“There’s an open question of will transaction fees be high enough – or in the aggregate total – enough to provide transaction finality?”
So says Pierre Rochard, founder of a consulting firm Bitcoin Advisory and a self-proclaimed power user of the Lightning Network.
That was after highlighting a sentence from the bitcoin whitepaper where bitcoin’s inventor, Satoshi Nakamoto, says fees will pay for security once no new bitcoins are issued.
The above has “turned into a major controversy,” Rochard said, because there’s a debate going on whether fees will be sufficient or “will bitcoin have to hard fork in inflation?” – he asks.
In this presentation at the Baltic Honeybadger, Rochard does not answer the question, but appear to somewhat subtly imply the latter.
He first tells the audience to dismiss “altcoiners,” the “them,” and when focusing on the “us,” he says there’s a lack of data on what it’s going to look like when there is no further bitcoin issuance. Then he says:
“There’s confirmation bias. We’re all very bullish on bitcoin, I certainly am, and so we want to pick out arguments and facts that support our position rather than trying to see all sides of a debate and have a more balanced view. Or at least have some level of uncertainty and self awareness in how much support we actually have for our arguments.”
Then he highlights unknown unknowns. How fast adoption will happen, how fast the tech will innovate.
Rochard goes on to very briefly cover the debate, generally in a neutral manner, except for what follows:
“Long time ago back in 2015 TwoBitIdiot wrote a piece called The 21 Million Bitcoin Soft Cap, which was basically arguing that… he was arguing for more bitcoin inflation.
I admire the chutzpah for him doing that. He got a lot of flack for it, but I actually think he laid out his arguments kind of in a steel man way where he did a good job of expressing what his point of view is.”
Ryan Selkis, known also as TwoBitIdiot, is a well crypto connected Silicon Valley VC/Entrepreneur who came to prominence by leaking what then was a secret proposal to potentially save MT Gox – just before it went under – in the same fashion as Bitfinex “saved” itself after the 2016 hack, i.e. paying off past debts through future profits.
Little has been heard of Slekis since as far as the public is concerned, with it appearing unlikely he has some underground knowledge regarding bitcoin protocol development or perspective, unlike Rochard who may have some insight on how Bitcoin Core devs are thinking.
He does not say much more about this matter, but it does come just months after Peter Todd – the one who arguably with Gregory Maxwell “enforced” 1MB blocks – basically advocated for bitcoin perpetual inflation back in March.
He said “we’ve got a good 10 to 20 years to argue about it anyway,” with it unclear whether Rochard thus has now very subtly pre-begun the argument by pointing out that there is actually one going on.
You’d think it unthinkable, but that bitcoin’s capacity was to be limited at 1MB was unthinkable too.
The 1MB Vision
This is the good outcome of small blocks according to Rochard, which he says is the current situation.
Fees are low, there’s enough capacity, and there are no double spends after confirmation because new bitcoins are still being produced, he says.
For this to continue, then the blocksize presumably would have to increase, but he says if fees go to $1,000 and there’s a 90% consensus to double capacity, we may still face the 2015 situation of endless debate.
“I don’t think this is bad from the perspective of monetary economics. I still think in this outcome bitcoin has still destroyed all the fiat currencies and is the premier store of value, but everything has to be done through a custodian because using on-chain transactions is too expensive even for Lightning.”
Rochard studied accounting at the University of Texas during the banking collapse, so he stayed on there for a Masters until 2013.
He then went to work for Deloitte, one of the big four accounting firm, working there as a Securitization Consultant.
He stayed there not long at all, off to BitPay in 2014 where too he presumably was not very happy as he went off to Hudson River Trading.
In a transition of sorts from accounting to programming, he went off to Axial, a fund raising consultant, and then shortly after that ended up now being a sort of bitcoin consultant.
We mention that background because it does not give much indication of knowledge of monetary economics with accounting being more a sort of vocational profession rather than concerned with theory.
This may be the outcome, he says, if fees remain low as there would be constant double spends presumably because he assumes miners would try and steal each other’s fees instead of, as they do now, create an implicit cartel of sorts based on a professional understanding of business necessity.
If they are trying to sort of prep the public for a debate, however, what miners would do would be theory, with Rochard so arguing what he does and with miners presumably backing his argument.
One such miner may well be Blockstream which has opened an industrial mining farm. What real relation Rochard has to them is unclear, but if they were thinking of inflation, very quietly raising it before the halving to then more and more less quietly raise it before the one after that, was sort of the strategy employed in regards to the 1MB limit.
When the soft limit was increased, for example, from 500kb to 750kb, there were the sort of quiet “debates.” Then the slightly louder ones when it was increased from 750kb. Then the full on so-called civil war.
That may well repeat because they clearly seem to think the Lightning Network may well not work as people might simply not use bitcoin instead of buying and storing bitcoin IoUs with custodian banks who then somehow give them some LN channel.
The alternative would obviously be them opening the channel themselves and pay the $1,000 fee – a fee not based on demand but on what is needed to secure the network as they see it.
Then the other alternative would be to double capacity and so on, but they may instead rather argue to just increase inflation to maintain low node costs.