Bitcoin Forum

What happens if Bitcoin market cap reaches a globally significant level? In the following I'll try to sketch why it will be in the interest of the bitcoin community to hard fork to a different supply scheme and sacrifice bitcoin's original philosophy.

Assumptions for such a fictive day in the future:

• Bitcoin becomes widely adopted for legal commerce and its market cap reaches an economically significant level.
• the bitcoin community has become ideology-free due to mass-adoption
• bitcoin holders and miners act rationally and purely out of self-interest

Consequences:

Central banks will loose power due to the unregulated cryptocurrency and they will not like that (And I don't want to discuss if they are right or wrong here.)

Governments will not like the fact that their central banks can't control money supply anymore and will therefore regulate the use of cryptocurrencies. Most probably they will forbid all companies to accept bitcoin.
(And do not think that such a ban would only be imposed by "evil governments". Such a decision could very well be made with democratic legitimacy.)

In the best case they will allow the use of cryptocurrencies under the condition that a central bank controls their money supply.
edit: This assumption is not plausible. Gov. has no reason to leave mining decentralized

So the bitcoin community will face a choice:

• Stick to the fixed supply model and get banned from legal commerce. This would destroy BTC value and bitcoiners would lose a lot of money (or more precisely: wealth) within short time.
• Accept regulation of money supply by a central bank and hard fork to a centralized money supply algorithm. This would prevent a price crash for BTC as the currency could survive as a legal means of payment

As I assume rational behaviour of at least 51% of the miners, the choice is obvious. The loss is smaller in the second case. The 21M money supply cap will fall.

Whatever.. I think you're on the wrong forum.

Didn't china ban bitcoin like 4 times?

Even if the government tries to regulate it, how effective will it be?

I wouldn't call today's market cap "significant". How many real things have you bought with BTC so far? As long as Bitcoin is pure speculation the government probably can't do a lot about it (and doesn't care too much). But as soon as it is used for daily purchase by many people a ban makes a major difference.

Sorry, but you're wrong. If we want to expand the crystallographic money supply we don't have to fork Bitcoin, that's already been done with alt-coins.

And I'm quite sure that few countries will try to ban it, and almost none of them will be successful. It's harder than banning the internet and that hasn't ever worked.

I encourage you to start an alt coin that has the characteristics that you believe are necessary for success. Then when Bitcoin fails, your coin will be there.

I get takeaways form takeaway.com and pay with bitcoin
I buy and sell stuff for bitcoins on uk.webuy.com
I buy vouchers for high street stores and amazon.com from pock.io :)
I'm now gonna book hotels any pay with bitcoin!

Bitcoin for everyday stuff :)

Banning bitcoin technology is close to impossible, I agree. But prohibiting the acceptance of cryptocurrencies for shops is a very easy task. You just state that it is prohibited and its done (on national level. But that's enough to seriously affect the usefulness and value of BTC)

And for the altcoins: Decentralized is a contradiction to central bank controlled. So its not done by altcoins today. But I agree that there is an additional scenario: The governments will issue their own cryptocurrencies and prohibit all others that are not state-controlled.

Would anybody trust Citibank-coins over bitcoins?

https://www.getbitcoin.com.au/bitcoin-news/citibank-central-bankers-miss-point-bitcoin

The Citibank report says that the technology behind Bitcoin might be better utilised if it were in fiat currency, such as US dollars or euros.

OP: No. There's an altcoin for that.

Creating an alt coin is not good enough because I would lose all my Bitcoin wealth.

OP:  I agree with you.  This is one of the biggest concerns we face and it keeps me up at night.  

Please, so that I can get some sleep, please, please hard fork the chain as soon as you possibly can and change Bitcoin as you described so that it won't get banned.

Thanks!  

This wouldn't be my suggestion. Governments around the world are just starting to learn about bitcoin. As long as there are very basic misconceptions and contradictory regulations I see no reason to act.
Moreover, those governments would first need to agree on who should be given the power over BTC money supply. I hope it will not be the fed but an international entity (with a UN mandate?).

