Update FAQ

_posts/2023-09-09-fees.md

@@ -0,0 +1,80 @@
+---
+title: The Economic Security Model
+show_author: true
+comments: true
+date: 2023-09-03 05:00:00
+---
+
+This is part of a series on [Tidwell's Questions](https://twitter.com/miketwenty1/status/1696943794321588383?s=20).
+
+## The Question
+
+If we look at the real world example of Monero:
+
+1. Market cap = 3 billion
+2. Daily fees = 1 thousand
+
+A self-interested actor (or algorithm) would always take (1), over (2).
+
+The chain gets terminated, and users rugged.
+
+## The Answer
+
+### 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.
+
+Let's assume:
+
+* Total fee demand, across all sidechains, of $ 7,200,000 per day -- this is ETH's fee-demand TODAY (see [cryptofees.info](https://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.
+
+### 4. Interpretations
+
+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.
+
+## Conclusion
+
+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.

faq/index.md

@@ -7,40 +7,22 @@ Updated March 2023
 
 See also [Drivechain Q&A](https://fiatjaf.com/drivechain.html) by [fiatjaf](https://github.com/fiatjaf) (creator of Nostr).
 
+See also [Paul's Tweet Highlights](https://twitter.com/Truthcoin/highlights).
 
-## 1. Security ## {#security}
-
-### How are drivechains secured? ### {#sidechain-theft}
-
-Miners "farm" sidechains for their txn fees (and exchange-rate value-add). Why kill the "goose that lays the golden eggs"?
-
-Well, it depends on:
-
-* How many eggs they lay
-* How much the dead goose is worth, and
-* How much effort it takes to actually kill the goose.
-
-So, no two drivechains will have the same level of security.
 
-Some will lay many "eggs". These will have high fee-revenues, and/or will enhance the underlying coin-utility.
-
-Similarly, some drivechains are more valuable to "kill" than others. The more coins on a drivechain, the higher the incentive to "kill" it (and take all those coins).
-
-Finally, how to "kill" such a drivechain?
-
-Because of the "slow return" feature of BIP300, it isn't easy. Miners must 51% attack in a very transparent and obvious way, in full view of everyone, for a continuous 3-6 months, *before* the coins can be stolen.
+## 1. Security ## {#security}
 
-The formal security model is [here](http://www.truthcoin.info/blog/drivechain/#drivechains-security).
+### Miners can just withdraw the coins wherever they like? Won't they just steal all the L2 coins? ###
 
-In general, Drivechain security is higher when:
+Yes, Miners set the destination for withdrawals.
 
-* The drivechain in question is popular with users.
-* There are many popular drivechains.
+The security model is econonmic. Miners "farm" sidechains for their txn fees (and their exchange-rate value-add).
 
+The idea is that greedy miners will not kill the goose that lays the golden eggs.
 
-### What if a sidechain isn't popular?? Can miners "steal" from a sidechain? ## {#unpopular-sc}
+See [the original 2015 post](https://www.truthcoin.info/blog/drivechain/#drivechains-security) and also [this math](//) for concret numbers.
 
-An unpopular sidechain is one which:
+When a sidechain is "unpopular", ie:
 
 * Has low total txn fees, AND/OR
 * If the sidechain went away, the market price of Bitcoin would NOT fall significantly.
@@ -68,9 +50,9 @@ I looked into it in detail, [in 2016](https://www.youtube.com/playlist?list=PLw8
 
 ### Really?! What about miner incentives? ### {#mining-incentives}
 
-Sidechain merged-mining is a new revenue stream for miners, yes.
+Drivechain is comparable to [RIOT's use of "power curtailment credits"](https://riotplatforms.com/bitcoin-mining). It is just a new way for miners to make money.
 
-But [Altcoin merged-mining](https://medium.com/braiins/why-slush-pool-merge-mines-rsk-and-not-elastos-or-vcash-156a8a0c470c) has existed for years. It was invented by Satoshi in 2010. And has been in [widespread use](https://blog.bitmex.com/the-growth-of-bitcoin-merge-mining/) ever since.
+When I'm asked: "does drivechain affect miner incentives?" I say "no". I personally lived through the invention of: FPGAs/ASICs, heat-reuse, [stranded natgas flaring](https://www.forbes.com/sites/christopherhelman/2021/08/02/green-bitcoin-mining-the-big-profits-in-clean-crypto/?sh=275922a534ce), curtailment credits, and [a whole lot else](https://www.newsweek.com/bitcoin-mining-americas-most-misunderstood-industry-opinion-1669892). Merged mining was [invented by Satoshi in 2010](https://truthcoin.info/blog/security-budget-ii-mm/#c-its-too-late--mm-is-already-widespread), and is [already in continuous use](https://medium.com/braiins/why-slush-pool-merge-mines-rsk-and-not-elastos-or-vcash-156a8a0c470c). So, to someone like me, getting revenues from merged mining doesn't even register as a change. It's just business as usual. 
 
 All BIP300 does, is supercharge MM. With sidechains, miners would (hopefully) get huge revenues (and profits) from MM... instead of the pittance they get from MM today.
 
@@ -81,14 +63,7 @@ Yes, I'm sure.
 
 Profits are good for miners. And good for us. They increase Bitcoin's [security budget](https://www.truthcoin.info/blog/security-budget-ii-mm/). They increase the network Difficulty. They deter 51% attacks (by making them more expensive).
 
-Mining has seen many "changes" that have increased profits:
-
-* Using ASICs, instead of CPUs
-* Using a pool whose software maximizes txn-fees (vs one that leaves this "free" money on the table)
-* Collecting [natgas tax credits](https://www.forbes.com/sites/christopherhelman/2021/08/02/green-bitcoin-mining-the-big-profits-in-clean-crypto/?sh=275922a534ce), while taking advantage of stranded energy
-* Negotiating lower-than-normal energy prices via a ["demand response"](https://www.newsweek.com/bitcoin-mining-americas-most-misunderstood-industry-opinion-1669892) contract
-
-Merged mining is no different than those changes.
+Mining has seen many "changes" that have increased profits. Merged mining is no different than those changes.
 
 
 ### But this is a change that affects the protocol! ### {#affects-protocol}