Individuals who clamor on about Bitcoin's dwindling block subsidy and claim that Bitcoin's long-term security is in question lack vision and an understanding of Jevons Paradox.
Yes, Bitcoin's fee market may be paltry at the moment due to better use of the blockchain as individuals and businesses learn how to use block space more efficiently. I will concede this.
However, one needs to look to where the puck is going.
However, one needs to look to where the puck is going.
Bitcoin isn't on top of the public's mind like it was in the Fall/Winter of 2017.
If number continues to go up like it has consistently done for the last 11 years, this should stoke activity in the fee market as more people are dragged into Bitcoin's gravitational pull.
If number continues to go up like it has consistently done for the last 11 years, this should stoke activity in the fee market as more people are dragged into Bitcoin's gravitational pull.
This is pure demand for block space driven by speculation.
Only one aspect that will contribute to the fee market and Bitcoin's long-term security as the block subsidy falls.
This is where Jevons Paradox comes into play.
Only one aspect that will contribute to the fee market and Bitcoin's long-term security as the block subsidy falls.
This is where Jevons Paradox comes into play.
Jevons Paradox "occurs when technological progress increases the efficiency with which a resource is used, but the rate of consumption of that resource rises due to increasing demand."
As the Bitcoin protocol continues to advance technologically (SegWit, Schnorr, Taproot, OpCTV, DLCs, assumeutxo, Erlay, etc.), individuals will be able to do more creative things with their UTXOs, which should stoke demand for UTXOs, driving up fees.
We're only talking about technological innovations at the protocol level at this point. We haven't even mentioned second layer tech like the Lightning Network and Liquid, which also increase the utility of UTXOs.
As these particular second layer solutions mature and become more useful to bitcoin users, this will also stoke demand for UTXOs that can be locked up and leveraged in more unique ways, driving up fees.
On top of this, it would be incredibly naive to think that these will be the only second layer technologies that come to market over time. One needs to factor in solutions that haven't even been thought up yet into their long-term Bitcoin security models.
We haven't even touched on the future dynamics of mining, which provides the long-term security that people are so worried about.
As oil and gas companies continue to wake up and realize they can use all of the FREE gas they are currently wasting on their fields to mine bitcoin, this will severely reduce the price at which your average miner can mine profitably. An externality that many are blind to atm.
When you combine all of this, it is incredibly stupid to claim with any sense of authority that Bitcoin's long-term security is at risk.
The number of things one can do with a UTXO is increasing at an incredible rate. This utility will drive demand, and create a fee market.
The number of things one can do with a UTXO is increasing at an incredible rate. This utility will drive demand, and create a fee market.
Don't let the haters try to convince you otherwise. These people don't have any vision and lack an understanding of economics.
Particularly, Jevons Paradox.
Number go up. Bitcoin fixes this. Get over it.
Particularly, Jevons Paradox.
Number go up. Bitcoin fixes this. Get over it.