So waiting is not a healthy option for you. If you want to sleep better: sell!  :)

The point is that you can try to fork the blockchain now - which will totally fail, or you can wait until the powers that be try to fork the blockchain in the future - which will also totally fail.

Really makes no difference to me or anyone who will continue to use Bitcoins and will never be converted over to a psuedo Bitcoin that you describe.

Except:  after you or the powers that be fork the chain to create their FiatCoin or UnCoins whatever they call it I will sell all my FiatCoins given to me by the forking process and convert them to real Bitcoins.

In fact I will sell them to you if you want them.

I really like "UnCoins" for these UN controlled coins.  Please call them that!

No government would be able to control the BTC money supply. To have that level of control would be like controlling the internet.

I would like to believe that a majority of newbies can easily be taught how important the controlled supply is for BTC to succeed.
For the next few years we are safe, and after that only time will tell.

I think this person was trying to say that bitcoin would be so widely adopted that it would almost completely replace fiat currency. Central banks would not be able to control interest rates and inflation (printing money). As a result the government would force Bitcoin to become somewhat inflationary via a change in the Bitcoin code. if the code was not changed then the government would regulate it to death.

This is not what I think will/should happen but what the above person was trying to get across.

Government loyalists can threaten all they like, I have made copies of some of the early versions of the source code just in case they try anything as I'm sure other people have, they will not win.

Hahahaha!!! Good one!!!  ;)

Whoever dislikes bitcoin can create their own altcoin and go on from there if they like the technology!!!  ;D

Government doesn't need to control Bitcoin on the technological level. That's exactly my point. All the govmt needs to do is make sure BTC holders have more wealth when forking to altered bitcoin sources and giving up decentralization. No majority will reject personal benefit (or the smaller loss) just for ideology.

And what do you intend to do with your backups in case of manipulated bitcoin releases? Start your own blockchain? With a market cap of 0$? For the kids to play with?

You have got that backwards.  Even if a majority of full nodes and miners opt to go with the protocol changes you suggest that is the new branch after the hard fork.  The blocks that continue to build on the original blockchain using the orginal protocol supported by clients that use the original protocol supported by miners that still use the original protocol is the original chain.  That is still Bitcoin, even if you attempt to name the new alt coin created by the hard fork "Bitcoin" it is still just another alt coin.

As I suggested it should be called "UnCoin" since the supply would be manipulated and controled by the UN in your ideal scenario.

Upon a hard fork that you suggest the Bitcoin holders at that time get BOTH.  The pre fork coins can be used and spend on both blockchains.  Get it now?  So if the goobermint forces a blockchain fork I would be very excited.  I get to keep, use, horde the original Bitcoins and I get an equal number of UnCoins to do whatever the hell I want to with, including selling them to the UnCoin backers like you in order to increase my real Bitcoin holdings.

I say quit talking about it and fork the chain already.  If/When they do it will be a happy day for all Bitcoin supporters!

I guess I'm not that surprised by more of these claims now after so many have been addressed and disproved over the years as far as I'm concerned.  I mean there has been alot of talk about the 51% attacks and now I'm fairly certain it's all just people looking into it a little to much and it's just become hyped. 

Not saying the discussion is bad just sharing another opinion.

A few months learning about bitcoin will teach people more about money and politics than twenty years studying under the present educational system will. That done, there is no going back to trusting governments and banks. It won't even be a matter of ideology.

OK, got your point. But I think, you're missing one important point:

Let's say you've got N BTC now. You would be cheering because after such a hard fork you will have N oldBTC plus N newBTC. You're wrong if you think that this makes you more wealthy. If the majority uses newBTC, then this will mean that the real value of your oldBTC will pop to close to nothing, because no one will want to buy those coins because no goods can be legally bought with them anymore. Of course, some illegal trade could continue using oldBTC. But this will be a small fraction of the original market (For those, something like zerocoin would be more attractive anyway).

