Bitcoin Forum

Imagine Satoshi coded bitcoin so that the first miner would receive the only bitcoin ever to be created & it could be infinitely divisible.  Of course, he would be the first miner, so he receives the only bitcoin.  Just like he distributed early bitcoins by convincing people to run the software, he could have convinced them to download the software & he'd send them .01 BTC.  Eventually, enough micro-bitcoins would be in circulation that people could buy them from others instead of asking Satoshi.  Then you'd be at the same situation we are now.

The largest differences are inflation & transaction fees.  Inflation wouldn't exist because no more coins can ever be created.  People would understand transaction fees early on because miners would be more restrictive since the fees would support their mining costs.

It is easy to prove the reward model works since bitcoin uses that model.  But I don't see any reason someone couldn't try the other model out with a change to the protocol.  The owner of the first coin could even setup a website like bitcoin fountain to distribute the currency instead of keeping track of PMs & emails.  Would it be a slower distribution model?  Hard to say.  Is the reward model the main reason for bitcoin's success?  Hard to say.  But I'd personally prefer this coin if it was at the same popularity as bitcoin is now.

Any thoughts?  Could this work?  Does this alt coin already exist?  Has this been mentioned before?

Just not good enough. Bitcoin will also reach 21M and there will be no more coins.

This system is way better.

Interesting idea though...

We're only half way there.  So your bitcoins will be worth half as much as they could be if 10.5M was the cap.  Still a better inflation rate than fiat.

That scheme would have no chance of ever becoming popular.

Why exactly would he give anybody that 0.01?  For downloading software?  What happens after after 100 downloads, and still nobody is running the client? (because, why run it?)

How would you market this?  "Hey I created a new currency and gave it all to myself.  Please use it." 

No good.

Keep in mind, Satoshi basically used the same strategy for bitcoin.  And the same questions can be asked in the beginning of bitcoin.  Giving people .01 is equivalent to him telling people to download the software.   He could have mined forever by himself, accumulating all the bitcoins, but they would be worthless.  Giving away .01 or telling people to download the software prevents him from acquiring every bitcoin but hopefully works out in the long run by making it worth more.

And realize this was before blockchain.info & other online wallets.  So the only way to see your balance or even generate an address to send bitcoins to was to download & run the software.  This idea does remove the incentive to run the software 24/7, but Satoshi could just leave theirs on until more people were transacting & people were making money from transaction fees.

It would defeat the purpose of Bitcoin if a single person were to be in control of minting it.

Zero people will be minting bitcoins after 2140, so how would that defeat the purpose?  This basically starts right at that 2140 position where no bitcoins are minted, and the only way to acquire them is to trade.  And just like bitcoin, the more you trade early on, the better off you will be long term.

It has already been proven that no one likes premined coins except the preminer. I mean, you do realize this scheme is exactly, that, premining, right?

Just like I said before, someone that is born 2140 could say the same thing about bitcoin.

Only if in 2140, a single guy has every Bitcoin in existence and can distribute them however he sees fit.

I think his point would be that Bitcoin in 2140 won't be much different from a 100% pre-mined coin after the coins have become reasonably distributed due to sales, giveaways, or whatever. While true, this model probably wouldn't work well for Bitcoin  -- the block reward was needed to encourage mining which is needed to secure the block chain. And block rewards probably still are needed. By 2140, either Bitcoin will have already died off or a reward won't be needed to encourage mining anymore. Boostrapping Bitcoin adoption by people mining for transaction fees just doesn't seem doable.

And if that was the case, bitcoin would be worthless, just like it was when Satoshi just released bitcoin.  If he keeps it to himself, it will continue to be worthless.  If it is distributed, just like Satoshi told people about mining, it will start to gain value.  The more people that have at least some fraction of coin, the more popular it will become, and the more it will be worth.  Therefore it would be in the best interest of the first miner to distribute their coins so his remaining coins will start to have value.  The more coins you keep, the higher the risk is that the currency will never take off because there isn't enough in circulation.

