If your open to suggestions might be better have a fixed inflation rate and adjust block rewards accordingly. Say you wanted to fix inflation at 2%.

((Number of coins in existence / 100) * 2) / (60 * 24 * N. days this year) /  (N. Blocks mined last minute) = Block Reward

So if you launch with 100,000 Altcoins (possibly put them in a none profit AltCoin foundation or something). The first block reward would be:

(((100000 / 100) * 2) / 525600 / 6 = 0.00063419584 Alt per block

You could also either hard code or create a formula to keep the inflation rate high the first few years (to increase coin circulation faster) and then fix itself.

year 1 inflation 20%
year 2 inflation 15%
year 3 inflation 10%
year 4 inflation 5%
year 5+ inflation 2%

Nobody is going to buy a currency with that kind of inflation rate. Your looking at 20 years until inflation reaches an except-able level of ~5% (518400 / (518400 * 20) * 100 = 5.

Also add my new upcoming currency "piCOIN" - the slogan will be "There is enough pi for everyone" or "Because pi tastes better than bits"

I've made a small script that collects data from blockexplorer to generate some statistics about bitcoin's running costs.

http://rainydayapps.com/bitcoin-efficiency/

It updates every 24 hours. When I have enough data I'll add some graphs and stuff, should be interesting to see how things change over time.

Interesting, i had only thought of increased transaction volume requiring increased security, but I guess the amount available to steal i.e. the market cap is the real driving factor.

$1.4 billion dollars on security seems like an expensive requirement for something only worth $2.1 billion. The point still stands, as the block rewards decrease the security of the system will fall, so at least some must be surplus. Really its better for the collective group to not push up the market price until enough transactional volume is being processed, else we are just wasting extortionate amounts of money on not much.

It's better to own 1% of a company that is operational than 10% of a company gone bankrupt.



I have a number in a database that can be changed anytime (without the company even knowing you wanted to buy a share)
VS
I have a part of a master bitcoin which can be invalidated at anytime by a company deciding to move to a different "master coin".

The point is law enforcement and trust is still required.


No, it's illegal to trade with information which isn't available to the public (all traders are meant to be on the same playing field). Directors have to declare all deals they make. If your an employee of a company who sells your shares right before a company releases bad end of year results the SEC will come for them.


Imagine an oil company attempting to take over a company which has just invented a new form of reusable electricity. Once the oil company has taken control they could drive it into bankruptcy. If shareholders know someone is building a significant stake they can refuse to sell, in the proposed system they would have no idea until it was too late. Another example is monopolies: if you don't know who owns companies then you don't know if there is genuine competition or just one group colluding. On the london stock exchange all holders with over 7% stake have to declare themselves.

But then it doesn't really have any advantages on the "trust" side, I'd probably rather trust and 3rd party broker than the company itself who has more motive to cheat.

The only advantage is the ownership is public. But if all you have is a bunch of anonymous address the information is useless. If shareholders are anonymous how do you prevent insider trading? How do I know if one single holder has control of more than 51% of the company? Large shareholders legally have to be declared so you know who is running the show and what conflicts of interest there maybe.


I guess not, I just assumed the phrase "master btc" meant one btc.

- With this method you don't either. What is stopping the company changing to a different "master btc", leaving you with one normal bitcoin.

- Bitcoin is divisible by 8 decimal places, so a "master btc" can be divided to 10 million shares - that isn't enough for most large companies.

- A company can never raise capital by issuing new shares, which is common practice.

- If you have to pay transaction fees to trade shares your slowly giving away part of your company to miners

One more thing to add. Consider these scenarios:

We have approx. 14 million coins left to mine.

1) If the price of bitcoin stayed at $10 tomorrow then by the time all bitcoins are mined we will have spent in the region of $140 million dollars on electricity.

2) If the price of bitcoin rose and held at $100 tomorrow as a collective group we would spend $1.4 billion dollars.

What is gained in the 2nd scenario? The security provided is surplus to requirements and cannot exist at that level when the 50 BTC block rewards stop. We are paying to distribute wealth but using that wealth in the process.

Sure things were different bitcoin is now much more popular and can support a larger ecosystem of miners. Also a few months ago we were still going through the "gold rush" e.g. the cost of producing a bitcoin was significantly lower than the market price. Things are now starting to reach their natural equilibrium where the electricity cost of producing 1 bitcoin is close to the market price (not quite there yet).

New advancements in hardware efficiency only effect energy consumption briefly. Once all miners are using the new technology they now have lower costs and competition forces difficulty to increase until their profit margins are the same. If GPU's are twice as cheap to run then miner can afford to run double the amount.

