Bitcoin Forum

The idea is inspired by revcoin's topic http://forum.bitcoin.org/index.php?topic=19278.0

To prevent deflationary spiral that may come some day, I have a very simple suggestion: all the miners and mining pools make an agreement that transaction fee should be a function of activity(or "age") of payer's address/account, which can easily checked by tracing back it's information in old blocks. Old account will spend more transaction fee to make the transaction confirmed, unless the payer build a powerful mining rig and successfully create a block to include that transaction.

For those account with huge amount of bitcoins, if the owner want to spend them in some day that each bitcoin can exchange for 10000$, he/she may only be able to trans 1% of them, and the rest 99% will be charged as transaction fee. He or She will still be a rich person, but bitcoin will not make any one a billionaire by simply hold a large amount of bitcoin for several years.

I think the idea is feasible： miners can earn more by this 'rule', and daily users of bitcoin will not worry about the bitcoin they spent will have severalfold purchasing power after one year and grudge to use them.

With this "rule", bitcoin will become a "currency" rather than "digital gold".

First the proper place to discuss such topics is Economics subforum.

Second there are already 20+ such threads. I for one enjoy some deflation of deflation critics.

This measure is easily defeated.

1. Create two receiving addresses within the same wallet
2. Daily, transfer all funds from one receiving address to the other

Now I am maintaining activity and so do not need to pay these extra transaction fees.

Just ignore this post if the idea have been suggested before.  :)

That won't work. As I have mentioned--transaction fee is a function of the age of account(address), which do not means that you wont be charged if your account is a one day fresh account. If you have 100BTC, and you transfer it from one address to another daily, you might be charged 0.1BTC every day--63.5BTC left after one year, or you let your money sleep for one year, and get a 20BTC charged for spending the rest 80, you may definitely prefer the second choice.

If this is implemented now, cant I just move my btc between two wallets like once a week or once a month?

Great idea. Go make your own block chain now.

What is so wrong with early adopters becoming rich. What incentive is there for people to participate during the early hard time like the Mt Gox hack, DEA crackdown on SIlk Road and theft of $500,000 worth of BTC? What is the incentive if people come along and decide that it wrong to make profit for taking risk?

Furthermore, the whole deflationary spiral thing is a myth of Keynesian economics. More info:

https://en.bitcoin.it/wiki/Deflationary_spiral

Why should he? He's suggesting miner's fees...

He should rather build his own pool and enforce these rules there - additionally document this so well, that other pool operators that agree with him also can easily enforce this ruleset.

It is much easier to get 50% miners to conform with this idea (and block other 50% of miners who do not conform) on a new block chain where you control 100% of mining than on a 10 Thps block chain where you control 0%.

Edit: made bold a part of my post for those with reading comprehension issues.

Having 50% of miners following these rules would only mean that it takes 50% longer for someone putting up a transaction that does not conform with these rules until it gets coded into a block. It would hinder noone to mine them into blocks themselves, hiring miners to manually put this transaction into blocks (could be even something for your mining contractors? 0 fee, always guaranteed on your mining cluster like Luke-Jr does with his Eligius Pool + client patch) even if 99.9% of the network would follow these (artificial) rules.

To forge this into a block chain, some serious development effort would need to happen to ensure only such transactions are allowed.

The point of the OP is, that such transactions are allowed in Bitcoin, but in his/her opinion not desired, so miners should not include them.

To enforce such a rule, a LOT of miners would need to be convinced (as only 50% would just mean that it would take just twice as long until it gets into a block - so it takes 7 instead of 6 blocks to confirm...).

Great Depression made up too?

you are basically proposing the "Freigeld" theory: http://en.wikipedia.org/wiki/Freigeld
in particular what gsell calls "cash flow safe".

whatever you think of it, the fact that there seems to no decision yet still about transaction fees shows you that bitcoin is in a very early stage.
when all is said and done, bitcoin could be Freigeld. or not.
no decision yet.

I'm not against early adopters. Satoshi Nakamoto should be as rich as Mark Zuckerberg does if bitcoin survived. but bitcoin will not make any one a billionaire by simply hold a large amount of bitcoin for several years.--I don't think early adopters will do so, they will spend their money to open business to make bitcoin success and earn more.

I write is just for those who worry about deflationary spiral--if this happen some day and it really turns out to be terrible, the bitcoin community have ways to solve it.

Deflationary spiral? I don't believe there is such a thing. Inflation? Yes. Deflation? Shady.

From Wikipedia:

"Whether deflationary spirals can actually occur is controversial, with its possibility being disputed by Austrian school libertarian economist Robert Higgs."


