bitcoin-dev

HODL Tax Proposal

HODL Tax Proposal

Original Postby Garlo Nicon

Posted on: August 2, 2024 08:45 UTC

Implementing changes in test networks, specifically testnet3, is advised as a starting point for any updates due to its close resemblance to the mainnet in terms of history and the occurrence of multiple halvings.

This approach could mitigate potential issues arising from insufficient block rewards and vulnerability to attacks, such as miners mining empty blocks for profit through demurrage fees or censoring transactions by refusing to include them in blocks. Such actions would increase the required demurrage fees beyond the original transaction fees, effectively discarding the transaction due to consensus rules. This scenario implicitly introduces "transaction expiration," where transactions not confirmed within a certain number of blocks become invalidated by accumulating demurrage fees.

The concept of "tail supply" and its potential implementation raises concerns about the inflation of Bitcoin and the counteraction by the community through burning overprinted coins. This mechanism suggests a self-regulating ecosystem where any increase in supply beyond designated limits would be corrected by community actions. However, high demurrage fees could deter large stakeholders, or "whales," from participating in the network due to disproportionate costs compared to on-chain transactions, potentially relegating the network to an altcoin status with limited appeal and utility.

Furthermore, the possibility of miners circumventing proposed rules by refunding demurrage fees to users just to comply with transaction inclusion requirements highlights the inefficacy of such measures. This could lead to an unnecessary increase in the number of transactions, burdening the network without substantial benefits. Lastly, the ability to disable proposed changes by modifying node configuration settings questions the practicality and enforceability of implementing such proposals, suggesting that more robust and universally applicable solutions are necessary for addressing the underlying issues without compromising network integrity or user participation.