All I am trying to point out is that if the thesis of this thread come true, then the reality of the situation is developed world governments will be bankrupt with limited tax options and huge unfunded liabilities/promises to voters. The pressure to find funding mechanisms for past unfunded promises will be thundering.

he's using a very lame excuse that he doesn't want to be overly criticized on bitcointalk if he releases his code that supposedly leads to Bitcoiner's losing money.

Powerful entities would game the system, turning it into a proof-of-bandwidth system, which would be a bad thing.

One thing I've learned over the course of building Armory is that those time-remaining bars are very difficult to get right.  Especially when it comes to things like downloading data that fluctuates in speed rapidly.   I have an extensive background in signal processing, yet I still can't get it right.

On the other hand ,there is a flaw in my algorithm -- it seems to use CPU-timings instead of wall-timings.  Typically this results in the system reporting that it took 2 sec to move 1% of the bar, instead of 3.2 or whatever.  This leads to very optimistic estimates.  I've been meaning to go in and figure out what is causing that, but I haven't had it on my priority list for a while.

Everybody thought I was exaggerating. "It's no problem - we'll talk to the regulators and do what it takes to become compliant like a good citizens and everything will be fine," they said.

I wasn't always what you call a "jackass". A long string of women turned me into one. Blame your sisters.

Choo choo.

Where does coinbase get their coins? Directly from miners? Or do they buy from an exchange?

a little paranoid   (must be single)

i've got some damage control to do now

Right.  The majority of the miners, working together, will always have the ability to set a lower block limit.

The block limit embedded in the reference client is there to prevent massive blocks that cannot be handled in a distributed way.  Large enough blocks mean that miners who don't have a high speed connection can't keep up.

As long as the average VPS can handle the block size, then centralisation risk is low.

Miners might still decide to keep the block size small to push up fees.  There is an inherent cost for larger blocks, since they take longer to distribute (though that depends on low latency optimisations).

I'm no protocol know-it-all, but wouldn't increasing the maximum block size increase the number of "no fee" transactions?  As the block reward drops, the protocol relies on those fees to keep miners interested. 

I agree the current supply curve may look like S2 on http://econpage.com/301/practice/mt1-s.htm.

However the perhaps the reason fees are not that low now is the following:
1.   Mining is not currently perfectly competitive and thus miners are not lowering their offer prices of their services to the marginal cost
2.   The orphan risk is currently a large risk and the marginal cost of including a transaction is actually high

The problems I am talking about do not apply now when there is a large block reward, but could occur in the future when the block reward is low and miners need to be incentivised by the transaction fee.

In a competitive market price should equal marginal cost, in that environment mining profit should fall to zero and there will be limited incentives to mine.  I propose that the system needs arbitrary limits on the blocksize to “manipulate” the transaction fee market, so that there are high enough mining incentives.  

In the current network a corollary situation occurs with respect to the difficulty and the Bitcoin price.  For example, at any given Bitcoin price, miners enter or leave the market and profit margins tend to zero and the system self-adjusts.  This is not a problem, if the Bitcoin price falls, miners exit, the difficulty falls, mining profits increase and we are fine.

Let’s consider the situation when the block reward is low and transaction fees compensate miners, then the dynamics are different.

If supply is not constrained, transaction fees fall to the marginal cost, mining profit falls and then miners exit and the difficulty falls.  The remaining miners can then find blocks more easily, but they don’t necessarily get compensated more for this, because the fees would still be low.

For example, let’s consider the music industry, improvements in technology are reducing the cost of distributing music and this is a good thing, it means more people get more music at a lower price.  If the marginal cost of distributing music is zero then in a competitive market the price should be zero and the consumer wins.  The record industry or CD production industry may suffer and shrink, which many people may argue is fine, that’s just market forces at work.  With respect to miners, it is different, users need miners to be around.  Improvements in technology which reduced the cost of processing transactions to zero, could damage network security.

