@Eric
>
People who transact are realizing the benefit of money - the avoidance of barter costs.
I'm very confident you're incorrect that holders don't receive any benefit and you're certainly not correct that every spend is receiving the same benefit. As I'm sure you're aware, one of the primary components of a currency's value and purpose is as a store of value. Storing value happens while you're holding it, not while you're spending it. Consider the following two scenarios: one person holds onto 10 bitcoin for 10 years and then spends those 10 bitcoins in some way in 2 transactions. Another person spends 4 bitcoins to buy something, then sells it for 6 bitcoins, and then buys something else for that 6 bitcoins and then never acquires any bitcoin for 10 years.
Both people spent 10 bitcoins over 2 transactions. Over that 10 year period, only one of those people utilized bitcoin's utility as a store of value. Who benefited more from their use of bitcoin?
> Those who never transact, never realize any benefit.
While that's true, its not relevant and basically a red herring. You need to compare those who transact often and rarely hold, to those who hold a lot but rarely transact. Its not helpful to consider those who throw their bitcoin into a bottomless pit and never retrieve them.
On an idealistic level, I agree with Keagan that it would make sense to have "a balance of fees to that effect". I think doing that would be technically/economically optimal. However, I think there is an enormous benefit to having a cultural aversion to monetary inflation and the consequences of convincing the bitcoin community that inflation is ok could have unintended negative consequences (not to mention how difficult convincing the community would be in the first place). There's also the economic distortion that inflation causes that has a negative effect which should also be considered. The idea of decaying utxo value is interesting to consider, but it would not solve the economic distortion that monetary inflation causes, because that distortion is a result of monetary devaluation (which decaying utxos would be a form of). Then again, maybe in this case the distortion of inflation would actually be a correction - correcting for the externality of benefit received by holders. I'm stream-of-consciousnessing a bit, but anyways, I suspect its not worth the trouble to perfect the distribution of bitcoin blockchain security costs to include holders. Tho, if I were to go back in time and influence how bitcoin was designed, I might advocate for it.
@Peter
> demurrage and inflation have identical economic properties.
The distortion of incentives is identical, however there is also the effect it has on a currency's property as a useful unit of account. Decaying utxos would mean that it would contribute substantially less to market prices needing to change. I suspect this effect would be bordering on negligible tho.