bitcoin-dev

Re: HODL Tax Proposal

Re: HODL Tax Proposal

Original Postby Keagan McClelland

Posted on: August 2, 2024 00:12 UTC

The discourse highlights significant misunderstandings and challenges associated with a demurrage proposal for Bitcoin, emphasizing that such a concept is not only impractical but also misaligned with the fundamental principles and technical operations of the Bitcoin protocol.

Critically, the proposal to self-assign a Bitcoin Improvement Proposal (BIP) number without following the established process undermines the legitimacy and structured governance of Bitcoin's development. Moreover, the notion that Bitcoin, in its current design, can implement a mechanism to deduct fees based on time—given its rudimentary understanding of "days" solely for difficulty adjustments—shows a lack of comprehension of how the network functions.

Bitcoin's architecture does not facilitate direct deductions from balances or addresses, as these elements do not exist in the way they are commonly understood within the protocol level. This misunderstanding extends to the role of miners, who do not share computational efforts in block discovery but rather compete, with only the miner who finds the block receiving the reward. The system’s design inherently disregards legal or jurisdictional considerations, focusing solely on cryptographic proof and decentralized consensus.

Furthermore, the message critiques the central planning aspects of the proposed demurrage, such as setting prices and inactivity periods, which contradicts Bitcoin's market-driven, decentralized ethos. Any form of demurrage would introduce negative trade-offs that could potentially harm the ecosystem by deviating from its core principle of providing a censorship-resistant and permissionless form of value transfer. The communication advises against pursuing such proposals without a deeper understanding of Bitcoin's operational intricacies and philosophical foundations, suggesting a focus on education and understanding of the technology before proposing fundamental changes.