Probably the real value of newBTC will also drop because all the hoarders see no point in hoarding anymore as an inflationary policy will be applied to newBTC.

I just want to make clear that this is not "my ideal scenario". I'm not judging anything of this with my liking or disliking. All I say is what I think could happen.

Interesting point. I myself learned a lot about the nature of money and the mechanics of money supply since I first learned about bitcoin. But "we" early bitcoiners are avantgarde and think more about its nature than anyone who starts to use Bitcoin when it already has become mainstream.

I doubt that this education you mention will change the way of the world.

I don't know anything about programming cryptocurrencies, but I'll upload it to some place like piratebay for people to download for sure, I wouldn't be surprised if someone has already done this regardless but I'm keeping the code on hand just in case the U.S actually tries something because they might target torrents as well if they get angry enough, it's good to be prepared for anything.

I do believe that as the devs go deeper to the point of no return with the U.S government that eventually they'll be threatened into making changes, they'll either be forced to make them or they'll go down fighting and bring down the whole site with them, just like with what happens regularly to Bittorrent sites.

You still don't get it.  Something like this might cause a setback and create a great buying op that is true.  However in the long run oldBTC would recover its value and more and newBTC would be inflated to nothing just like every other fiat inflation currency.

Probably t The real value of newBTC will also drop by design because all the hoarders see no point in hoarding anymore as an inflationary policy will be applied to newBTC.

Fixed that one for you.


Not true.  You made the following judgment:

Now that you have learned a little more about how Bitcoin actually works perhaps it is time to change the title of your thread.  At this point you must agree that "Why bitcoin supply will NOT cap at 21M BTC" is very misleading.  A more accurate thread title would be:

"What if the government(s) started their own alt coin?"

All that drama about forcing the current Bitcoin devs to do their bidding is totally unnecessary.  All the code is open source.  Anyone, including the goobermint, can hire a bunch of programmers and create their own alt coin to compete with Bitcoin.  The goobermint can do this fairly and let the market decide or they can do it unfairly by outlawing all competition.  They can create their new alt "UsCoin" or "UnCoin" as either a brand new alt or as a hard fork of the Bitcoin blockchain.

But, if they are going to create a centrally controlled alternative to Bitcoin they do not need to go through all the trouble of creating a decentralized solution.  They can simply create a new form of electronic fiat currency that acts kind of like Bitcoin.  In fact there is no reason to do that because, except for a very small amount of cash left in the system, the entire world fiat currency system is exactly that:  a centrally controlled electronic fiat currency system.

So this entire thread boils down to the one single question:  Will the goobermint attempt to outlaw Bitcoin and all other decentralized currencies or not?

It already has.

As long as there is an inflation safe alternative, both mechanisms will depress the value. Inflation of supply will depress the value, and people running away from it will also depress the value.

Ok. got me there. ;-) However, my OP intends to be judgement free.

You're certainly not short of arrogance.

I disagree. Your title is of course a possible scenario. But as I'm talking about bitcoin, this is covered by:


What you suggest (gov starts its own altcoin) will only open a possibility for bitcoiners to flee the sinking boat

Don't forget that bitcoin is nominally a HIGHLY inflationary currency today (~11% (https://en.bitcoin.it/wiki/Controlled_supply)). Is its real value declining? Sometimes ;-), but not in general. And certainly not "by design".

Real value of a unit of currency does not solely depend on nominal inflation of money supply. You need to consider the growth of the market the currency serves.

The day we create more than 21Million BTC is the day the first 21Million are valueless. There is no need whatsoever to change the total number of coins. It is an arbitrary number and does not matter. Even if there were only 1 BTC it would work.
Think of bitcoin as more like a pie we are cutting into slices. The number of slices is irrelevant. 

