Wednesday, December 27, 2017

Using difficulty to get constant-value dev fees

I posted this to bitcoin-ml and bitcoin-dev mailists and to reddit and bitcointalk, but no one seems interested.
Has anyone used difficulty to get constant-dollar developer or node
fees? Difficulty is exactly proportional to network hashrate, and
network hashrate is closely proportional to coin price.

Say a coin is currently $1.23 and someone wants to get a fixed income
from the coin like $0.01 each time something occurs. To achieve this
they could use a constant that is multiplied by the difficulty:

fee = 0.0123 * difficulty_at_$1.23_per_coin / current_difficulty / reward_per_block_at_$1.23 * current_reward_per_block

Dollar value here is constant-value relative to when the ratio was
determined (when difficulty was at $1.23). If hash power is not able
to keep up with coin price (which is a temporary effect), the value
would be larger than expected. Otherwise, the real-world value slowly
decreases as hashing efficiency increases, which may be a desired
effect if it is for dev fees because software gets outdated. But
Moore's law has gotten very slow for computers. Hashing should get
closer to being a constant hardware cost per hash.

To get constant value:
Q1/Q0 = D0 / D1  * moores_law_adjustment
Q = quantity of coin in circulation
D = difficulty
0 = baseline
1 = current

Electricity is more than half the current cost of hashing and
could soon be 3/4 or more of the cost. Worldwide electricity cost is
very stable and possibly the best single-commodity measure of constant

Also, all coins for a given POW (if not in an even more general sense) will have the same factor above, adjusted only by multiplying by 2^(x-y) where x is the number of leading zeros in maxTarget for the other coin, and y is the number in the coin above.

In a very idealized situation where the algorithms running on computer hardware control all physical resources with a certain constant level of efficiency, then any increase in the hardware capabilities (Moore's law) would be proportional to the increase in the efficiency of the economic system, so there would not be a Moore's law adjustment. This is hyper-idealized situation in the distant future, but I wanted to point out the quantity ratio with difficulty has deep roots.

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