pay attention, the latest version of Bitcoin Core is v 0.19.0.1. The zero at the beginning indicates that the developers themselves designate the current version as beta. Many Bitcoin enthusiasts have long wondered when Bitcoin will finally «come out of beta»? And that's a tricky question to answer, because no one really wants to try to responsibly draw this highly speculative line for the code base of a global distributed network like Bitcoin. When I ask this question to some of the Bitcoin Core developers or those working on other Bitcoin implementations, they just smile politely and shrug their shoulders.

Caution with which participantsThe Bitcoin community is approaching attempts to draw this line - a good sign. As far as I can tell, engineers working with Bitcoin code believe that this moment should be determined more by the market than by any specific change in the code base. If so, by what signs can we say that Bitcoin is out of beta?

It seems to me that our good friend @ 7d5x9proposed a good indicator for this: the ability of the commissions market to maintain mining profitability in the absence of network subsidies for finding new blocks. And this is another unknown value for all bitcoiners, since network subsidies continue to be halved every 210,000 blocks. In the early years of Bitcoin, block subsidies serve as a kind of rocket launching steps that help the network independently ensure its own development and achieve a separation point thanks to the efforts of people who, driven by economic incentives, strengthen the security of the network and contribute to the development of the system. Ultimately, the growing utility of the network ensures the creation of a self-sustaining feedback loop that will serve as a fuel for this space shuttle in the future when it enters uncharted spaces of human organization and ingenuity.

However, today the situation in this regard does not look so rosy.

Last month, the share of commissions in the totalthe block reward received by miners was only 1.1%. Not a very impressive figure and quite far from the peak of 30.40%, recorded two years earlier, in December 2017, at the height of the ICO mania and at the time of the formation of the price peak of bitcoin. This is a product of many factors, including the fact that we are not in the phase of mania, the increased efficiency of the protocol, the more efficient packaging methods implemented by major network players, and, among other things, the improvement of commission setting tools used in wallets.

Looking forward, it is unlikely that growthefficiency in this direction could slow down in the foreseeable future. Many bitcoiners (including me) are enthusiastically awaiting the adoption and implementation of bip-taproot (or another similar proposal). If this happens, then bitcoiners, ceteris paribus, will receive many additional opportunities to save even more on commissions using SegWit or packaging. Does this mean that in the long run, the Bitcoin security model is doomed?

Not! At least I don’t think so. The growth in network efficiency achieved to date, and the one that has yet to be implemented, will increase the overall usefulness of Bitcoin, and this should also affect the total cost of the network. With increased efficiency, Bitcoin users will be able to more creatively use the core network, stimulating demand and increasing the use of the underlying token (BTC). This is the Jevons paradox applied to a distributed ledger.

Today, when the share of commissions in the total award forthe block fluctuates around two-year lows, this forecast may seem overly optimistic, but if you step back a step and look at the current developments, the development of SegWit and the improvement of standardization of wallets from this position, then you are likely to readily share my optimism. The Lightning Network is perhaps the most obvious example. Although it has not yet received widespread distribution (which should not be surprising, given the less than two years of age of this network), the existing primitives and applications built to this day look extremely promising. The possibilities of sending micropayments, anonymous Wi-Fi payment, exchanging encrypted messages and winning Satoshi when playing video games all look like useful functionality in an increasingly rent-oriented world with total monitoring of users of services and the growing popularity of e-sports. And these are just a few options for using only one second-level protocol.

In general, there is nothing surprising in suchlow commission share in the total block reward today, because we are still in the midst of the «great construction» new ecosystem. Fortunately, the Bitcoin network provides some stepping stones to safely overcome the resistance of conventional wisdom while the cypherpunks' bold dream of a perfect monetary system becomes a reality. If governments and corporations continue to plunder the world, pushing people to the edge, I am confident that we will see a great migration into the dream ecosystem long before the supply of Satoshis in the starting stages is used up. Demand for entry tickets (BTC) into the Bitcoin ecosystem will increase, and with it network fees.

 

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