As discussed in this very thread and in hundreds of other threads just like this one:  The total number of Bitcoins specified in the Bitcoin protocol cannot be changed.  Bitcoin will end up with (slightly less than) 21 million coins, end of story.  The only thing you, the government or anyone else can do to get more is to change the protocol to allow more coins but in doing so a hard branch will be created.

Even if there are only a handful of people left in the entire world mining, using and doing transaction on the original blockchain - the one with the 21 million coin limit - that chain is still Bitcoin by definition.  Even if the value goes to $2.00 per BTC some of us will still mine it, use it, and support it, just like we did the last time it was $2.00 per BTC.

There are already what, over 100 alt coins?  There will be more and maybe someday a government controlled and backed one.  It is all good.  Let the market decide which coins live and which coins die.

Not true. Value comes from trust. Some people's trust will drop to zero if the money supply formula is changed in the source code and a hard fork has taken place. Those can stick to the old code and run the 'old' chain.

But other people will trust a centrally controlled BTC fork, because:

• they don't care about centralization (or just don't understand what all the fuss is about)
• it would be the only fork that can be used for purchasing goods legally

This is true if you see bitcoin only as a store of value or a medium of exchange. But it doesn't make sense if you want to use it as a unit of account.

If a good costs 3 BTC today and you expect it to cost 2 BTC tomorrow, you'll probably wait until tomorrow with purchasing that good if you can. Today's central banks are doing what they can to avoid such a deflation. And that is why they will certainly want to regulate crypotocurrencies if they become relevant.

Alright. Call it what you like. If you define bitcoin as the thing that works exactly like satoshi designed it, then I agree. It doesn't matter what you name it, the OP applies all the same.

I wish you good luck. Where will the security come from? If 90% of the hashpower goes to the legal fork, how easy will it be for those miners to perform 51% attacks on the genuine-bitcoin chain that now only has 10% of the original hashpower?
There is no chance that multiple bitcoin forks or altcoins based on the same mining algorithms can coexist long term. The biggest one will win because it's the only secure network.

governments will not have that kind of power once a large enough group of people realize that the infinite printing of fiat money causes almost all the problems in the world.

Once bitcoin reaches mass adoption, or even before that, a lot of people will know that the 21 limit and the decentralization are what makes bitcoin have value, and what makes it different from fiat.

I think most people would rather fight to keep bitcoin as it is than to fall from one fiat to the next fiat. As fiat is essentially worthless and people are starting to gradually wake up to this fact.

Thanks.  We will see how it goes.

When the mainstream come on board and recognise the benefits of decentralised currency, they'll also recognise the ideology that made it work and want to defend that.  They'll know by then that printing masses of fiat money out of thin air by banks and governments was just a con.  The only ones to see any benefit from the creation of fiat money were the ones reaping all the interest because the money was, in reality, just debt.  A continuous loop of theft to transfer wealth from the bottom to the top.  They won't want to go back to that once they've seen the light.

The protocol could be changed in the event that the miners were to agree to the changes.

Now the question of would the miners agree to this type of change, no almost certainly not.

The question of is this a realistic scenario, also no.

The old deflation problem. We have solved that problem, the dominators are wrong. Proof: There are always two parties to a trade. The seller would not wait, he will hurry to sell his warez. Why, because later he will get only 2. Maybe he proposes 2 1/2, and maybe you accept. It's only a half more, and you need not wait.

Why would anyone operate a business under these circumstances?  Deflation is bad for business

No proof at all. If a seller is ready to offer a discount of 17% today he will be ready to offer the same discount tomorrow (or your example is not sustainable). So if the price is 2.5 today, it will be 2.08 tomorrow.

Ok, let's play the same game with inflation (in prices). Why would the seller sell anything for 2, when he can get 3 tomorrow?

Deflation is a transfer of wealth from the bottom to the top as well. Whoever has the possibility to save money today will be richer tomorrow. The poor need to eat today, they can't wait until tomorrow.
Inequality can't be addressed by monetary policy alone.

