,
9 tweets,
2 min read
Read on Twitter
1/9 Blocks WILL be full sooner or later. We're not making smart use of block space, so we're likely to experience a bumpy fee ride until people adjust their behavior. It's human nature to want to deny unpleasant truths, but it's better to be ready. Here's what you need to know👇
2/9 It costs miners virtually nothing to add a transaction. Block space is given to the highest bidder - if nobody bids, it's practically free. If you think mass replicated immutable blockchain data is at least worth something, then it logically follows that blocks WILL be full.
3/9 Full blocks mean transactions will actually cost something, and that's needed. Not only does it replace the block reward, but Bitcoin's censorship resistance depends on it: a censoring 51% attacker gets the FULL block reward, but NONE of the transaction fees it censors.
4/9 Wallets need to get smarter. Fee estimates aim for the next block by default. The result? A bidding war. Better to use Replace-By-Fee (RBF) + under-bidding and automated fee bumps to get a cheaper confirmation within a user-defined time limit. This smooths out the fees.
5/9 Upcoming changes like Schnorr, Taproot, MAST, MuSig & SigAgg significantly reduce transaction sizes, but will take a long time to safely get introduced into Bitcoin and require significant changes to wallets in order to support the interactivity required for MuSig & SigAgg.
6/9 Are you sending coins between exchanges? Centralized services can settle through federated sidechains. @Blockstream built an entire service for this (Liquid) - we need more of these. Any transactions that don't require strong censorship resistance can use sidechains instead.
7/9 Lightning + Channel Factories, especially when combined with eltoo, provide a powerful way to minimize on-chain transactions without losing trustlessness. Statechains are another method which sits between Lightning and sidechains in terms of security: reddit.com/r/Bitcoin/comm…
8/9 One caveat: all off-chain solutions, whether it's third party services or Lightning, do NOT make you immune to on-chain fees. When there are issues, people have to go back on-chain. If you can't afford to pay the fee, you are stuck and won't be able to exit from misbehavior.
9/9 Does this sound complex? It is. There's simply no other way for Bitcoin to stay trustless. If you personally don't need trustlessness, you can always transact cheaply off-chain via third parties. But if we sacrifice trustlessness on the base layer, it'll be gone forever...😞
