Delivery-date: Thu, 01 Aug 2024 14:13:49 -0700
Sender: bitcoindev@googlegroups.com
Date: Thu, 1 Aug 2024 14:03:01 -0700 (PDT)
From: Richard Greaser <thebitcoinbugle@gmail.com>
To: Bitcoin Development Mailing List <bitcoindev@googlegroups.com>
Message-Id: <6512db18-bd15-462e-92fd-7549b5e885e7n@googlegroups.com>
Subject: [bitcoindev] HODL Tax Proposal
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Hi everyone, 

It has become apparent to me that there is an issue where users of the 
network holding their coins, are not adding value to the network. 

As miners continue to get squeezed post halving, they would benefit 
tremendously from fees being taken from individuals refusing to move their 
coins, providing increased security to the network. 

I have written out a proposal more in depth and is attached below. 

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Hi everyone,=C2=A0<div><br /></div><div>It has become apparent to me that t=
here is an issue where users of the network holding their coins, are not ad=
ding value to the network. <br /><br /></div><div>As miners continue to get=
 squeezed post halving, they would benefit tremendously from fees being tak=
en from individuals refusing to move their coins, providing increased secur=
ity to the network.=C2=A0<br /><br />I have written out a proposal more in =
depth and is attached below.=C2=A0</div>

<p></p>

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Richard Greaser Proposes BIP 432: HODL TAX
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D

BIP: 432=C2=A0 =20
Layer: Consensus (Hard Fork) =20
=C2=A0 Title: HODL Tax =20
=C2=A0 Author: Richard Greaser [thebitcoinbugle@protonmail.com.com](mailto:=
thebitcoinbugle@protonmail.com.com) =20
=C2=A0 Comments-Summary: No Comments Yet=C2=A0 =20
=C2=A0 Status: Draft =20
=C2=A0 Type: Informational =20
=C2=A0 Created: 2024-07-31 =20
=C2=A0 License: BSD-3-Clause =20
=C2=A0 Post History: None but I=E2=80=99m a credentialed journalist

### Abstract

This Bitcoin Improvement Proposal (BIP) suggests implementing an inactivity=
 fee for Bitcoin addresses that do not engage in any outgoing transactions =
for over 60 days. The collected fees would be distributed to miners, incent=
ivizing network security and promoting more active participation from Bitco=
in holders.

### Motivation

The primary motivation behind this proposal is to encourage Bitcoin holders=
 to engage actively with the network, thus promoting decentralization and s=
ecurity. This is also a response to Michael Saylor and PODCONF's attempts t=
o limit Bitcoin to being a corporate treasury asset with Coinbase being a c=
hief custodian. Currently, a significant portion of Bitcoin remains idle, p=
otentially contributing to reduced network liquidity and less frequent fee =
contributions to miners. Udi is currently failing to sufficiently supplemen=
t miner incomes and thus action needs to be taken before Peter Todd's sugge=
stion of tail emissions get any serious momentum. By introducing an inactiv=
ity fee, this proposal aims to:

1.  Encourage users to engage in the network instead of being rent seeking =
full time podcast listeners.
2.  Provide an additional revenue stream for miners, thus supporting networ=
k security and more Bitaxe circulation.
3.  Discourage the hoarding of coins without contributing to the network's =
operation.

### Specification

**Inactivity Fee Mechanism:**

1.  **Inactivity Period:** An address will be considered inactive if no out=
going transactions are detected for over 60 days.
2.  **Fee Calculation:** The inactivity fee will be a small percentage of t=
he total balance of the inactive address. A proposed rate is 0.1% of the ad=
dress balance per inactivity period.
3.  **Fee Collection:** The fee will be automatically deducted from the add=
ress at the end of each inactivity period and added to the mining reward po=
ol of the next block.
4.  **Distribution to Miners:** The collected fees will be distributed to m=
iners proportionally, based on the computational work contributed to mining=
 the block.

**Implementation Considerations:**

1.  **Threshold and Rate Adjustments:** The inactivity threshold and fee ra=
te can be adjusted based on community feedback and network conditions.
2.  **Exemptions:** Certain addresses, such as those holding funds for lega=
l or institutional purposes, may be exempt from this fee, subject to criter=
ia defined by the community.
3.  **Technical Challenges:** Implementation will require modifications to =
the Bitcoin protocol, particularly in how addresses and their activity are =
tracked.
4.  **Proper Permission:** We must also consult the President of Bitcoin, D=
ennis Porter, as well as FINCEN and other relevant agencies in order to rem=
ain compliant.

### Rationale

This proposal seeks to balance the need for increased network activity and =
miner incentives with the freedom of users to hold their assets without int=
erference. The chosen fee rate and inactivity period aim to be minimal enou=
gh to avoid significant financial impact while still encouraging active par=
ticipation. The HODL meme stands in stark contrast with Satoshi's original =
goal of Bitcoin acting as Peer to Peer cash.

### Backward Compatibility

This proposal introduces new rules that affect address balances, but does n=
ot impact the core transaction mechanisms of Bitcoin. However, it requires =
changes to the Bitcoin protocol and wallet software to track inactivity and=
 implement fee deductions. Like Paul Sztorc's previous proposals, this one =
has zero negative trade offs.

### Security Considerations

Ensuring the security of the fee deduction process is crucial. It is vital =
to prevent unauthorized deductions and ensure that the fee mechanism does n=
ot introduce new vulnerabilities to the network. While individuals will lik=
ely question whether or not this change will cause issues to the network an=
d change game theory, the more important security consideration is the nega=
tive impacts that will be caused for not adopting it.

### Conclusion

The proposed inactivity fee aims to enhance Bitcoin network security and ac=
tivity by incentivizing regular transactions. Community feedback and furthe=
r analysis are essential to refine this proposal and assess its potential i=
mpact on the network and users.
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