the oxidation fee idea

hey everyone.. with rewards dropping due to halving and crypto prices along with transaction fees being kinda wild, how about we go back to the drawing board and come up with a new fee system that keeps miners happy and encourages more folks to run nodes? so, I’ve got this idea about revisiting an old concept. it’s about those old transactions stuck in aged blocks. like, if someone finally decides to move those, they should cough up an extra fee, let’s call it the oxidation fee. for instance, if this fee goes up by 10% each year, after a decade of sitting frozen, that transaction could end up costing the owners a whopping 100% oxidation fee, turning it into a reward for miners. once we roll out this oxidation fee framework, we might see a big drop in old block data and new nodes pop up that only handle non-oxidized transactions. basically, this is the price every participant pays to keep the whole blockchain system running smoothly (the bit-gold-layer). would love to hear your thoughts.

i'm just brainstorming here, but i imagine such a proposal would result in everybody spending all their unspent outputs at least once a year to avoid the tax... This would result in more broadcasted transactions, fuller mempools, blocks that are consistently completely filled and a fee war??? In other words, would forcing everybody to spend all their unspent outputs at least once a year result in higher fees for everybody? I'm sure miners would be happy, but the rest of the network not so much.

That's terrible idea, why someone has to pay 10% fee for holding their money? The banking system is better than what you are proposing because banks give interest when you hold money in bank accounts not the other way around. Miners are making more money that makes them to be profitable even after all the expenses, if miners can't able to make profits and stop their operations the one who remains will enjoy the rewards.

I think that this approach would create new rules that were never included in the protocol and would penalize users who have already used it (like the classic hodler). A lot of people find themselves with inputs blocked, among other things this would just penalize small inputs! because they would have to pay many more fees to be able to release these funds ... in such way people getting payment for trivial amount would decide immediately to spend it since in the long terms it can become impossible to spend Probably this approach could work for a fork or an altcoin, I don't think it can fit in btc current protocol.

What you are proposing is called "demurrage". It is an alternative form of inflation. Rather than devaluing money by printing more, you devalue it by canceling it or taxing it. Anyway, it's not clear what the problem is that you want to solve.

Thanks for reply, mocacinno.. there might be a trade-off among enforcing holders to participate in decreasing the block-chain length and block-size. in other words, when we compress the block-chain by oxidation-fee, then we could increase the block-size on the other hand. so once the idea show its merit, then we could set all these variables to fit in.

this is not that terrible, Findingnemo ) thanks for reply, but please be advised that that 10% was just an example to explain the concept, but I would offer a logarithmic approach to the oxidation fee that just gets curvy shapes in last years.. and please consider that, a blockchain system is not a bank. the closest entities in decentralized echo-systems to the banks are crypto exchanges, which already have several EARN programs for customers too and charge their own level of fees. but miners should work and benefit to make everything safe for end users. p.s.: blockchains could get consider as digital version of Safe Deposit Boxes that everybody could RENT and put banknotes in it. I really do not know a bank in the world that pay interest to values in safe boxes.

Thanks, bitbollo as said, this is not going to be a simple decision. a complete simulation may help to understand the side-effects of such upgrade. but when we increase the block-size and decrease the block-chain length, the whole btc protocol may get more closer to its goals in whitepaper, when in the first sentence we could see it was going to be a payment system, not a system for Saving of Value.

thank you odolvlobo, we ha the same chat before about "demurrage" here in bitcointalk and I still could remember your key notes about the topic. the oxidation fee may get stem from the idea that - by inventing btc - wants to introduce the digital form of gold as we find / lose in nature. everyday people find / buy / lose / reward gold all around but once you lose your address keys in btc, they never revive and get back to the circulation. but with this oxidation fee in the protocol, the whole halving process could remain unchanged but the reserve amount of remaining BTCs may increase in future, so rewards also increases. eventually I expect this oxidation fee with formal transaction fee could provide a continuous balanced profit for miners to keep high level of hashpower for the network and secure at all. p.s.: just think what monero is doing in its reward system (unlimited amount of fix rewards) will devaluate it at all. but reviving lost / oxidized coins and make them back to the circulation will end to situation that taxes directly convert into more investment for infrastructure.

Aside from all problem which already mentioned, i fail to see how it incentive people to run full node. After all, only miner get the oxidation fee. Real full node still need to download whole and verify blockchain. Compressing (i assume you're talking about lossless compression) blockchain data could be done by upgrading how each node communicate.

Hello ABC, thanks for reply. please correct me if I have misinformation, but we have full and partial nodes in btc. partial nodes only collect hash of roots so are fully depended on other full nodes to function properly. but just try to offer a new version of nodes (non-oxidized node) that download and sync like a full node, but after that begins to drop all its old blocks - sequentially from the genesis block - that contain no verifiable (unspent) transaction data. so I hope this decreases the size of storage needed for a node to run with most important blockchain data to be trust-able enough. so this is not about compression algorithms, just a compressing behavior.

It's oxidation TAX! You're taxing people, that's what it is, you want to tax some to keep the miner's revenue up, but what will happen if there are no people willing to move their coins and pay those coins and what will happen if everyone will weasel their ways around? I mean common, we have had taxes for millennia and just as old there is tax evasion, one area where people exceed is finding ways to avoid it, they will do the same here. Why would this happen and how?