A valid opinion, certainly.  I personally think relying on transaction fees to supplement mining costs from day 1 would work fine because there would be other incentives at hand.  The cheaper & easier to transfer coins early on, would make the coins worth more & more.  The electricity to mine early on was very little.  The appreciate of wealth from active/cheap/easy trading could easily supplement the cost of mining.  Mining in bitcoin is skewed to be very expensive because it is also a way of receiving new coins which devalues the existing coins.  Granted, this also makes the network very secure, who's to say having an smaller portion of the hashrate wouldn't be secure enough?  Assuming relying on transaction fees only instead of an additional block reward would create a network that uses only a portion of the current bitcoin hasrate.

I completely disagree.  To mean, a major part of the appeal of Bitcoin is that its distribution is not controlled by any single person.  If it was, it would be worthless to me, both before and after he started distributing it himself.

Now if you argue that he could give everything but 1 coin away, but whose to say he didn't give 1 million coins to 1 million addresses that he owns that just happen to look like legitimate other users?  I don't see any way to verify that the coins are indeed given away, and not just redistributed back to himself.

If you think this is a good idea, then start an altcoin, give part or all of them away, and see what happens.

Either his accomplices/clones/puppets act substantially the same as non-accomplices or they don't.

If the accomplices act substantially the same as non-accomplices, then it doesn't matter. The supply and demand will be the same. The currency will still be just as useful as either a means of exchange or a store of value.

If his accomplices act substantially different from the way non-accomplices would act, then you have a way to tell -- the supply and demand will be what would be consistent with accomplices rather than what would be consistent with non-accomplices.

That's not to say it doesn't matter if someone cheats, lies or steals. That's definitely bad and probably criminal. It's inexcusable and we would probably hope that such a person is punished. But it's not going to effect the usefulness of the currency, assuming the supply and demand are the same. (Although, of course, it might be useless for other reasons.)

If the concern is that someone might hoard large amounts of currency and dump them on the market as some sort of secret plan to make lots of money, that has nothing to do with the initial distribution. Someone could buy up a currency to do that. Once you have something, how you can make the most money from it is independent of how you go it. (And these schemes never work anyway.)

I don't think this takes away the decentralized nature of bitcoin.  Before Satoshi told anyone about bitcoin or before anyone downloaded the client, bitcoin was controlled by a single person - Satoshi.  The only reason he lost control of it was because he told people about it.  In the same way, the first miner could lose control by giving away a portion (or all) of his first coin.

To address your other concern, Satoshi could own a majority of bitcoins now.  We have no way of knowing whether Satoshi owns none or a huge percentage.  I'll agree the chances are greater that he owns less than 25% because only half of all bitcoins exist & mining has gotten pretty popular.  But I could be wrong.  And I've already mentioned the incentives for the first miner to distribute a portion of that only single coin.

I do think its a good idea, and I would start an altcoin if I had the programming expertise.  But I'm a horrible promoter.  =D

Interesting thoughts... I honestly cannot think of any decent rebuttal to this, but somehow, the idea of it still doesn't jive with me wanting to get involved in utilizing such a currency.  I appreciate it from a logical standpoint, just not from a "gut feeling" standpoint, and I can't pinpoint why, given these arguments.

I completely share your feeling, actually. We've watched a long list of people who have brought no innovations to the table declare that Bitcoin is fundamentally broken somehow and that their alt coin is the way to fix it. (It's deflationary, that means it's broken. CPUs can't mine, that means it's broken. It doesn't force people to give money to open source software that means it's broken. It's unfair. It needs company. Etcetera, ad nauseum.)

Unfortunately, people have invested in these alt coins, causing jumps in price that have caused others to similarly invest. It's all obviously got to implode because none of these currencies had any realistic chance at being used as a means of exchange which is the only thing that can sustain them.

What I object to is people making up nonsensical claims about Bitcoin to try to make a personal profit without contributing any innovation or taking any risk whatsoever. I don't begrudge the Bitcoin early adopters because they contributed innovation and took risk.

(And if you search back, you will find that I took this exact same position long before I was associated with Ripple.)

Hmm.. responds to a thread about 100% premine while working for a 100% premined scam currency..

