Coalition of BTC Mining For Profit

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Avatar for Hossein.Amin
3 years ago

According to growth potential of BTC's on-chain transactions it is the time for BTC Miners to form a coalition to maximize their profit taking.

Here's why, If you look at most growth companies. When growth of their active users flattens out they will start to maximize their profit taking.

Bitcoin has the potential to becomes global money, The growth potential of that is a lot more what we have right now. But the actual growth of on-chain transactions of all Bitcoin chains combined are not growing as much as we expected. And this is largely caused by the famous chain split in 2017 that resulted in BTC to keep the Bitcoin brand name and most of Its infrastructure.

The on-chain transaction growth of BTC has intentionally limited by keeping the block size limit. Even though bitcoin is getting more and more popular. The utilization of the available capacity is not peeking until the start of 2021.

In the chart below you can see the block size utilization of BTC in last three years. Only in the last few months it is hitting the full capacity more often.

Only when block size is getting close to capacity the transaction fees has started to go up, Since demand for higher value transactions are higher (We are in a bull market). It has resulted in bad user experience for BTC users that can't afford to pay the high fees. Which in effect it is dis-incentizing people from using BTC (onchain).

This is the second time it has happened. Same thing also happened in late 2017 for the same reason.

When the BTC transaction fees are fluctuating like this, BCH chain will have less chance to differentiate itself from BTC. It is harder to argue Against using BTC for day to day transactions when fees are less than $5.

Why the coalition is needed?

The growth of BTC chain has flattened out. It is time for maximizing the profit taking. Since bitcoin mining is not done by one entity. There's a need for a coalition to have influence on the mining profitability.

High value transactions will have the chance to pay cheaper fees when the network is not congested. The goal is to stabilize the fee market such that the optimal profit can be taken from transaction fees.

With stabilized transaction fees it will be much more clear what each chain is suppose to be used for.

How the coalition can influence the fee market?

Miners can assign a minimum fee per byte. When the significant amount of miners choose to join the coalition and increase the minimum fee, Utilization of BTC blocks will drops it will reduce the throughput of the system. At some point all transaction fees will get closer to minimum fee and potentially will go higher if there's more demand.

Conclusion

Unfortunately BTC's on-chain transaction growth is flat for a long time. It has intentionally limited by the developers of BTC. It is the time for miners to maximize their profit taking.

Miners are able to influence the BTC fee market by setting a minimum fee per byte. They will be able to maximize their profit if higher value transactions are forced to pay higher fees when network usage drops below the maximum capacity.

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Avatar for Hossein.Amin
3 years ago

Comments

I came here to say Hi to my friend Hossein. Thanks for your generous tips. ❤

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3 years ago

Great job on your first post

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3 years ago