Thank you Stompix for reply, Taxation is not a bad thing if spend in its true ways. spending taxes out of the taxed system is harmful but investing taxes on infrastructure of the taxed system always improves and creates value. but lets look at the oxidation concept as a hidden cost, not taxation. imagine you have 6 x 50 USD banknote in your pocket. you are happy that have this money in cash and can spend it anywhere freely (lightening channels), but nothing more. the only cost of it for you is about finding the nearest ATM and pay the cost as time. just take in mind that central banks also pay for printing those banknotes at the beginning (genesis block), because each banknote could spend in more than 1000 transactions, so the cost of providing those cash will break into plenty of transactions - so imposes small rates of fees on society and economy. but when you have 3000 USD as banknote with you, you will begin to worry about its safety, so instead of walking in the street to home, you may hail a cab for more safety. therefore as you could see, your 3000 USD in cash in fact has lower value - after pay the cab driver, something like 3000 minus 55 USD (the cab fee, not cab tax). now imagine you have 30'000 USD in cash and you are in real trouble, because the problem is how to keep it safe in home! so you need to pay for a vault. and now your 30'000 USD worth can calculate after reducing the cost of buying and installing a vault in your home! so as you could see none of them are taxes to your money. they are all about preserving your money. p.s.: while miners are responsible for providing equivalent level of security for coin hodlers in a blockchain, why hodlers should not pay their cost? that is why I call it FEE. the oxidation fee makes everybody to move their coins into new blocks, so after a while older blocks will be full of data that may not get accessed for a verification process for new transactions. so in new generation of nodes that only save non-oxidized transactions, you always find free spaces for bigger amount of transactions per new block.

I think you refer to pruned node, which download whole blockchain but only store some latest blocks and UTXO set (which necessary for verification purpose). People already can run pruned node since some years ago using Bitcoin Core software.

You're not helping in decreasing the blockchain size. As already said, holders can just re-create the same outputs. The only thing you enforce is people making more transactions to avoid your fee. So, you're actually disincentivizing transaction compression. You're probably surrounded by people who share a different perspective, myself included. Taxes are often times obstacles from innovative thinking and creation of value in the free market.

Nope , really bad analogy! My money is already safe in the bank (blockchain), and satoshi's coins are as safe as everyone else, why would I who knows my coins are safe pay 10% and the guy who has just moved coins 6 months ago not pay since we both are offered the same security? 50 satoshi or 100000 Bitcoins we;re both offered the same, the blockchain doesn't care about the amounts! The real analogy for what you're doing is the Cyprus bank crisis, when everything above 100 000 was no longer your money! You're creating artificial demand for block space with this, it will make things worse when we look from the fees standpoint, so it will hurt everyone , imagine you need to transact and suddenly 10 blocks are full because some huge custodian is moving away his funds not to be taxed, jus as an example some hold their coins in under 10BTC blocks, like Bitgo in thousands of adreses.

I agree that miner rewards is a potential problem in the future. If transaction fees don't go up the blockchain will be vulnerable. I like the Idea for compressing the blockchain by getting old UTXO's to be used but I still don't think this would be the right way to go. I think a better idea would be instead of halving the block subsidy every 4 years it should flatline at 1.5625BTC. This would insure miners will keep getting rewards and keep securing the network regardless if transaction fees increase. This level of inflation should be negligible. only 82,125BTC will be mined each year which is only a 0.39% yearly inflation rate.

The blockchain is only as safe as how much power miners use on the network. If miners end up only getting 50k per a block some day then it would only require 50k worth of power to create a false block. Thats 2.6 Billion USD worth of power to basically shut down the network for a year. This is a lot of money but if bitcoin is to become a global reserve currency 2.6 Billion is a small price to pay to disrupt it.

You know ABC, basically just think we need this brainstorming to meet more and more "Core Wallets" out there among BTC hodlers, instead of hardware and SPV wallets. [1] so prune nodes are very close to the concept if they save ALL unspent transactions (non-oxidized transactions) - which amazingly this could also provide potential compatibility with GDPR principles in future [2]. I also do follow ideas like assumeUTXO which shows us there are still some sort of improvements needed to get considered[3]: "Rather than the status quo — setting a number of blocks and compressing historical blocks prior to that milestone — O’Beirne’s assumeUTXO is an experimental way for new Bitcoin full nodes to delay their need to verify historical transactions until the user receives recent transactions." now look at this oxidation fee how forces the entire network and hodlers to achieve better performance of prune-nodes in bitcoin blockchian and facilitate ideas like assumeUTXO. [1] https://coinguides.org/bitcoin-blockchain-pruning/ [2] https://bitcointalk.org/index.php?topic=5453832.0 [3] https://protos.com/bitcoin-core-developer-proposes-new-type-of-pruned-node/

thank you BlackHat, in fact the size of such prune-nodes for addresses with only one unspent tx will remain unchanged, but addresses with more than 1 unspent tx will summarize into one out tx, that I look for these sort of compression effect in blockchain-size. true. and I really do not mean a tax system could help btc blockchain. just do research on situations that emerges hidden costs and try to pay them by new fees.