Yes and I'd say its an accurate reflection of the BTC community, everyone gather round and prepare for the deflationary-rapture.

What kind of non-sequiter is that?  Your paycheck is the valuation of your labor and uses the units of currency to denominate that value, the question is do you deserve to be given more, equivalent or less value by society then your labor was initially worth at a later date by just stuffing the currency token under a mattress.  You argue that your act of stuffing is somehow increasing societal wide wealth in the future and thus your somehow entitled to that increased wealth (which even your argument was made by someone else's investment and work).


Then you admit that investing and not saving is the source of future wealth?  If so then only the investor can make a claim to a have earned a surplus, aka a return on investment.  Even if saving (capital formation) is a prerequisite to investment it is not investing, no risk has been taken yet.  Show me ware BTCs are actually invested in anything productive (no mining or circulating more BTCs dose not count) and I'll admit the possibility that someone might have earned a return.


Again your trying to have it both ways, if BTC's are meant to be currency then hoarding them is removing currency from circulation, removing currency from circulation causes money to rise in value and goods to drop in price.  This sends price signals through the economy and it is not a signal that encourages anyone to invest, it tells producers they are making TOO MUCH and to make less instead. 

The actual demand removed from the economy is sending the same "Their is too much stuff" signal, but the money reduction is being multiplied by the velocity it previously had, the 1 currency unit would have circulated multiple times buying goods and services and would have supported prices even more, the longer the currency is not circulating the more purchases it is failing to influence.

An investment though IS spent, its just spent on capital goods.  This sends a signal that production of capital goods should continue or even increase.  If the investment improves production and lowers costs then the investor can sell at a lower price while still making a profit and then his lower prices can make other activities profitable.  When deflation occurs from reduction in consumption and money supply their is no business that benefits because they have unsold inventory that loses value on the shelf and can then never cover it's cost of production.  So business reduce production to match the lower demand.

The end result of deflation is always a destruction of capacity and capitol to the point ware goods become so scarce that they stop falling in price and the deflation burns itself out.  The greater the deflation the more physical capitol is wasted or lost.

To clarify, for the first 3 years the mining process creates new money, most of the new money goes to hard coded addresses that are owned by a non-profit foundation and the remainder to the miner.

At all times demurrage coins are destroyed, but an equal number are added to the miners portion of every block reward, this grows as money supply grows and by the end of the 3 year issuance period the miners reward is entirely from this recycled demurrage and the foundation stops receiving coins.

So while the literal coin 'shavings' that occur from demurrage are destroyed the creation of new coins for miners is equivalent to transferring it to them, so people frequently simplify by saying the miners get every ones demurrage.

While you probably meant that in jest, it actually IS how you avoid Demurrage, loan your coins to someone else at 0%, the borrower pays the demurrage then returns your coins 1 for 1.  You've just successfully avoided paying demurrage.  Now of course the borrowed coins in the borrowers hand are undergoing demurrage too so they need to come up with more coins then they initially borrowed (just like any loan), maybe they invest, maybe they sell their TV, you the lender don't really care so long as you get your coins back.  This is what we want to see happen.

Finally someone talking some sense, these BTC fanatics see conspiracies behind everything, its like the 12 rules of 'Bitcoinery"

http://www.ritholtz.com/blog/2013/04/the-10-rules-of-goldbuggery/

Also 3D printing is never going to be used for anything but making some non-functional design and  demo pieces, its too slow, too expensive and the parts are too fragile to ever replace conventional CNC machine tool work in metal or plastic.  I blame the hyper around it on Sigulataritarian and other techno-religious types.

Address counts in the block-chain are completely un-reliable, its know that some people have created hundreds if not thousands.

Your examination of the number of client downloads is probably the best method I've heard so far as everyone must get at least that to be a user.  Look a bit deeper into that and see if you can isolate the latest version as well as identifying other possible download locations then total them up.  See if their is some division by time to see if you can pick up a change in the rate of download particularly during the bubble.