Get um while there hot lol

The one thing the precious metals have, (so elegantly illustrated by Adam Smith) is how they came to be valuable and how typically they were introduced into the market.

Bitcoin is often compared to gold with added benefits, but it does not share the same fundamental function, in that although gold is somewhat finite, it was introduced slowly. As technology for mining gold improved exponentially the rate new gold was introduced to the global market increased somewhat constantly. 

While the first gold was easy to get and required nothing more than a pan, it was quickly snapped up accounting for a small contribution to the overall total, unlike Bitcoin the first miners were able to mine over 15% of the total to date with just a CPU, and as the demand increased the supply diminished.  The introduction model below would be more representative of how gold was introduced.

Aptly nicknamed GaussCoin I imagine an improvement to the distribution to look something like this.
http://www.jdidesign.com/files-in/Bitcoin-Enhanced-Rate-of-Supply-2.jpg

Something like this could run parallel to Bitcoin as unlike other ultcoins, there is no big penalty for switching from Bitcoin to GaussCoin coin in the first 50% of the adoption stage (https://bitcointalk.org/index.php?topic=113606.msg1227345#msg1227345). The result will be a bigger adoption base with a larger innovators stage, this will, in my view, catapult the growth of a p2p crypto currency system to the main stream.

As in right this second. Worth half as much, right this second, if 21 million were the cap. If suddenly everyone had double bitcoins, to max out 21 mil for <insert reason here> they would be worth half as much as if the cap were 10.5 mil at this time. Again, right this second and only right this second; all endeavors, futures, and beyond is an entirely different and complex equation, obviously.

Sorry for the arrogance, just thought I would/should clarify.  8)

This assumes the supply inflation rate of gold is ideal.  This is an assumption I disagree with.  These rates are arbitrary & unnecessary.  Miners receive 25 BTC for every block they solve.  Why 25 BTC?  No market force is coming up with that number.  It is just hard-coded into the software.  What if 10 BTC every block is more ideal?  The point is no one knows what the ideal rate is except the market.  Transaction fees can & will give you that option in 2140.  But until then, our bitcoins will continue to lose value relative to having no supply inflation.

There is plenty to love about bitcoin.  And I'll take it over what is currently available in a heart beat.  But bitcoin won't be the only option forever.  I personally think a premined setup is best, but we will have to wait & see.

With a premined coin; network growth is not encouraged as strongly.

In such a system new nodes would only be rewarded for transaction processing. And as zero transactions would be occuring at startup I dont see how the fire could ignite?

I agree there isn't an ideal, or it is too complex to ever understand and wasn't ideal anyway so not worth mimicking. The only similarity I draw to gold is in primitive times easy gold was found, with primitive tools, all easy gold was found before the primitive tools became obsolete and throughout the centauries technology advanced and with each advance new gold was discovered this is in my understanding of the evolution of the world, is somewhat appropriate.  Bitcoin does not follow this trajectory which concerns me.

All I am stating is; it is probably advantages to the adoption (and propagation of the use) of gold that 50% of all gold was not uncovered millennia ago in primitive times, but discovered at a rate that is somewhat correlated with technological advances.  

To the PO's point using the gold metaphor, I think if all gold (1 BTC) were available to one "king" (Satoshi) at the start and disseminated, there would never be consensus as to the value, and it would not spread equally even though it is practically divisible and finite. To use it as money would be problematic as those without it would be at the mercy of those with it. (You would need to have similar powers to that of a state to enforce its use)  

The Bitcoin mining model is better than having it disseminated from a single source. But the Bitcoin model is still problematic.  

And here is why:
Any new technology goes through an adoption cycle (http://en.wikipedia.org/wiki/Technology_adoption_lifecycle) statistically it is similar whether it is a printing press, a new fashion of shoes, an automobile or a farming technique and the Laws of Diffusion of Innovations (http://en.wikipedia.org/wiki/Diffusion_of_innovations) typically apply.  (p2p Criptocurrency is one such revolutionary technology and will by it revolutionary nature propagate along the same lines, Bitcoin on the other hand is hindered by the market distribution mechanisms. "It is becoming too valuable to spend"  

Here is how 100% of the total Bitcoin user's saturation will occur divided up into 5 groups:  
1) The innovators 2.5% Battle to get Bitcoin off the ground - they get it and are motivated by the dream,
2) The early adopters 13.5% are the big winners who get into Bitcoin early before main stream adoption.
These are the guys that actually use it and build an economy to earn it.
3) The early majority 34% are the first to benefit from mainstream adoption,
4) The late majority 34% of the users who have to adapt or die, but missed out on the early benefits.
5) And the Laggards, 16% they are the dumb asses that refuse to acknowledge the benefits of a finite P2P Criptocurrency, but have to use it because it works.