The supply curve I made was assuming successful IBLT O(1) block propagation, which should reduce the marginal increase in orphan risk to alomst zero, this will leave only the small amount of computer processing as the marginal cost of including a transaction in a block.  This small cost is why the supply curve looks the way it does.  Miners include as many transactions as they can because there cost of doing so is limited and therefore the market driven transaction fee will be very low.  Then if demand increases such that there is insufficient space in blocks, supply is constrained by the limit and the price increases.  This is the area on the curve the network may need to be at to ensure mining revenue is sufficient.

Coindate, you could well be correct, larger blocks could mean more transactions and therefore if the fees fall then miners can be compensated by higher transaction volumes.

However, let’s make some assumptions about how the network may operate in the future:

1.      IBLT O(1) block propagation has been successfully implemented, and therefore the marginal costs to miners of including additional transactions is close to zero.

2.      Bitcoin mining is competitive such that there are many miners driving down transaction fees to the point where marginal cost is close the marginal revenue

These are both reasonable and desirable assumptions.  Now let’s consider the implications for transaction fees.  I propose this would result in a scenario in which fees are very low and then suddenly sharply increase as we approach the blocksize limit. For example in the following two illustrative charts the supply curve should be very close to the x-axis and then sharply increase at a tipping point, before being very close to the blocksize limit line.  In the charts the orange area represents mining revenue.

Healthy supply and demand curve for space in blocks

 
Scenario in which the blocksize limit has increased too fast


Demand for Bitcoin transactions is unchanged in both scenarios, however in the first chart mining revenue is far higher than in the 2nd chart as the orange boxes demonstrate.  This is because despite the fact that volume has increased, the transaction fees are too low because the blocksize limit has increased too fast, resulting in almost zero transaction fees.  Therefore it is important to keep in mind that the blocksize needs to be small enough to generate fees that compensate miners when the block reward becomes too small.  Reducing the rate of growth in the blocksize when the reward falls may be a good idea for this reason.  Somebody must pay for miners, distributed consensus is not free, I hope the cost per transaction is very low, however it needs to be sufficient.

3.  i think since June, Pantera used it's known considerable BTC resources obtained in the early days of Bitcoin, to sell/short down the market with a bot and occasional 1000 BTC chunks, keying off known bulls like myself to knock the market down with the goal of causing a whale or whales to finally capitulate, at which time they'd buy back the sold coins or cover shorted coins back at a cheaper price, at what turned out to be in this case @$300.  i doubt they had a specific price point; they were simply hunting for a large selloff source from a weak whale.

4.  a large economic actor like Pantera could afford to hire forum and Reddit trolls to help talk down the price.  no matter what anyone says, this type of trolling is effective in destroying confidence.  it is also well known that when there are big price moves either way ppl come to these meeting places to find out what's going on.  the fact that Severro, antibitcoinconsortium, falllling, etc. have all abruptly disappeared since Sunday indicate to me they were on hire by someone with substantial resources to manipulate the market.

5.  Pantera Capital is the major investor in Bitstamp and clearly has a close relationship with its founders.  only they would have the resources and confidence to leave large amounts of BTC and fiat on an unregulated exchange awaiting opportunities, manufactured or otherwise, considering what happened to mtgox clients.  

now it's time for them to talk the price up with bullish reports.

i welcome any thoughts or criticisms.

the great thing about the Blockchain.info investment is that of all the wallets and exchanges out there, blockchain.info adheres most closely to the founding principles of Satoshi and Bitcoin. headed by Roger Ver, you just know that blockchain.info will never do anything to compromise the original Bitcoin vision; that of privacy (tumbling), personal handling of keys, safety, and great development.

When you need clothes, food, rent, a car. Your go to currency is not Bitcoin...

Just saying

Bitcoin needs its own form of escape velocity, into the 10k-100k price to make it useful for voting and for other smaller nations to use it in place of their national currency.