This is part of a series on Tidwell’s Questions.
If we look at the real world example of Monero:
- Market cap = 3 billion
- Daily fees = 1 thousand
A self-interested actor (or algorithm) would always take (1), over (2).
The chain gets terminated, and users rugged.
1. If DC Breaks, Bitcoin Probably Breaks Also
Yes, Drivechain uses a “fees only” model – L2 cannot print any new coins.
Eventually, Bitcoin’s L1 will share this fate. That’s Bitcoin’s long run security model. So, if it doesn’t work, we had better learn now!
2. Basic Assumptions Using Today’s ETH Fee-Numbers
Fortunately, it probably does work.
- Total fee demand, across all sidechains, of $ 7,200,000 per day – this is ETH’s fee-demand TODAY (see cryptofees.info).
What would that look like, in a drivechain world? It might be:
- 10 drivechains total
- Each drivechain has a 10 MB blocksize. 400 byte txns. 25,000 txns per block.
- Users pay $0.20 per txn – half of today’s BTC rate ($0.50)
Sanity check: $7,200,000 = $0.20 * 25,000 * 10 * 144
That would comes out to $5,000 worth of fees, per block, per drivechain.
Either way, 7.2 million per day, comes to $216 million per month.
3. How much BTC can be held by all drivechains?
Basic NPV analysis can convert $216 M per month, into one fixed lump-sum today.
At 8% annual interest rates (0.6434 % monthly), this is equal to:
- $ 4.04 billion , if you truncate after 18 months
- $33.57 billion , if you calculate via perpetuity
At today’s prices, this is roughly 1.27 million BTC total. Or about 127,000 BTC per each of the 10 drivechains.
Thus, mining hardware goes up in value, by $33 billion, if (and only if!) miners play ball with Bip300 withdrawals (which costs them nothing). If more than $33 billion is deposited, then users should worry! But if less is deposited, then greedy miners will make more money keeping the sidechain alive, than they would by killing it.
Not bad! And we only absorbed the revenue of one Altcoin project. (We also assumed these revenues would never grow.) By comparison, the entire lightning network today, is just 4,700 BTC – aka over 250x smaller than the $33.57 billion drivechain security budget figure.
Possible Objections to this Reasoning
Some say that ETH revenue’s are ill-gotten. For the purposes of this exercise, it doesn’t actually matter. The blockchain passes no judgement on that; nor do I.
Some say, that ETH-users won’t voluntarily switch to a BTC drivechain. I agree! But ETH built their revenues from nothing. If they can do it, then so can someone else. In the end, I believe that everyone will switch involuntarily …if you know what I mean.
Some may say – those ETH numbers aren’t real! It’s ETH whales, spending millions of dollars per day, to give Ethereum the appearance of use! Maybe – but would they really keep that up for 8 consecutive years? Wouldn’t they have dumped by now? Personally I think the demand is real. ETH was a shady project back in 2015, but in 2023 it no more premined than BTC is. Not to a newcomer, anyway. If the strategy of faking txn fees to pump is viable, then L2 pioneers might do something similar, to pump the price of BTC. Totally symmetric.
Finally, some say that it will make Bitcoin look bad, merely to be associated with any Alt-stuff. (Do you want adoption or not?) These people are enemies of sidechains in general, and their objection has nothing to do with Melvin’s Fee Question.
This question was crucial, since if I am right, it disqualifies the whole “miners can steal” complaint. It converts that complaint into a question: can the drivechain developers build something popular enough to survive?
We also touched upon the “drivechain kills sh\tcoins” idea. It has nothing to do with what sh\tcoin-issuers prefer! In fact, it kills sh\tcoins because this is their worst nightmare: something that only survives, if it has real end users. It cannot be pump-and-dumped, because of the 2wp. And it must be used in the real world – it must have “paying customers”. If it does nothing, it will fall out of existence. Killing sh\tcoins, literally.comments powered by Disqus