And it would require wages to be paid in bitcoin being a driving factor of the economy. Just not seeing it happen. Even.

Exactly. Miners can earn more because the new rule will force users to spend there money and there will be more transaction fee generated. I don't think convincing miners will be a issue.

I'll quote myself

OK, so I'll generate a new receiving address every day. You don't know the age of my wallet, all you can know is the age of the receiving addresses. You don't even have any idea what receiving addresses belong to my wallet. And even if you did know the age of my wallet and all of the receiving addresses inside of it, I can always just generate a brand new wallet whenever I wanted.

Feel free to do so then, not just outlining some ideas here: convince the pool operators of deepbit, BTCguild and slush as a starter - just head over to the Mining --> Pool section and off you go! :)

I highly doubt though that they would do this, partially because at least Tycho and slush are early adopters as well... ;)

@Vladimir:
To override someone's blocks, you need to find 2 blocks faster than they find 2 blocks.
This would also mean that the total hash rate of the network is no longer Miners_with_fee + Miners_without_fee but only the portion that is larger. Should this average around the 50% mark, this would be even more disastrous, as blocks would regularly become invalidated by the other fraction. All in all the total hash rate would be cut in half - something that not even miners who want more TX-fees (the current ones are a JOKE, seriously!) would risk. Also it would cut the income of these miners in half, block generations are worth far too much currently (and as it seems also for the upcoming decades!) to make this risk desirable of forcing your ideas by using 51% attacks.

doesnt matter. when transaction fee is a steady function of time transferring your coins to a new address every day will cost you as much or more than just keeping it where it is.

@Sukrim And how this contradicts anything I said? Or are you picking on 50% I mentioned and not 51%?

Forget that, convince the newer pools instead, the ones who aren't sitting on a BTC hoard would stand to gain enormously.  This would be a boost to the majority of miners who don't own a lot of bitcoin, a sort of wealth re-distribution.

OK, I understand where this is going now.

But.

That doesn't fix anything. If it is a directly proportional function, then there isn't really enough incentive for spending now vs later. Because it is directly proportional, all that it does is change the prices that people are willing to accept on both sides of the table. It would cause some problems early on, but eventually, the market would stabilize and you'd have to find some other way of upsetting it again.

I'd rather pick on your "comprehension issue" flame and that you mention 10 GH/s and not 10TH/s... ;)

With a new block chain, you would have (like namecoin) first see difficulty explode and then the whole chain dying out slowly.
Also he is specifically talking about Bitcoin. Any blockchain that enforces these rules rather than leave it up to the miners would not be "Bitcoin" any more.

To enforce such a rule in the Bitcoin network, there are 2 ways:
It becomes the "de facto" minimum standard agreed upon between all/nearly all miners + pools, so it takes nearly forever until transactions that don't "fit" to that scheme are confirmed, forcing everyone to pay these fees.
More than 50% of miners want this fee and risk heavy forking, big parts of their income and that someone might come online/start mining to "overrule" them and they start 51%-attacking the network, pushing blocks with undesired transactions out of the block chain. The bigges this fraction becomes, the easier it gets to invalidate "rogue" blocks, so after some time, once a part of the miners has "won", it will become impossible to get a transation into blocks, that doesn't conform with these rules, as it will be 51%-overruled as fast as possible. This however would very likely lead to a split or to people fleeing from Bitcoin, who are not happy with these rules.

+1 Please go and start your currency.

@Sukrim. Fixed typo, and have reading comprehension issues here myself now, failing to see what is it you trying to argue with me. All I said is basically that the idea is non starter in current blockchain. Could be done in a new block chain. I did not say that such new block chain would be viable.

Exactly. Not to mention that basically bitcoins would be worthless and would disappear since nobody would want to hold them. Why hold bitcons when they devalue in time, when you can hold gold or silver. Its fucking retarded.

I hope this guy starts this new currency so he realizes for himself what happens.

I'm not advocating this, but it isnt as easy as that to dismiss. there is a whole economic school proposing this for "regular" money.

google "freigeld" or "freiwirtschaft". I'm not sure though how many resources you'll find in english since it was started by a german: http://en.wikipedia.org/wiki/Silvio_Gesell

thats the point. > velocity of money

It is not retarded! People would be have more incentive to spend bitcoins instead of holding them. 

Also they wouldn't 'devalue', in fact they would appreciate in value just the same, as more people started using them, but they would be more useful as transactional tokens rather than a store of wealth.

