Thank you very much for reading the essay and giving feedback.
I think that you should try to explain what it is about my proof that you don't find convincing, which leads you to reject it and attempt to construct a counterexample.
There are a couple problems with your proof:
1) you assume that only consensus mechanisms that produce coins are viable. If you are right, then bitcoin is on a path of death. Bitcoin is slowing down coin production by half every few years. If Satoshi consensus stops working at some point, then bitcoin might want to switch to Flying Fox consensus. It is optimized for a finite non-growing money supply.
2) you only consider consensus maintained by the destruction of resources that cost the same amount for both coin-holders, and people who don't own coins. like POW and liquidity and elections. There exists a resource that is affordable for coin-holders, and expensive for non-coin-holders. (the coins)
Here is a very simple counterexample: Every coin holder is forced to stay online 24/7. The portion of coins you have is how much control you have to add the next block.
There is no way to force the addition of blocks, or censor a block, unless you are part of a coalition of >51% of coin owners who wants the same thing.
None of the coins are "bonded". you can spend them to whoever you want during any block. We aren't losing value by the interest rate.
The cost of consensus is very low, practically zero, but the cost of owning coins is excessively high. Leaving a computer on 24/7 is unreasonable for most users.
how expensive will the crypto-monetary system be when it is the case that no new coins are created? In Bitcoin, it will be the sum of all transaction fees. Here, presumably it is the same, and the fees go to channel operators.
It is as expensive as the fees yes.
In Flying Fox, the rate of block creation isn't connected to time. It is connected to a certain volume of money. Every time >X coins are ready to be spent, the next block is ready to add to the chain. So the transaction fee is proportional to the amount of money spent.
In bitcoin there is a finite supply of 1 megabyte per 10 minutes, and a variable demand.
In Flying Fox the supply changes to meet demand.
Flying Fox has normal tx fees, the same as bitcoin. It has channel fees on lightning txs, just like the lightning network will on bitcoin. Unlike bitcoin, we don't have to pay miners to waste electricity constantly, instead we pay juries of random coin-holders to vote on the next block. So the block creation fee should be a lot lower, for the same level of security.
Ignoring all of that, the block-creator always gets to exclude transactions which he/she doesn't like. What is the "heaviest chain" rule for selecting a blockchain history, if you wake up and see two blockchains of length 100,000, which forked awhile ago (such that each chain had a group that attempted to prevent members of the rival group from opening channels)?
somewhere in between these 2 rules:
1) the chain that had the most money provably destroyed.
2) the chain that has the most participation from validators.
In Flying Fox it is not possible for the chain to fork the way you describe. If 2 groups of validators were very determined to disagree on a particular block, it is like an auction. Whichever side is willing to throw away more money wins. It is more affordable for the side that has more validating power. The price of "raising" is at least 50% more than the previous raise. So it is a discrete process with exactly one winner. Everyone who stays online 24/7 can be certain that they are on the same chain they started with.
An attacker, instead of buying up tons of miners and wasting electricity, would be buying up lots of coins and provably destroying them. Which makes the rest of the coins more valuable. Flying Fox has anti-fragility built in. Attacking it makes it stronger.
It is possible to get a bunch of old private keys, and start building a fork from an old block.
This result is identical to taking the source code and launching a new chain from genesis block.
You treat it the same as any other altcoin. You go onto coinmarketcap.com or some exchanges to look up the exchange rate.
Either 1) you only have coins on the original chain, or 2) you have coins on both chains, and can't tell which is the original.
Either case is fine.
It cannot be profitable to make a fork by paying the jury of validators to double sign at every height.
The jury loses a safety deposit that is twice as big as the amount of money spent in the block.
The random seed is from a very long time ago. You would need >50% of the money in the blockchain to sustain the attack long enough for the random seed on each side to be different.