Dave articulates the issue through the free rider problem, exemplifying with two hypothetical miners, Alice and Bob. Alice attempts to incentivize users by offering a 5% discount on transaction fees if paid out of band, hoping that this will lead to an increase in future transactions and therefore higher fees due to increased urgency from users relying on Full Discount Tokens (FDTs). However, Dave points out that the strategy is flawed since there's no guarantee Alice will be the one to reap the benefits of her discount offer. Instead, another miner like Bob could capitalize on the increased transaction volume without having offered any discount, thus earning more on average per block than Alice. This imbalance could potentially force Alice either to revoke her discount offering or to exit the market entirely.

Furthermore, Dave suggests that widespread adoption of such discounted fee payments could make participants in contract protocols using FDTs simply adjust their behavior accordingly. They might start compensating for the discount by overestimating their transaction fees by a similar margin (e.g., 5%), which would nullify any perceived advantage for miners in providing discounts. This scenario indicates that the discount strategy may not bring about the intended competitive edge for miners who engage in it.