Another avenue is to look at the user accounts on major service providers such as Mt.Gox, at current difficulty levels any new users must buy coins on these exchanges so their user counts and particularly new user account numbers would give a very good indication of how many people actually joined BTC recently.  Unfortunately Mt.Gox is held in rather low regard and their figures may simply be hype.

Also beware of any estimates people here give they are quite biased, a million is rather absurd to me.

Stampbit: As we have repeatedly tried to explain to you on our forums, out demurrage code can NOT be subverted by transactions, even moving a coin every single block dose not stop demurrage because it is computer PER BLOCK.  If you want to make economic arguments against demurrage that is one thing, but do not comment on technical designs that you do not understand and appear to have spent no attempt to understand, our code dose what we say it dose.

bitrick:  Obviously loans that are only spent to consume are unsustainable and I never said otherwise.  The question to you is WHY THEY STILL EARN INTEREST when they create nothing?  Further more the whole basis of your argument that 'savings' represent a reduction in consumption and at the same time are 'invested' to create future productivity is trying to have it both ways.  If I literally just remove money from circulation and don't purchase consumer goods no investment is created by this, if anything is causes a decline in investment because demand is now lower and the decrease in circulating money has cancelled any cheapening of the remaining good that might have occurred, so now theirs just over capacity and some portion of existing capitol has to be abandoned.  If I instead Invest money either directly or by loaning it to someone then that investment IS consumption, it's just the purchase of capital goods rather then consumer goods and the total consumption has remained constant and merely changed in composition.

No one can make a rational argument that simply stuffing money under a mattress has a positive effect on the economy or increases future wealth in any way, it is instead a tax on productivity and this has been know for centuries.  Investment CAN be productive and every reasonable person can see how it generates real returns and increased wealth, but mattress stuffers can not claim those benefits as being caused by their actions.  BitCoins economy is pure mattress stuffing without a hint of productive investment (no before you ask buying an ASIC with BTCs is not a productive investment), and the nature of the coin guarantees it always will be hoarded, that is the flaw in deflationary economics.

BB:  The main problem I see with targeting Fiat is that the Fiat/coin exchange rate or CPI rate is a piece of outside information the block-chain and must be 'Injected', but WHO INJECTS IT?  We might have complete trust in government generated statistics like CPI but they just publish a number in dead-tree format.  To get that data into the block-chain you need injection and some means to validate that injection, some authority figure that is authorized to do the injection.  What ever authority inputs the information now has complete control over it, they can inject anything they want and the connection to the 'official' number is lost.

An internal futures-market solution alleviates the injection problem by making it distributed to ALL coin holders AND most importantly it requires skin-in-the-game, only with coins on the line can we expect honest inputs values that reflect changes in valuation.

As I try to figure out this future-market I repeatedly find it harder to reward a deflation prediction then an inflation prediction.  Because the deflation predictor really would be best off by just hoarding their money (ware as the inflation predictor is potentially attracted to the market because they believe their current wealth will erode).  Demurrage that is predictable though could potentially bring the deflation predictor in but only if their expected deflation rate is LESS then the demurrage rate.  In Freicoin we implemented a rate of 5% a year that's dose not vary.

One possible solution I though of last night would be to have the inflation and deflation predictors take turns paying each others demurrage.  Both sides put of an equal amount of coins to be subject to the effect.  The deflation predictor would pay for both first, then the inflation predictor would pay for both later.  The total demurrage collected would remain the same but each side has the potential to benefit if they are right.  The bidding process is done with time ware the periods the two pay for can vary to reflect a differing strength of their predictions.

Their is a weakness though, each side would need to have a great deal of money 'frozen' to pay the demurrage and possibly all of it, and this is contrary to the point of demurrage which is to pay for the liquidity of money, frozen money isn't liquid so it would be unfair to both sides.

deepceleron's theory of a 'auto-mininer' run by Satoshi that existed just to give the network a consistent block interval and which intentionally lost all it's coins seems logical given the total lack of spending on those coins.  But why wouldn't such a detail not have been made public long ago?  Why would such a miner use different addresses rather then not a clearly void address for which no private key could exist, it's trivial to do this and Satoshi would have know how.  If deepceleron's theory is correct it also implies that Satoshi didn't make the slightest effort to inform the community he was destroying a large chunk of the theoretical potential 21M coins?  Did he want people to believe those Million or so coins were liquid and could be sold?

