If the tx amount is sufficiently large, double-spending could be well worth the trouble for the attacker, even if his own holdings might decrease in value. He can engage in short selling on the side to further profit/offset loss.
Budish model, while inaccurate, is still more interesting than this oversimplified economic nonsense.
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Only as complex as necessary.
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Maybe you should consider how the free market overcomes state censorship without fees. In this scenario all miners earn the same return on capital, whether censoring or not. And given that all mining and transacting would be illicit, the state has the advantage in pooled mining.
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When something becomes illicit it continues only because prices to obtain/do the illicit thing increase to offset the cost of the state attack. If this is not possible, the thing is dead. Similarly it dies if the increase benefits attacker as much as attacked (no net increase).
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Fees drive everything, including hardware investment. We *need* fees. No one disputes that.
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What you are missing by saying only current fees - negotiated at one particular moment in time - matter for security & not hardware cost, is that hardware cost is *also a manifestation of fees* - more precisely, it is the stream of future fees, discounted back to the present.
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What you are missing is that this is not relevant to security. What gives the market power is the ability to raise fees for non-censors only. Fees are the only aspect of Bitcoin mining that exhibits this essential security characteristic.
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And no, that fact that fees are used to purchase hardware does not imply that hardware exhibits this characteristic. Disproportiately higher fees to non-censors is the basis of confirmation security. What a miner buys with their reward is inconsequential.
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I see you don't understand even the basics of stock vs. flow :-) I think I'm done here.
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