Giving the innovators the first 2.5% have mined the first 50% of all coins, leaving the next 50% of coins to be divided up among 100% of total users (groups  1, 2, 3 and 4 and 5) now knowing group 3, 4 and 5 will unlikely mine but just be users, that leaves distribution of new coins to mostly to groups 1 and 2.

If you believe Bitcoin is going huge then we are still in the Innovators stage, total users today are less than 2.5% of all users to still adopt Bitcoin, (I hold this view and I can't logically justify it - I bout a shitload at $3 and mined a shit load more) my profit is insane, the wealth I have been given has to come from somewhere, and my future wealth has to come from Groups 2, 3, 4 and 5.

So my concern is if the cost of entry is high for groups 2, 3, 4, and 5 (they have to transfer wealth to me and the rest of group 1) to be a part of the BTC economy, and if it is a lot of wealth as I predict, the benefit* has to be huge to motivate them to adopt.

*Let's quantify the benefit. let's say I go all in: Take the 3% banking fees on a salary of $100K a year = $3000 so using Bitcoin is worth $3000 every year, + the 2% inflation the total benefits Bitcoin provide are $5000 per year so loosely speaking the quantifiable benefit is about 5% of the value of BTC. So to get the $5000 benefit I have to invest $100K of my earnings (wealth or labour).

Now if 10M people had to use Bitcoin today and say each has a yearly salary of $100K roughly speaking each user would have 1 Bitcoin, and each Bitcoin would have the purchasing power of $100K. The net problem is to join the BTC economy and receive the 5% benefit, you have to buy in and that wealth will go the group 1 and some to group 2. ( I predict it won't happen and I will not get $100K per Bitcoin for this reason.)

Experiencing the escalating cost of entry will discourage group 2 from growing by adopting Bitcoin.  Leaving me to conclude that the adoption cycle is probably in group 3 or 4 stage right now (https://bitcointalk.org/index.php?topic=113606.msg1227345#msg1227345). Unless the price was to crash to single figures then the process of risk taking will start again in group 1 and growing of the user base starts again.

Now a better model will increase the distribution of new coins to better match the growth of the economy it can never be done correctly but it would be fundamentally structured to support market driven adoption if it followed the Laws of Diffusion of Innovations (http://en.wikipedia.org/wiki/Diffusion_of_innovations).   That way allowing massive adoption and benefit to go to a larger group of participants and fostering exponential adoption to a larger user base.  And that way 21M coins can be distributed to 100's of Milions leaving the value of Bitcoin to be very high.  (innovators and early  adopters -group 1 and 2 still benefit in proportions that supersede that of getting in on apple or other similar tach stocks at inception, but allows the system to grow for maximum benefit.)

Agreed.  But you are basically arguing that in 2140, the hashrate may not be high enough to protect us.  And in that case, wouldn't you rather know if transaction fees will be enough to protect the network before you dump your life savings into it?  I personally don't think it will be an issue & that the hashrate we have now is well above what is necessary.  But only time will tell.


The fire behind bitcoin is anonymity, control, and scarcity.  According to that survey that went around, only about half of everyone has ever mined.  I believe people could be just as excited from a different "mining" mechanism, such as Satoshi just giving away pieces of the only bitcoin on a website.  Satoshi's client could handle the early bandwidth of transactions & eat the cost of allowing zero transactions in the hopes of increased value in bitcoin.  With higher value & popularity, more people would join in mining in the same hopes & transaction fees.  In other words, hashrate would increase with value & popularity, much as it will in 2140.