Ok bad analogy, "worth" was the wrong word. However if I buy a t-shirt which costs $10 not because I want it or have any use for it then yes I am in deficit $10 until i manage to find a buyer. However people buy t-shirts because they have a purpose, to wear, they have a a fundamental use as a product. If at anytime the t-shirt "system" closed the manufactures have their money and the customers have their t-shirt, nobody looses. However the bitcoin "product" does not have a use outside the system, so if at anytime the bitcoin system closed the miners would have their money, but the holders would be left with a bunch of worthless hashes. The bitcoin system is insolvent, requiring a constant injection of new cash which means eventually someone has to loose out.

What if everyone in the bitcoin economy was using a shared pot of money. In the current bitcoin system anytime a person buys a coin a small profit goes to the miners (staying in the pot) but the majority goes to the power companies (leaving the pot). When the system closes the miners can take their small profit but the the majority has been spent on electricity, leaving the pot looking decidedly empty. If bitcoin was of negligible cost to manufacture when an investor bought a coin all the money would go to the miners, staying in the pot. When the system closed the holders still loose out but the miners have made significantly more, there is a redistribution of wealth, but as a whole the group breaks even.

Until 2014 miners will be producing some 7200 blocks / day which at a market price of $10 requires an input of $72,000 / day to pay them. At $30 it is $216,000 / day (or nearly $80 million dollars a year). The miners are parasites feeding off the collective bitcoin system, but not even they will be the real winners, as a collective group we are throwing our money away. Sure, while the system is running we get some use out of bitcoin as currency but the cost of this dwarves all other types of money and the bigger the system grows the more and more people that will suffer.

This is true, there is some difference though. If I purchase Windows i'm not expecting to my get anything back from it, as long as i'm able to use it for a certain length of time i will be happy. However with bitcoin people who purchase it are expecting to receive their investment back (whether that be by purchasing services/goods or exchanging back for USD).

 - If a miner produces 1 BTC at the cost of $1.
 - $1 production cost goes to the power company, leaving the system.
 - I buy the coin for $1.10, believing that i will be able to purchase goods/services worth that value.

How can the coin be worth $1.10 when $1 has already left the system? The system is insolvent.

Zby is right, the 50 btc mining reward has no value when paying electricity costs. All that matters is you've got x amount of USD coming into the system and x amount USD going out. Its true that miners are bringing more coins into circulation, increasing the Market cap and on paper creating a USD profit. But There is no guarantee there will be a buyer in future, to me it just sounds like a bubble.

For example even a few months ago when mt.gox was exchanging $3m per day. Let's say all of that is new income (extremely unlikely as people buy and sell multiple times. - $31,128 electricity per day is still 1% wasted. On the 28th July the volume was only ~$60k that means over 50% would be swallowed in electricity costs.

Bitcoin users are supporting this ecosystem of miners (not just electricity also time/hardware costs). Rather like the government I can't help but think a large deficit must be building.

I thought this was an interesting point.


So for all bit coin bought today nearly 8% of our money will be spent on keeping bit coin secure. Does this not seem wasteful to anyone else?

This really made me lol.

25% chance of ddos. 75% chance of incompetence.

I think you have absolutely no evidence, but i'm on board anyway.

>> https://github.com/macourtney/Dark-Exchange

Standings:

janedoe   $ 0.01
MadduckUK   $ 0.50
Enochian   $ 0.90
lardycake   $ 1.00
cbeast   $ 1.82
wegotpickles   $ 2.33
sammoocow   $ 3.00
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TonyHoyle   $ 4.99
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nemo   $ 12.10
DamienBlack   $ 12.25
Prze_koles   $ 12.34
jibjabz   $ 13.00
flug   $ 13.25
Havoc   $ 13.32
tulkos   $ 13.33
Isepick   $ 13.37
iya   $ 13.37
Slab Squathrust   $ 13.50
digdugg67   $ 13.56
killer2021   $ 13.69
pokermon919   $ 13.75
RomertL   $ 13.85
3txx   $ 14.00
The Bitburglar   $ 14.32
foo   $ 14.47
aeroSpike   $ 14.53
zottel   $ 15.00
Bth8   $ 15.60
Crs   $ 15.70
phatsphere   $ 16.32
natobombs   $ 16.38
£   $ 16.40
Peter Lambert   $ 16.45
trippp   $ 16.92
hex   $ 17.00
BtcNmcMiner   $ 17.01
kwukduck   $ 17.50
skull88   $ 17.50
kjj   $ 17.51
FractalUniverse   $ 18.20
imperi   $ 18.30
bcearl   $ 18.33
joepie91   $ 19.10
Maria   $ 20.00
flyswatta   $ 21.47
martin   $ 22.03
qwk   $ 30.00
opticbit   $ 33.00
Clipse   $ 34.00
TiagoTiago   $ 50.00
bitprotection   $ 114.00

Median is $13.32, tradehill is currently at $13.42 . Although i'm going to look into my crystal ball and predict some downward movement until gox is trading.