Fees
Bitcoin HODLers Need To Pull Their Weight Too
Published
5 days agoon
By
adminImagine a scenario where you’re heading off for a 100-year vacation and you want your wealth to survive when you return. You decide to bury a safe that holds:
- Some gold bars
- A bunch of $100 bills
- Your bitcoin in cold storage
What do you expect the outcome to be when you return from your 100-year absence?
The gold bars will still be there in good shape. The $100 bills will have physically decayed and the purchasing power will likely have dramatically weakened to the point where the bills are worthless.
What about the bitcoin? What is the bitcoin worth?
The answer depends on how the network operated during your long absence. If other people were actively transacting, then the miners were securing the network and your bitcoin will be safe and valuable. If everyone puts their coins in cold storage and joins you in a 100-year absence, then transaction fees will plummet, miners will go out of business, the network will atrophy and the coins will be worthless.
In other words, the backbone of the Bitcoin network is an assortment of miners who process transactions and maintain the integrity of the blockchain via expending time and resources. Since the miners are compensated via transaction fees and predictably-declining block rewards, transactions must occur for miners to have the funds to secure the network.
From the start, the bitcoin ethos is that those who use the network must work at it. Having ownership or stake confers no special privileges. Proof of Work vs Proof of Stake.
Unfortunately, HODLers are not working. HODLers are expecting that others will be compensating miners so that the HODLers’ stake will maintain its value. In today’s design and perhaps inadvertently, HODLers are not living up to the bitcoin ethos.
Working while HODLing
The question becomes, “How to secure the network (i.e. pay the miners) while HODLing?”
I believe the answer is to implement a HODL_FEE, which would compensate miners from dormant addresses.
In keeping with the bitcoin ethos, the HODL_FEE would be charged:
(a) to any address that had no coins going in or out for the last 52,500 blocks, which is one-quarter the halving period (approximately 1-year), and
(b) in an amount equal to 50% of Median Transaction Fee over the previous two weeks. Therefore, the HOLD_FEE would be re-set in a similar manner as the difficulty adjustment.
The HOLD_FEE is set to 50% MTF for two reasons: first, the address could avoid the HODL_FEE by making a simple transaction so we want the HODL_FEE based on current transaction fees, and second, the HODL_FEE is set to 50% MTF so that miners prioritize current transactions and then conduct HODL_FEE txns with the remaining block space.
Good faith arguments can be made to either increase or decrease the time and amount of the HODL_Fee, but these parameters make intuitive sense.
Benefits of the HODL_FEE
Aligns Incentives – In addition to block rewards and transaction fees, the HODL_FEE adds another mechanism for miners to be compensated, thus, encouraging the miners to maintain the network integrity even if transaction volumes plummet. HODLers will benefit the most as their coins will remain an effective store of value.
Cleans up the Dust – The blockchain is littered with Dust addresses that contain amounts of sats that are too small to conduct transactions. By one estimation, there are ~120 million addresses containing <1,000 sats (~$0.65), while the median transaction fee for a relatively quiet 24-hour period in May was 3,100 sats (~$1.90). With the HODL_Fee, all 120+ million addresses would be zeroed out and ~310 Bitcoin (~$20 million) would be paid to miners to help secure the network.
There are another ~20 million addresses with 1k-10k sats ($0.65-$6.50) with another ~1,000 Bitcoin (~$65 million) which would eventually be used to help secure the network.
That’s a lot of network cleanup with only a de minimis increase in circulating supply.
Unlocks lost Coins – Unfortunately, it’s easy for coins to get locked in addresses where the owner dies, becomes disinterested or forgets their keys. The HODL_FEE will bring some of these coins back into circulation, but at a very slow rate. If a dormant address holds 1 BTC and the HODL_FEE is 2,000 sats, it would take 50,000 years for the dormant addresses to be zeroed out, which should give the owner plenty of time to wake up from their coma and reclaim their coins!
Tests your Keys – A nice side benefit of the HODL_FEE is that it encourages owners to use their addresses, which means that at least once a year they can test to see if they remember their keys. This would seem to be especially important in multi-sig scenarios.
Encourages Network Usage – The HODL_FEE should increase network usage by encouraging owners to stack sats and/or spend their sats. Increasing the network usage helps ensure that miners are compensated properly and that Bitcoin remains a store of value.
Arguments against the HODL_FEE
Introduces a Tax – The HODL_FEE seems to run counter to the libertarian ethos as it is designed to force individuals to act in a certain way (i.e. keep stacking/spending) or pay a tax. Nobody likes taxes and nobody likes the idea of a tax for just existing.
Yet, a quarterly or annual custody fee is very common in bank or brokerage accounts, and the HODL_FEE is similar.
Most importantly, the bitcoin ethos is about Proof of Work. You don’t get benefits solely from ownership. Bitcoin owners cannot expect others to secure the network, and then have bitcoin remain a stable store of value.
Reduces Anonymity – The HODL_FEE can potentially reduce anonymity by encouraging individuals to make transactions (which can be surveilled), to consolidate their holdings into fewer addresses (which are more likely to linked to an owner) or to keep their coins on exchanges (which won’t have to pay the HODL_FEE because of their high transaction volumes).
However, anonymity always comes at a cost. People can build high fences, move to remote locations, use VPNs, etc. but each of these actions has a cost to it. For HODLers, the cheapest and easiest way to maintain anonymity while ensuring network integrity is to simply HODL and have the HODL_FEE withdrawn from their address every year.
Creates Unnecessary Transactions – The HODL_FEE will create millions of transactions, either through the actual HODL_FEE or by encouraging individuals to stack and spend. The HODL-FEE transactions will be very lightweight and easy to calculate, and the incentives are designed so that miners process current transactions before HODL-FEE transactions.
Regardless, there will be millions of new transactions, and the easiest solution would be to increase the blockspace so that transactions could be processed efficiently and miners would get more revenue to secure the network.
Final Thoughts
The Bitcoin ethos is Proof of Work, and HODLers need to work too.
The HODL_FEE:
- Is Fair
- Intuitive and easy to understand
- Easy to program and calculate
- Encourages stacking and spending
- Rewards miners for maintaining network integrity
- Helps ensure Bitcoin maintains its value
Who’s ready to write a BIP?
This is a guest post by Bob. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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Criminal Drains 95 Year-Old Woman’s Bank of America Account – Now Bank Wants $4,237 in Overdraft Fees
Published
7 months agoon
December 9, 2023By
adminA 95 year-old woman says she’s going through a nightmare scenario, with scammers draining her account and the bank demanding she repay thousands of dollars stemming from the criminal’s spending spree.
Florida resident Virginia Weimer initially lost $13,000 after a scammer gained access to her BofA checking account, reports the NBC-affiliated news station WFLA.
Although the bank eventually restored the stolen funds, the thief’s actions triggered the account’s overdraft protection, which led to BofA charging $4,237.83 in overdraft fees to Weimer’s credit card.
Despite the clear case of fraud, Weimer says the bank refuses to forgive the fees.
“It’s on your mind all the time. And I didn’t tell my daughter about it because she’s not well anyway, and I’ve lost two children. I don’t want anything to happen to her.”
Weimer says that she received a letter from BofA saying that her request to reverse the charge has been denied because it covered an overdraft linked to her account.
The victim’s caretaker spoke with a BofA representative, who told him that the bank’s decision was final.
At that point, WFLA News reporter Shannon Behnken reached out to BofA on behalf of the 95-year-old fraud victim.
According to Behnken, the bank then said it’s taking another look at the case and a “positive resolution” may be on the horizon.
To date, the victim’s caretaker says they have not received an update and the issue remains unresolved.
I
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