I think its that the peaking of one line coincides with the beginning of the next one so perfectly and they are slope-wise so consistent with trend so far, if they are not the 'black' entity then they have nearly identical hash-rate and the black entity stopped mining at exactly the same moment, very unlikely.

The red lines all have considerable lower slopes so they are clearly on slower machines and their are multiple machines their because the lines occupy the same space on the X axis rather then doing the saw-tooth that the black line dose.  From the looks of it their were 2-3 people who mined a lot slower but at steady rates very early and they actually would mine for considerably longer stretches before shutting down, this probably reflects a lower concern for backing-up their wallets.

Sergio seems to have developed a new methodology of grouping early mining

https://bitcointalk.org/index.php?topic=178629.0

The 'entity' (certainly Satoshi if his methodology is correct) would dwarf the currently largest wallet by an order of magnitude.  I'm interested in seeing how if his new methodology can be combined with the conventional closure method to reveal even larger sums.

Can you go into more depth about this 'ExtraNonce field' and what it is.  Also can you extend your analysis to see other larger miners, the red dots in the graph clearly show similar parallel upward slope trends and should be able to be parsed out into a few more 'entities'.  Also dose this methodology work as a tool after the introduction of mining pools?

How many addresses are utilized in this 'Nonce closure' group and how dose combining it with the conventional closure methods change the picture?  What percentage of the network hash-rate did the entity represent during that period?  If its mining at a steady rate and we know the number of blocks it won it should be simple to determine its hash-power which as you said looks to be steady, is it consistent with a single PC?

Red I've concluded that you need to have a market to predict inflation and deflation.  Obviously some external market is a single-point-of-failure and would not work, so markets need to be created INSIDE the block-chain itself, after all markets are just sets of user transactions handled by defined rules and we know how to do that in Bitcoin type networks.

The trick is that the market can only manipulate a few things, it can't trade coins vs commodities because it has no control over external commodities and no way to convey them or even compel people to deliver them.  Thus this market needs to utilize only things that are completely under the control of the block-chain rules, and that's not much.  The protocol can be control all balances, and it knows the passage of time (roughly), but that should be enough because all we care about is the value of coins today relative to the same coins later, we don't really care about it relative to other 'stuff' only too itself.

So the solution is to have this market make some kind of special 'instrument' like a Bond in a sense that creates or exposes this time-value change in value.  Then people put bets on each side putting their money on the line that their will be inflation or deflation.  The 'clearing price' tells us what is the consensus prediction and the instrument makes the correct prediction pay off.  Now we just adjust money supply counter to the prediction, if their inflation predicted monetary base contracts, if deflation is predicted it expands.

I just haven't figured out how to structure this instrument, It probably needs to involve waiting to receive coins at some later date or having some coins 'frozen' for some period of time.  Possibly the value being bid with is time rather then coins, their are lots of possibilities but it needs to expose that time differential for both inflation and deflation.

I'm afraid I can not support coins that simply move some zeros around and clone an existing coin.  Without some compelling technical improvement on LTC (and which they refused to adopt after petitioning) I can't really see this as anything but a "me too" coin.  Also I see no indication of a committed development team that will support this for the long term and as such is a waste of time.

You and Anon are cordially invited to Freicoin ware as you say we believe in cryptographic currency but are convinced most people here on bitcointalk are hopelessly committed to incorrect economic theories (like deflation being a good thing) that are handicapping an otherwise excellent technology (I recall a vivid analogy someone on a blog used of a fine microscope being used to hammer in a nail).

I agree that the value-stabilization mechanism needs to be a part of the protocol and be entirely distributed in nature and not rely on any individual or group to function as a unilateral decision maker.  Rather it would be a bit as you describe a counter-cyclical feedback mechanism that expands or contracts money supply as necessary.