I don't yet see any convincing arguments against this idea.  I wonder if what you're really saying is "get yer filthy 'ands off me stack o coins"

aral, we've just seen, wave after wave after wave of noobs coming in and screaming 'unfair! I cannot get 1% of all bitcoins in existence! Let's change the rules right now or I'l throw a tantrum!'

the best answer we can come up with is 'go get your own block chain going'.

I dont see how this is anything against early adopters. it is about the price structure of transaction fees, which AFAIK are not yet decided upon and subject to change. the FAQ or something says so.

Aral with all my heart I implore you to leave Gessell aside and study real economics.

With your system bitcoins would become worthless and nobody would use them. They would not circulate because nobody would accept them. But you odnt have to believe me. Go and start your own currency. Its a small change in the code, its very easy. Go and do it.

The transaction fees are subject to supply and demand and free market forces. Moreover they are currently heavily subsidised by 50 BTC block reward.

It is as reasonable to insist on some particular 'fee schedule' as it is to demand that all bitcoins shall be sold at a particular price, like 17.5$, for example.

The only viable way to dictate any particular 'fee schedule' is to successfully execute 50% attack and split the network by not including into your winning chain any blocks generated by miners not conforming to dictated fee schedule. Good luck with that.

One can suggest miners to adopt some particular fee schedule, and if it is reasonable miner probably would use it. However, given 50 BTC subsidy, and anti-spam fees as implemented in the current official client there is not much reason for miners to use any other 'fee schedule'.

I suppose that if someone agrees to pay, let's say, 10 BTC to those who solved a block while using some particular 'fee schedule' than it might work. Hopefully, this someone has lots of money to pay such subsidy. In such a case I would be the first one to implement paid for 'fee schedule', unless it somehow threatens the network.

bitcoin is not as decentralized as people think.
notwithstanding a major screwup by those guys, > 50% will adopt what the handful of people who are developing the official client decide should be the default.
and they apparently say: we're not sure yet what transaction fees will look like.


I hope someone does, even though I'm not convinced of the idea.
you can't be against central control of currencies and against competition of currencies at the same time.

the regular client already enforces some transaction fee rules to avoid spam and DOS attacks.
when it is decided by only a few guys that the official client only accepts transaction with a certain transaction fee and there is no "revolt" by users, miners cant do anything about it.

no I dont. see my post above.

WRONG:
If more than 50% of miners are pissed enough that Millions of BTC get shifted around but nearly no fees are being paid, they can as I said 51%-attack the network and force fees as they wish. If the official client doesn't do what they want to, that's the official client's problem.

The Eligius pool for example ONLY includes transactions that follow a certain fee structure and also offers a modified Bitcoin client that automatically pays them (cheaper than the current fees by the way, but for every transaction). There's not much to loose currently for pools, transaction fees are anyways only 0.1-0.2% of a block reward...

I doubt however that the fee structure you propose will be adopted.


Including free transactions comes at a cost: Storage space. Every kB of transactions gets stored on every Bitcoin node all over the world + transferred + verified... a huge waste of ressources that is leeched by people doing transactions for free. The only thing saving them right now is that pools are operated by idealists rather than economists, at least to a certain degree. This won't be the case all the time.

I can't start 'my own' currency, perhaps with a critical mass of people who think this is a better system that would be viable.  

And as for Gessell, you are now claiming that he was not a 'real economist'.    This is utterly untrue, he was an influence, among others on John Maynard Keynes.  This idea has merit and again you cannot present any argument against it.  'It would become worthless' Why?  There would still be 21 million coins, this system only increases the velocity of that money and discourages hoarding.  The value of the coin remains the same. The idea that hoarding is a good thing, that is the really crackpot thing I heard people claiming on here.


This is an interesting idea, not a 'noob tantrum'.  

That currency deflation is a bad thing is fairly conventional economics, and the problem of the 'liquidity trap' is very real.  It is entirely logical for people to withhold investment because they have more to gain by hoarding excess money.  Sure I can go and read all the Austrian school writing about how that's all Keynesian nonsense but I've not seen anyone on here yet with an argument that is anything more than handwaving or ad hominem attacks.  

