Bitcoin pays miners today. What happens when its new-coin reward gets small?
Miners get new coins and transaction fees. The new-coin payment for each block is cut in half every 210,000 blocks. Over time, fees will need to do more of the work.
There may be another source: coins that have not moved for many years.
Bitcoin stores spendable coins in records called UTXOs. UTXO means “unspent transaction output.” Put simply, it is a piece of bitcoin that has not been spent yet. It can stay ready to spend forever.
What if the owner of a very old UTXO had to show that they were still there?
No name or ID would be needed. The owner would only need to make a normal transaction before a far-away deadline.
The basic idea
Give every UTXO a long time limit
Imagine that every new UTXO has a long time limit. Before time runs out, the owner can spend it or renew it. Both actions make a new UTXO and restart the clock.
After time runs out, the rules can move most of the value to a new UTXO. The new UTXO keeps exactly the same lock. The miner gets the rest.
The rules set a far-away deadline.
A normal transaction restarts the clock.
The returned value keeps the same lock.
An old UTXO is not always lost. The rules cannot know why it has not moved. Its key may be safe in cold storage. Its owner may be ill. It may be part of a will.
This is also not a storage bill. A UTXO with many coins does not use more space than one with few coins. The idea uses age to choose who pays. It does not measure storage cost.
Why people may like it
No new coins are needed
The miner is paid with coins that already exist. Owners can avoid the cost by renewing. Very old coins become one more way to pay for mining.
This may sound better than making new coins forever. But someone still pays. Here, the cost falls on owners who do nothing.
The problems
Why it may be a bad idea
The idea has serious problems:
- Ownership changes. A key is no longer enough. Owners must also act before time runs out.
- Cold storage gets harder. People may miss the date because they are ill, waiting on a will, or using an offline wallet.
- Miners may wait. A miner may earn more by letting time run out than by accepting a late renewal.
- Careful owners remove the money. If almost everyone renews, little old value remains to pay miners.
The last point is the biggest problem. A source of money may not be useful if careful owners can make it disappear.
A real test
So we built a test version
OBTC, or Organic Bitcoin, is a separate test project built from Bitcoin code. It does not change Bitcoin. It lets us test this idea with real code.
In this test, a UTXO lasts 362,880 blocks. That is about 6.9 years if blocks are ten minutes apart. After time runs out, a special REAP transaction handles it. For a regular UTXO, 70% goes back behind the same lock. The other 30% can pay the miner. Very small UTXOs follow a different rule.
Miners cannot pick only the UTXOs with the most coins. The rules set the order. They also limit how many a block can handle.
The full technical report and source code explain the details. OBTC is a test project. It is not ready for real financial use.
A large test
The code worked. The result was messy.
We used a list of all spendable Bitcoin UTXOs at one point in time. The list had 165,782,759 UTXOs. The test acted as if nobody renewed.
The test handled every UTXO, but it took 391,984 blocks. At one point, more than 33 million UTXOs were waiting. Miner payments changed a lot from one block to the next.
This test made a simple guess: nobody renewed. In real life, careful owners would probably renew. Much less money might reach miners.
What this test cannot tell us: It does not predict miner income. It does not tell us whether people will use OBTC or what its coins may be worth.
The hard question
Working code does not make the rule fair
Old coins can pay miners without making new coins. The test showed that this can work in code.
Code cannot tell us whether the rule is fair. It cannot tell us how many owners would renew. It also cannot tell us whether the added risk is worth it.
- Should owners have to act from time to time? Or should a working key be enough forever?
- Is this better than making new coins? Or is it just taking coins after a timer ends?
If an idea does not hold up under strong criticism, it should not be called a way to fund mining.
That is why the idea is worth testing. We may find a better design. We may also find a good reason not to use it.
Learn more
Read the details
- The Bitcoin paper, especially section 6 about miner rewards.
- A Bitcoin developer discussion about the smaller new-coin reward.
- How Ergo charges very old boxes.
- The main OBTC rules and the code that checks REAP transactions.
- Data from the large test.