In Freicoin we have implemented Demurrage of 5% per anum, with the equivalent amount mined by miners to maintain a stable monetary base after the initial distribution is completed.  If the miners rewards were raised above or below the amount removed by demurrage it would effectively increase or decrease the monetary base.  We believe this demurrage fee to be beneficial entirely for its effects on velocity and interest rates and we don't use it too adjust monetary base, though its the logical mechanism to use when the base needs to shrink.

I do not believe that hash-rate would be an adequate mechanism, while their is strong indication that hashing establishes a floor to BTC valuation it's dose not reflect well the upward speculative swings.  I think the only way to get a handle on the problem is to run a distributed prediction market for the future value of coins inside the block-chain itself.  If the market predicts inflation less coins are made, if it predicts deflation then more are made.  All users would be able to place bets on either side putting their coins on the line and profiting if they are correct, thus by putting 'skin in the game' we can expect the predictions to be accurate.

Unfortunately I have not been able to come up with a reward structure that works, because all bets and rewards need to be in the the coins of the chain and need to be enforced by the block-chain such that the rewards are correct without any outside verification of the purchasing power.  In essence I need a transaction or financial instrument that can be bid upon and then 'won' by a party such that if their inflation/deflation prediction is correct they profit automatically and the person taking the contrary view loses automatically without any central authority deciding arbitrarily.

BitCoin already HAS a Central Bank, but no one seems to want to call it that.  Their is a entity with total control over the money supply and far from rebelling against this overlord the BTC community practically worships it as a demi-god.  It is Satoshi himself or more accurately his protocol rules that he acts through which control the mining rate and caps the supply at 21 million, everyone agrees that the decisions of this entity are ESSENTIAL to maintaining BitCoin, and when it comes to predictability and trust I must admit it beats the conventional bank hands down, you can look at some code and be sure what the protocol will do, heck we can GRAPH it out to 2140.  But the protocol is thus completely blind to the valuation of BTC and makes no attempt to stabilize that value, being blind and non-responsive dose not make an entity powerless or not a Central Bank, it simply replaces human fickleness with the human fallibility of the initial economic design of Satoshi, a design which is clearly failing at the very important job of stability.

Now oddly enough their is another part of the protocol that we can't predict in the future but which we also have a reasonably good faith in, the difficulty adjustment with hash-rate.  We can be confident that it will take roughly 10 minutes to find a block far far into the future without having any idea of what the hash-rate will be, how can that be?  Because this part of the protocol is an ongoing feedback mechanism that continually adjusts.  This principle must be applied to money supply if we want to be remotely confident of future valuation.

Your confusing holding of money with investing, In any economy the only investments that will be funded are those that can make a nominal profit (X currency in, >X currency out), the holding of money always acts a cut-off for what gets funded but that floor can be well above (or below) the level ware an investment is actually productive in a material sense. 

In a deflationary economy investments that ARE actually productive in a intrinsic material value are financially unprofitable.  Say we plant one bag of corn and harvest 9 bags a year later, a 900% increase in real value, but if money is worth 10x more because of deflation it would have been more profitable to just pocket the money and not grow anything.  So in deflation under-investment is guaranteed. 

Now don't think that society will just magically 'discover' enough super-productive investments that can beat the deflation rate.  At any time all possible investments are something like a pyramid, a few highly productive, many more that are slightly productive, and Huge numbers of unproductive ones.  Deflation dose not change the inherent productivity of investments, it just cuts off a the moderately productive investments from being performed. 

This is the logical inverse of the argument that Inflation can cause malinvestment, because it lowers the 'floor' such that some investments look profitable even when destructive (consuming more value then they produce).  The correct monetary system is the one which puts the investment floor at the break-even point between productive and destructive investments, and for that to happen the money should be stable.

Deflation is a change in purchasing power of money, it can occur because of a decrease in money supply or an increase in demand for the currency, just because monetary base is increasing dose not mean were not in deflation.  BTC is clearly well into its deflationary and has been from the earliest days of trading at Mt.Gox and has been averaging something like 1000% deflation a year even after eliminating the bubbles, this would easily qualify as for hyper-deflation.

Yes, I have a portfolio of pics of Shere Khan besides this one which I use on other sites such as github etc, keeps it interesting ya know.