With pleasure: Because the 3 he can get tomorrow will be worth the same as the 2 he gets today if he gets 50% interest on his savings.
In the case of deflation, nobody will accept negative interest, because they're better off by just hoarding the cash. So unfortunately this problem is not symmetrical.

Ok, I give up for now. We now set out to prove that it is wrong, with a non-inflating currency.

I give up for now. Let's see what happens when we have implemented the non-inflating currency.

Isnt it hardcoded with 21mio cap?

Of course, but its software. Change the code, convince 51% of the hashpower to use the new code and its done.

edit: You need to also convince the majority of nodes, not only the miners.

But with deflation, the cost of eating goes down so the poor can save more.

The reality is that inflation hurts the poor the most and helps the rich. Most of the wealth held by wealthy people is in the form of assets such as real estate and companies. Poor people hold most of their wealth in cash. Inflation helps wealthy people at the expense of poor people because the values of assets go up and the value of cash goes down.

Wealthy people such as bankers and politicians love inflation.

No, the salaries go down as well. Zero-sum game. If you never get the chance to save, you'll never profit from price deflation (or at least less than the wealthy).

I agree that price inflation hurts the poor more than the wealthy. But so does price deflation.

But I think we're getting off-topic here. There are a lot of threads around discussing the good and the ugly of inflation and deflation. I suggest we stop at this point and keep discussing the OP

Let's use some realistic scenarios. The price does not swing 50% one way or the other in a single day. Figure a 2% yearly deflation, what would happen? Everything would continue as it does now, with the exception that saving money makes more sense than spending money. Deflation would be bad for people with multi-year loans and good for savers, thus making people more likely to only spend money they have. It would be good for the common man and bad for bankers. Which is why we have inflation.

I see what your saying, however I think that a centrally controlled bitcoin would have zero following. I certainly have no interest whatsoever in someones coupons. That is all they would be. Basically frequent flier miles. The supply, the price, even distribution would be controlled. The fact that BTC is beyond the control of any entity is the single most important aspect of bitcoin. And I'm quite moderate. Many around here would DDOS the hell out of any site that used them.

As far as the second point I have to disagree that it only applies to hoarders. I have used BTC as a payment network for years. I do not "invest" in bitcoin, I use bitcoin. In fact I have not made a purchase online with a credit card this year. I exclusively use bitcoin online. I don't care about the price of a bitcoin today or tomorrow, I'm still going to use it no matter what. I also don't care if it is made illegal. There is nothing that will dissuade me from using it except any kind of control being exerted over bitcoin. In that case I will divest 100% and move on to crowdfunding investments.

I am getting a bit tired of fixing this lie, which is a still a lie no matter how often you repeat it.

Let's get more specific shall we?  The proposal is an incompatible change to the coinbase rules.  Specifically, instead of cutting the subsidy in half on predefined block numbers the subsidy would be set on a periodic basis by a central authority “hopefully the UN”.

Now you claim that by just getting 51% of the miners to change their coinbase rules you can change Bitcoin.  This is not true.
  
First, the effect on the remaining 49% of the miners and the entire Bitcoin network of somehow convincing 51% of all the miners to produce incompatible blocks would be identical to simply turning off 51% of the miners.  Block confirmation times would slightly more than double from about 10 minutes per block to about 20 minutes per block until the next difficulty adjustment time which would be pushed out from about 14 days to about 28 days.  So after having to suffer with 20 minute confirmation times for about 28 days the remaining Bitcoin network would be back to normal operation with half the hashing power it had before.

Now let’s look at the miners you somehow convinced to change their coinbase rules.  First, they have to find each other and form their own peer to peer network.  Oops, without changes to their code all the nodes on the network are going to reject the incompatible blocks produced by all these miners!  OK, you can solve this by somehow convincing some/most/half of the nodes to change their coinbase rules to accept the incompatible blocks.  Perhaps you promise to pay them for doing it, or, it may be easier to just fire up your own collection of new full nodes all around the world that support the new rules.  (One node inside each bank that wants to participate in the new system would do it.)  So we end up with one network of nodes and miners that support Bitcoin and a second network of nodes and miners that support the new alt coin.