Being an influence of Keynes is nothing to be proud of, on the contrary. They would be worthless because there would be no demand for them, regardless of their number. But please, prove me wrong. Start your own currency. You can and its very easy. Attracting people will take time as it did with Bitcoin. But its doable. Do it and prove me wrong. Start your own currency.

that is what I called a "revolt" above. how likely is that about to happen?
about as likely as someone actually succeeding after you said "f.. your idea, go fork the blockchain if you want it".

users and miners are going to accept whatever the official client enforces, unless the developers of that client screw up big time.


there's actually pretty good evidence that deflation isnt a problem at all, like during the industrial revolution or after wars. but I don't wanna turn this into an age-old debate about economics.

you are already proven wrong.
currencies are accepted today even though there is inflation.

built-in devaluation as is proposed here is just an "honest" form of inflation, i.e. you don't see the value of your money decrease, but you actually see your money decrease.

there isnt much difference, acceptance-wise.

There would be still be demand for their value as transactional tokens.    Presumably you agree they are useful for that.  If not, what exactly are they for?  Currency is a medium of exchange.   Gold for example is scarce but although this makes it highly valuable it isn't used for international trade.  The dollar is.  I thought bitcoins would be extremely useful for global trade, you think I'm wrong in thinking that?

Is this a joke? Inflationary currencies are being accepted because the government forces them.

The USA had three central banks before the Fed. Everytime they lost the monopoly on money imposed by the government and they tried to stay in business they went bankrupt. Dont tell me that people accept inflation voluntarely, people are forced to accept inflation.


Yes there is, because people know that this currency will lost value if they hold it so they will just drop it until nobody accepts it. The only way for an inflationary currency to work is impose it using violence. But please, start your own currency and prove me wrong.

Economists are useless gasbags.

One of the few jobs where being wrong is not only compensated, but expected.

Ok, stop pissing off and be honest. The dollar is only accepted because the USA government imposes it by force. Ive seen enough of this. IOm done. Go and start your own currency.

hello?
I usually dont argue with "you fail to understand", but you don't.
all I'm saying is that the majority will use the official client.
you aren't saying there'll never be a new version again, are you?



there are no changes to the protocol needed.

absolutely untrue. they just have to become the standard currency somehow, violence being one way.

in fact, the first inflationary currencies were NOT imposed by violence.
gold smiths took gold on deposit for receipts, which became currency.

guess what happened.

Ok, this thread is officially retarded. Enjoy.

I hope whoever you have a talk to in the future enjoys your way of discussing something  ::)

Trolling how-to for bitcoin forum:

1.  Show why hoarding is bad for debt based fiat currencies.  (aka deflationary spiral)
2.  Show that both debt based fiat currencies, gold and bitcoin are money.
3.  ???
4.  Hoarding must be bad for all types of money!
5.  We need to change bitcoin so people don't hoard it!!!!

Just like the majority of us use the official WWW client (http://en.wikipedia.org/wiki/Mosaic_(web_browser))?

The bitcoin devs are currently putting a great deal of effort into bootstrapping alternative clients.

good, then I'm not a troll because I never said anything close to that.
I don't even advocate this change.

the mistake I made here apparently was trying to actually discuss the idea instead of the usual "go f... yourself and your idea" answer you get on this board.


note that I am NOT OP.

Miners are taking whatever getwork they get from their pool operators. As long as they get coins for that, they are fine.

Users can't do anything about fees imposed/forced by pools - if they require 1 BTC fee or nothing gets transferred, then they have to enter 1 BTC as a fee or nothing gets transferred. Simple as that!
As fees are currently as low as possible, and it's not expected that miners wnat to have LESS fees, the official client will happily relay any transaction that has more fees than it itself requires.

the transaction doesnt even reach the miner if the client doesnt relay it. look up the current rules against SPAM and DDos.
second, why would the miner be against that? we are talking about a fee the miner collects.

No... the mistake that you have made is not doing any research before your posted... Not searching the forum for the 1000 other threads that is topic has already been debated to death with.

Everyday... we get the same people declaring the same 'arguments' and the same 'solutions' to the said problems of the deflationary spiral... lack of demurrage, hoarding, no inflation.  These come from a key lack of understanding about the natural differences between debt based money or asset based.

Both viewpoints are covered in the wiki article:
https://en.bitcoin.it/wiki/Deflationary_spiral

However,  I always believe that a non-deflationary currency will always be at an economic disadvantage to the deflationary one. As the deflationary currency will be more attractive.  Upon market saturation... the change of the fixed amount currencies value will be in DIRECT RELATIONSHIP with the change of the total economy size... This is extremely healthy, as only very profitable ventures will get money.

Inflation based currencies (esp debt based ones), create an artificial demand for growth. Causing most of the world's problems... unsustainable growth is unsustainable. Only linear growth can be sustainable.  Exponential growth, will always end in disaster.

I don't believe in a deflationary spiral either, neither in debt money nor in socalled asset money.
but I accept that others do because there is no hard evidence on either side.

lets hope there will be competing currencies so this can be shown.