By the time all 21M coins are mined in 2140 the network will be established. Then transaction processing will be the sole driving force (a powerful one at that) as nodes compete for lowest hash/watt to offer lower transaction fees. By 2140 a tablet will exceed the hashpower of the current network.


I agree anonymity, distributed control, and finite resource add fuel to the fire. But they are not igniters of the network infrastructure, only sustainers (great ones). But they primarily attract clients, not nodes, you need nodes to become established.

My argument is that mining rewards are the only incentive for a good network to emerge from nothing. Without that incentive I think it would be difficult to have the network emerge, people would only want to create a node to get a share of the transacting fees, which at the start of the network would be zero. And so you would need to establish the economy in order to establish the network, such a scheme would not ignite easily.

Your proposal is an interesting idea, just not as optimal as mining rewards IMHO.

I finally did some reading on Ripple.  I didn't realize how similar it was.  I don't really get the point of OpenCoin.  But the premine giveaway idea of XRP is basically what I'm talking about.  Too bad XRP can only be used as transaction fees instead of actual currency.  Obviously people could & do trade them online, but bitcoin's method of trading & transaction fees mixed into one is genius.  Maybe the success of XRP as an actual currency may prove whether a premined bitcoin is a better way to go.

I think you missed the point that Ripple is a credit and payment system that allows people to borrow and pay fiat currencies like dollars and Euros. You can compare Ripple and Bitcoin, and people inevitably do, but the main problems Ripple is intended to solve are totally different from the problems Bitcoin is intended to solve. A hammer isn't as good at putting in a screw as a screwdriver is, but it's what you need if you want to drive in a nail.

And I hope the best for Ripple & its intended purpose.  But doesn't mean its intended purpose will be the reason for its success.  The more I read about Ripple the more I realize it is almost exactly what I was envisioning.  People can trade Ripples in addition to them being used for transaction fees.  So they can be used as currency.  The only real issues I see so far with Ripple is network security & divisibility. 

Where bitcoin has way too much network security, Ripple has almost none.  There isn't enough incentive for people to run servers.  People who run servers in bitcoin are rewarded with transaction fees.  The transaction fees in Ripple are destroyed which increases everyone's wealth proportionally, but doesn't benefit the people running servers.  Of course there is an incentive to keep the network safe & running, but that only goes so far.

Maybe a better model would be if everyone running a Ripple server got an equal piece of the transaction fee.  Then ripples won't reach their divisibility limits as quickly since they will be used more as currency than as their intended purpose.  But what do I know?  Seems to be working for them so far.

If Ripple is widely adopted, there will be a huge incentive to running servers. People who do high-volume transactions, arbitrage, or the like will need a high-bandwidth pathway into the Ripple network, and nobody is obligated to provide it to them. If they don't run a server, they may have to move from server to server, get banned, be required to do proof of work to prove they're not malicious and so on. The best way to do it will be to run your own server and share the burden, then other servers will be willing to give you everything you want because you are also giving that to them.

Also, I think your analogy to Bitcoin isn't quite right. Bitcoin has to reward miners because it needs massive amount of computing to secure the block chain. It's hard to imagine people will just pile on more and more computing power for nothing. Ripple doesn't need proof of work to secure it. A closer analogy to a Ripple server would be a regular Bitcoin server that's relaying transaction and serving blocks to anyone who wants them. People don't get any reward in Bitcoin for relaying transactions or serving blocks. (This analogy isn't perfect. Ripple servers do more work than non-mining Bitcoin servers do but still not nearly as much as mining. And miners have an incentive to make sure blocks can move quickly because they need that to keep their block rewards.)

I don't expect this will actually be a problem. I think there are plenty of individuals, non-profit organizations, and commercial operations that will find it in their interest to run Ripple servers. If not, then it will only be because Ripple isn't providing enough value to justify the cost of running it, in which case it would deserve to fail.

We tried to find a way to do that, but we couldn't come up with one. There's no way to measure system-wide how much work someone is really doing as opposed to simulating fake servers that don't do any real work.

It is possible that servers might charge people for "priority" or "high volume" connections. I don't think that model will be necessary, but it's always there.