Now let’s look at it from the user’s perspective.  They get to keep their Bitcoins as if nothing happened (well they have the 28 days of slow response time) and they also instantly get an equal number of the new alt coins.  Not a bad deal for them.

So, in summary, no, you cannot change the Bitcoin protocol by simply changing the rules for 51% of the miners and even if you do convince some percentage (any percentage) of miners and nodes to change the rules it only creates a new alt coin that shares the coin history with the Bitcoin blockchain at the time of the hard fork.

You blow into the same horn again, and I agree to most of your reasoning. But not to your conclusion, because it lacks one critical point.

Please answer this and prove me being wrong:

That doesn't oppose my point. You are using bitcoin as a medium of exchange, but almost certainly not as a unit of account. How do you judge the price of a good you intend to buy? You might see a price written there in BTC but that doesn't help much these days. You need to check how many dollars,euros or whatever fiat that equals to decide if the price is right. So your unit of account is de facto still a fiat currency. And I guess you still earn your living in fiat. That will stay your reference.

All this might change. If my assumptions in the OP are fulfilled, BTC might become a unit of account. But then we're back at the OP and the reasoning there.

This lie is the one I am currently addressing.  In this scenario you have somehow convinced 51% of the miners to jump to the new alt coin in addition to creating the necessary alt nodes, wallets, exchanges etc.

To do this you must have convinced these miners they are going to make more income on the alt chain than on the Bitcoin chain.

Now you are going to turn around and ask all these same miners to take a loss in revenue and go back to hashing on the Bitcoin network with the hope of performing some sort of attack?  Not only does this leave no hashing power to run the new alt coin, if your attack works and the value of BTC drops because of it you are asking these miners to take a total bath on all the Bitcoins they mine during the attack.

Getting 51% to join some sort of centrally UN controlled inflato coin is a total pipe dream.  Getting 90% to join is not even worth talking about.

BTW: the idea of a centrally contolled coinbase subsity rule requires a central point of control which in turn is a weak point in the system and an obvious point of attack for those that don't like the idea.  In other words a distributed Bitcoin network with half the hashing power is still more secure than the centrally contolled UnCoin due it its central control.

Nope won't happen cause if the miners accept the abolition of the cap then it's a free for all with unlimited coins and they become inflationary exactly like the fiat system which is the polar opposite of the ideals behind bitcoin.

I'm giving up. Here's why:

I was thinking a bit more about the choices of the government. My assumption:
is not very plausible.

Even if money supply could be adjusted by a central bank, it would not be attractive for any government to support a cryptocurrency with decentralized mining. Where would the benefit of such decentralization be if the formula for money supply was centralized?
They'd be better off by mining on their own, probably pegging it to fiat and distribute the cryptocoins just like they do with bills and coins. This - of course - is very far away from bitcoin protocol.
This solution would even save a hell of a lot of energy consumption by the miners that will by then have risen to globally significant levels together with market cap. (See: Energy consumption could become an issue if bitcoin really breaks through (https://bitcointalk.org/index.php?topic=181759.msg1897702#msg1897702)) This consumption would be futile because it can no longer be justified by the benefits of decentralization. (And I doubt this justification anyway, because there are alternatives to proof-of-work....but that's another topic)

So I agree that bitcoin will stay bitcoin, even if it will become illegal. Even if it's value drops to zero.

Thanks for the discussion.

brenzi:

First, also thanks for the discussion.

Second, I totally agree with you.  In fact if they do all the initial creating of the coins (no miners) they get to control the initial distribution of the coins as they see fit - which is what they are familiar with and used to.

It would depend on what the new cap would be set to. If the TX fees are not enough to cover miners electric costs then the cap could certainly be increased to continue to give miners incentive to mine while giving bitcoin more time to grow