This isn't true!  The US government does not force you to use the dollar and other local currencies are used in some places.

I see you did not even attempt to defend your claim that bitcoins would be worthless under this proposal.  I am genuinely disappointed by the defensive response to this thread.  Maybe the OP was a troll but I am not.

And yes I actually think it's very likely that a new currency will emerge from this morass.

The client currently relays nearly ANY transaction - as soon as there are fees, it will even more likely relay it than less likely. Miners would charge higher fees than currently, not lower and the client bans "too cheap" transactions, not too expensive ones.

Hope this is clear now.

Once more than 50% (of the hashrate) of the miners are willing enough to risk their reputation because they are making losses or whatever, they can force the whole bitcoin community to pay arbitrarily large fees according to any model they want. If someone includes a transaction that they don't like, they would have to 51%-attack this block and fork the blockchain off invalidating these unwanted transactions.

They can include their own payout transactions for free anyways if they want to, so that's not an issue.

was clear before


right. any why couldnt they decide they only want to charge more for long inactive addresses because they dont wanna punish moving your moneys around or the real bitcoin economy (goods and services)?

voila - the free market has implemented OPs idea.

Internet will treat censorship as damage and will route around it, surprise, surprise. If a miner wants to process free or low cost transactions he can. He could for example set up a bunch of client nodes which would route transactions to him. people would simply connect to these nodes specifically for free or low cost transactions.

Thinking that clients have any control over miners in matters which transactions to include and which to not include, is rather naive.

Give up, it is so simple, miners are free to include or not include any transactions, clients are free to woo miners with fees to get their transactions processed quicker or at all. That's it really.

Proponents of crazy fee schemes are free to bribe miners to play by their rules.

Wow, mining seems to become quite a glamours occupation, all of the sudden.

Sorry for bumping the thread after almost two mounths, but you know that I want to participate in all demurrage related threads (there aren't that many).

@ chodpaba and relative
Although miners could agree and make it happen (like they're going to do in namecoin soon to allow merged mining), a change in the protocol (not only the official client) would be needed.


There's difference or not between demurrage and inflation?
Your claim would be more accurate if you say "The only way a medium of exchange that doesn't perform well the storage of wealth function can be accepted is to be enforced legal tender". Because demurrage and inflation are not the same thing and you want to include both.
There's many proofs of the falseness of this claim working today as medium of exchange. You didn't proved wrong even the goldsmith counter-example.
And just out of curiosity, if the bitcoin protocol changed to include demurrage, would you sell your coins back for your national currency or would you prefer to exchange if for good and services?
If you had an internet business would you reject freicoins even if some service like bit-pay can turn them into bitcoins for you?


The balance of an address is calculated adding the amount of each output sent to that address. To apply demurrage, you just need to substract the storage fee from each output since the block number they appear in the chain.

@Sukrim and Vladimir
With merged mining there's no point in a 50/50 battle. If the majority of bitcoin miners want the change it will be done, if not, I new chain must be started.
I personally find much easier and likely the later option.


Miners can't avoid demurrage. It's in the protocol, their blocks would be rejected just like if a miner tries to send 60 btc from a 50 btc balance public key.


To exchange with them?
They can still hoard the gold to store value.


Yes, with deflation only the very most profitable business will be funded, but that's beyond competition, that's elitism.
With stable prices some more business with lower profitability (but still with profits) can operate.
With lower interest rates (yes, I know how bad this sound here) even more investments can take place.


The proposed currency is neither inflationary nor based on debt. It's pure cash like bitcoin because it is scarce.
I must say have nothing against credit based moneys. In fact I advocate for LETS and Ripple.
But they lack the quality of our financial system that makes the growth of debt unavoidable, which is interest.
Interest is what Gesell wanted to eliminate in the first place (no, not risk premium).
Now you will say "low interest are bad, that's what Bernanke does, it leads to miss-allocation of capital".
But are low interests the problem or the means to achieve those low interest?
Do low interests lead to malinvestments without inflation?

Sure we should start a new chain, but let's just use praxeology to prove Gesell's theory on interest right or wrong.
 

Deflationary death spiral only happens to money that are not infinitely divisible.

Bitcoin is, technically, infinitely divisible (though some limits are currently coded into mainstream clients).

Problem ?

I don't know what a "Deflationary death spiral" is. I guess you mean a deflation not caused only by growth but also by shrinking credit and thus liquidity. But that has to do with debt creation and interest, not with the divisibility of the currency.