Home CRYPTO NEWS Bitcoin HODLers Want To Pull Their Weight Too

Bitcoin HODLers Want To Pull Their Weight Too

by ef1jq
0 comment

Think about a situation the place you’re heading off for a 100-year trip and also you need your wealth to outlive once you return. You resolve to bury a protected that holds:

  • Some gold bars
  • A bunch of $100 payments
  • Your bitcoin in chilly storage

What do you anticipate the end result to be once you return out of your 100-year absence?

The gold bars will nonetheless be there in fine condition. The $100 payments could have bodily decayed and the buying energy will possible have dramatically weakened to the purpose the place the payments are nugatory.

What concerning the bitcoin? What’s the bitcoin price?


The reply relies on how the community operated throughout your lengthy absence. If different individuals had been actively transacting, then the miners had been securing the community and your bitcoin will likely be protected and invaluable. If everybody places their cash in chilly storage and joins you in a 100-year absence, then transaction charges will plummet, miners will exit of enterprise, the community will atrophy and the cash will likely be nugatory.

In different phrases, the spine of the Bitcoin community is an assortment of miners who course of transactions and keep the integrity of the blockchain by way of expending time and assets. For the reason that miners are compensated by way of transaction charges and predictably-declining block rewards, transactions should happen for miners to have the funds to safe the community.

From the beginning, the bitcoin ethos is that those that use the community should work at it. Having possession or stake confers no particular privileges. Proof of Work vs Proof of Stake.

Sadly, HODLers aren’t working. HODLers predict that others will likely be compensating miners in order that the HODLers’ stake will keep its worth. In in the present day’s design and maybe inadvertently, HODLers aren’t dwelling as much as the bitcoin ethos.

Working whereas HODLing

The query turns into, “ safe the community (i.e. pay the miners) whereas HODLing?”

I imagine the reply is to implement a HODL_FEE, which might compensate miners from dormant addresses.

In step with the bitcoin ethos, the HODL_FEE could be charged:

(a) to any tackle that had no cash stepping into or out for the final 52,500 blocks, which is one-quarter the halving interval (roughly 1-year), and

(b) in an quantity equal to 50% of Median Transaction Price over the earlier two weeks. Due to this fact, the HOLD_FEE could be re-set in an analogous method as the issue adjustment.

The HOLD_FEE is ready to 50% MTF for 2 causes: first, the tackle may keep away from the HODL_FEE by making a easy transaction so we wish the HODL_FEE primarily based on present transaction charges, and second, the HODL_FEE is ready to 50% MTF in order that miners prioritize present transactions after which conduct HODL_FEE txns with the remaining block house.

Good religion arguments will be made to both enhance or lower the time and quantity of the HODL_Fee, however these parameters make intuitive sense.

Advantages of the HODL_FEE

Aligns Incentives – Along with block rewards and transaction charges, the HODL_FEE provides one other mechanism for miners to be compensated, thus, encouraging the miners to take care of the community integrity even when transaction volumes plummet. HODLers will profit essentially the most as their cash will stay an efficient retailer of worth.

Cleans up the Mud – The blockchain is suffering from Mud addresses that include quantities of sats which are too small to conduct transactions. By one estimation, there are ~120 million addresses containing <1,000 sats (~$0.65), whereas the median transaction price for a comparatively quiet 24-hour interval in Might was 3,100 sats (~$1.90). With the HODL_Fee, all 120+ million addresses could be zeroed out and ~310 Bitcoin (~$20 million) could be paid to miners to assist safe the community.

There are one other ~20 million addresses with 1k-10k sats ($0.65-$6.50) with one other ~1,000 Bitcoin (~$65 million) which might finally be used to assist safe the community.

That’s loads of community cleanup with solely a de minimis enhance in circulating provide.

Unlocks misplaced Cash – Sadly, it’s straightforward for cash to get locked in addresses the place the proprietor dies, turns into disinterested or forgets their keys. The HODL_FEE will carry a few of these cash again into circulation, however at a really sluggish fee. If a dormant tackle holds 1 BTC and the HODL_FEE is 2,000 sats, it could take 50,000 years for the dormant addresses to be zeroed out, which ought to give the proprietor loads of time to get up from their coma and reclaim their cash!

Assessments your Keys – A pleasant facet advantage of the HODL_FEE is that it encourages house owners to make use of their addresses, which implies that not less than every year they’ll take a look at to see in the event that they bear in mind their keys. This may appear to be particularly necessary in multi-sig eventualities.

Encourages Community Utilization – The HODL_FEE ought to enhance community utilization by encouraging house owners to stack sats and/or spend their sats. Rising the community utilization helps be sure that miners are compensated correctly and that Bitcoin stays a retailer of worth.

Arguments towards the HODL_FEE

Introduces a Tax – The HODL_FEE appears to run counter to the libertarian ethos as it’s designed to pressure people to behave in a sure method (i.e. preserve stacking/spending) or pay a tax. No person likes taxes and no one likes the concept of a tax for simply current.

But, a quarterly or annual custody price is quite common in financial institution or brokerage accounts, and the HODL_FEE is comparable.

Most significantly, the bitcoin ethos is about Proof of Work. You don’t get advantages solely from possession. Bitcoin house owners can’t anticipate others to safe the community, after which have bitcoin stay a secure retailer of worth.

Reduces Anonymity – The HODL_FEE can probably scale back anonymity by encouraging people to make transactions (which will be surveilled), to consolidate their holdings into fewer addresses (which usually tend to linked to an proprietor) or to maintain their cash on exchanges (which received’t need to pay the HODL_FEE due to their excessive transaction volumes).

Nonetheless, anonymity at all times comes at a value. Individuals can construct excessive fences, transfer to distant places, use VPNs, and many others. however every of those actions has a value to it. For HODLers, the most cost effective and best strategy to keep anonymity whereas making certain community integrity is to easily HODL and have the HODL_FEE withdrawn from their tackle yearly.

Creates Pointless Transactions – The HODL_FEE will create hundreds of thousands of transactions, both by the precise HODL_FEE or by encouraging people to stack and spend. The HODL-FEE transactions will likely be very light-weight and simple to calculate, and the incentives are designed in order that miners course of present transactions earlier than HODL-FEE transactions.

Regardless, there will likely be hundreds of thousands of latest transactions, and the simplest answer could be to extend the blockspace in order that transactions may very well be processed effectively and miners would get extra income to safe the community.

Last Ideas

The Bitcoin ethos is Proof of Work, and HODLers must work too.


  • Is Honest
  • Intuitive and simple to grasp
  • Straightforward to program and calculate
  • Encourages stacking and spending
  • Rewards miners for sustaining community integrity
  • Helps guarantee Bitcoin maintains its worth

Who’s prepared to jot down a BIP?

It is a visitor put up by Bob. Opinions expressed are completely their very own and don’t essentially mirror these of BTC Inc or Bitcoin Journal.

You may also like

Leave a Comment

Newswebbie content provides up-to-date information on various topics such as current events, politics, sports, entertainment, and more. Stay informed and get the latest news with a wide range of information available.

Edtior's Picks

Latest Articles