MetaCoin (MC) is the primary reason for the dramatic increase in block sizes on the BSV network over the past couple of months. Users are paid a token based on the proportional amount data uploaded to the ledger via the MetaID protocol.
The MC price has floated around 20,000 satoshis for the past week or so. Interestingly, the daily amount of data uploaded via MetaID apps is approaching 40 GB.
Assuming the fee rate for data transactions is 0.25 satoshis per byte, the break-even rate for mining matches perfectly if you bought MetaCoin on the open market.
Coincidence? I think not as it is quite amazing how markets form naturally around incentive structures.
As the daily MetaBlock size increases above 40 GB - (assuming demand for MC persists) it will stop making sense to upload data, but rather purchase MC as the market price will be cheaper. Of course, that could push the price up to a point where it makes more sense to upload data rather than buy the coin - but that will also mean this ‘mining’ activity is profitable if the equilibrium price rises above the proportions mentioned above.
If this equilibrium persists (as it should, because You Cannot Have Arbitrage) then one of two things need to happen for MC to continue to make economic sense:
- The speculative price of MC needs to increase (more utility added to the token)
- The status-quo network fee rate must decrease from 0.25 sats/byte
Given all of the recent debate and drama around miner behavior, #2 is quite likely before the end of 2021.
In my opinion, MC is probably the most important innovation on BSV to date as it aligns incentives almost perfectly between users, application developers and miners. I think it is inevitable that (again, asssuming MC demand exists) the following consequences will occur:
- The block size will continue to rise
- Miners must to switch over to mine BSV for increased revenue
- The floor for network fees will decrease from 0.25 sats/byte
- Speculative demand for MC will rise
- MC price rises
- BSV price rises (no way!)
Immediately, the first of these to occur needs to be the lowering of the fee rate. That will break the equilibrium and should increase demand in the other categories, moving towards the above coming true.
All that stated, no one can predict the future, so who knows!