1/ Once we realize that PoW hashing ops are close to 100% efficiency *for the purpose of protecting the ledger from being rewritten*. That is, one hash in (to mine), one hash out (to revert). A follow-up question might be:https://twitter.com/hugohanoi/status/952289179387310080 …
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4/ Eventually, once transactions fees completely take over block reward as mining incentive, transactions volume would become the primary driver of hash power.
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5/ In both cases, the market decides how much resource to put in securing the ledger. That is, Bitcoin users decide. If one day users deem Bitcoin is worthless, there will be zero hash power going into securing the ledger. Then its immutability property would be gone. Poof.
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6/ Note that this is true for all variants of PoW, i.e., different hashing algorithms. It’s probably true even for things like Proof-of-Space. The amount of burnt resource will rise up to match whatever the market deems the security is worth (MR=MC).
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7/ Would it be possible to cap the amount of hash power going into a block? This would serve as an artificial limit on the burnt resource / security.
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8/ I’m not even sure if that could be feasible / implemented in consensus code without significantly changing the security model & network stability, but let’s assume we have some way of capping the hash power, lets call it C ~= 10,000 TH/s.
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9/ Below C, miners compete as they do right now. The nature of Bitcoin mining is a random lottery function plus proof of work burnt, let’s call it L1. Beyond C, the winner of a block will be determined by a new, different random function L2 that does not require further PoW.
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10/ First problem: mining hardware constantly improves. So you’d have to constantly update the cap to match with improved hardware. Who would decide on this cap & when to update it?
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11/ Second problem: an artificial limit on resource burnt means that miners will earn a surplus on their investment, beyond what they already earn, since price & transaction fees are still determined by the market.
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12/ This extra miner surplus might have an impact on centralization since they could potentially use this surplus to build a higher barrier-to-entry to mining.
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13/ TL;DR: hashing ops are close to 100% efficiency for their purpose. It’s impossible to reduce energy cost without reducing security. Currently market determines how much security the ledger needs. Not sure if there’s a non-market-based solution that can do "better."
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End of conversation
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