Isn't the Dual EC implementation in OpenSSL broken anyways?

http://nakedsecurity.sophos.com/2013/12/22/the-openssl-software-bug-that-saves-you-from-surveillance/

From TFA:

First, thanks for your response. I appreciate being able to have a rational discussion about this. I am extremely excited about virtual currency and would like to discuss my concerns without being having to combat blind fanboi-ism.

I think it's difficult to find an instance of a deflationary episode after 1929, because so much is done (since then) to stop them. It's definitely difficult to find any instance of rampant deflation or inflation that wasn't or couldn't be contributed to an external factor. After all, something always has to start the ball rolling.

But we do see them start, and then governments go on money printing sprees to correct them before they get out of hand. You only have to go back to 2007-2009 during the housing bubble burst in the United States to see this. Yes, the most recent US recession was caused by greedy lending and trading schemes that created a price bubble, but the result of this bubble bursting was an influx of personal and corporate debt defaults that caused some banks to close, and virtually all banks to freeze credit. Since the United States money supply is largely generated by debt, this created a deflation in the money supply which is what caused all the problems you can still see signs of today including unemployment, entire industries failing, skyrocketing government debt (to correct the issue), etc.

Of course above we're talking about a potential for rampant deflation. One could argue that a small amount of deflation can be just as benign as a small amount of inflation. Of this, I'm not so sure. My hunch would be that hyper-deflation has a more inheritant run-away effect than hyper-inflation. If you like analogies I would hypothesize hyper-inflation is caused by a continual effort from a government to print too much money, or over-value goods and services and thus participate in pushing a hypothetical boulder up a hill. While hyper-deflation would be pushing a boulder down a hill. It doesn't take a whole lot to get it started, and once it's started it's hard to stop. But again, this is just an educated guess. I am not certain, and don't think anyone can be.

So, I guess I'm a Keynesian (I didn't know this). And as a Keynesian, the deflationary nature of bitcoin is worrying. Whether or not this will be an issue, I guess time will tell.

As for POS. What I like about POS is that blocks are generated for saving the currency (as in not spending it). The rate of generation can be controlled at whatever value you like, say 1%. This acts as a built-in Treasury Bill generation to the currency constantly inflating it at a maximum of 1% per year. This pre-defined POS generation rate would also define the prime lending rate, and give the currency room to generate interest for private loans. The community could also agree to raise or lower the POS rate based on economic indicators that would require it. Currently, all implementations of POS try to offset the POS block generation by requiring mandatory transactions fees that become 'destroyed' by the network. But in principle, without these mandatory destroyed transaction fees, POS could guarantee the continual slow growth of a virtual money supply.
 

I'd have to take exception with the following quote:


I definitely don't want to get into a pissing match with you (like some people seem to be doing in this thread) but perhaps I'd need you to explain this a little better.

From what I can reason, when the bitcoin supply stops growing we will have a rampant effective supply deflation due to many factors:
- lost/damaged currency
- population growth
- saving/hoarding

Supply deflation also causes other problems which, in themselves, cause more effective supply deflation and price deflation. Ex:
- reduction in currency supply causes unemployment, which in turn causes more effective supply deflation
- reduction in currency supply causes "effective debt value" to increase which slows credit re-payment and tightens credit availability, which causes hoarding, which causes more effective supply deflation
- supply deflation encourages hoarding, over spending, which therefore causes more effective supply deflation
- loans with interest go into default since the interest required to repay the loans is never created. This causes an economic downturn and ultimately more deflation.

It is for these reasons, and many more, that deflation can quickly become an unstoppable beast, and is therefore a economy's worst nightmare. This is why virtually all central banks across the world try to keep the money supply at a growth rate of 1-3%, and go on T-Bill printing sprees whenever a hint of deflation is detected. And since most fiat currency is generated through credit, this is why a credit freeze is so detrimental to the world economy.

Because of population growth, lost currency, and people's desire to save, you can never have a "neutral" money supply. You will always have either inflation, or deflation, and due to deflation's exponential run-away nature it is considered the lesser of two evils to keep a well controlled, very low, supply inflation rate. Furthermore, a low level of inflation determines acceptable interest rates which aid in economic growth and wealth re-distribution.

There is also a human psychological element. Supply deflation, or even stagnation, requires continual lowering of prices and wages in the face of economic growth. People typically are more resistant to a reduction in wages and revenues, versus increases.

This is the biggest problem I see with bitcoin, and why I favor altcoins that solve this issue with proof-of-stake (like Peercoin).  

I also see problems with a mining incentive relying entirely on transaction fees. Transaction fees will be completely controlled by "purchasing power" of sorts. The entities capable of providing the lowest transactions fees will invariably be the largest (in terms of infrastructure). This will naturally create transaction titans, and likely a monopoly by cartel, which is the worst thing that can happen for the bitcoin network.

Thankfully proof-of-stake solves both of these problems, so I think virtual currency has a future, but I don't believe that future is secured in BTC.

Thoughts?

I asked myself the same question and, after much research, I decided on peercoins. I'll explain why.

Ultimately I have always seen 3 things wrong with bitcoin:

1) The 22 million coin cap.
2) The network relying on transaction fees once the cap is hit.
3) The 10 minute transaction verification time.

Once the 22millionBTC cap is reached we'll have a problem. The currency will be naturally in a state of constant deflation due to lost wallets, hoarding, population growth, etc. This is very bad. Deflation is about the worst thing you can have happen to a currency. This is why all central banks work tirelessly to keep their respective national currencies at a very low level of inflation.

Furthermore, the network relying on transaction fees is going to mean the lowest fees will win. The lowest fees are always going to be produced by those with the greatest "purchasing power" which will translate to those with the largest mining infrastructure. This is also very bad since it encourages the network to become monopolized by one, or a few, big players. When a few big players monopolize any industry they form cartels. This is the single worst thing that can happen to bitcoin as it puts the entire network (and currency) in the control of a single entity.

And finally, the 10 minute transaction time is just not feasible for in-person point-of-sale transactions.

Peercoin solves 2 out of these 3 problems. Peercoin works exactly like bitcoin except it also uses a proof-of-stake system. This proof-of-stake system is designed to kick in once the block generation rewards reduce to 0. In essence it is a way to ensure a 1% return on participating in the network at very low electricity costs. This essentially acts like a T-Bill or GIC as a guaranteed savings vehicle and consequently encourages network diversification. It also helps to mitigate against potential deflation by guaranteeing a 1% inflation rate for all staked currency participating in the network.

It does not solve the 10 minute transaction time but I see this as a minor problem since its unlikely any government will completely embrace a currency it doesn't have control over. I think best case scenario, virtual currencies will be used like a commodity to back national currencies (much like gold used to). However, virtual currencies will probably always dominate online and international transactions where the 10 minute verification lag shouldn't matter.

Your argument would be served better by a real rebuttal rather than a veiled attempt at condescension.

From my position, I would argue that there is no such thing as a completely stable currency. With a currency like bitcoins that has an upper limit to the amount that can exist, you are going to continually (albeit probably very slowly) lose currency to factors such as lost wallets, hoarding, and the like. Without a small level of inflation you have, invariably, a small amount of deflation which is far more devastating. This is why virtually all national currencies aim for a 1-3% annual inflation rate.

TL;DR: 1% inflation > any amount of deflation.

Also the 1% inflation acts as a form of investment "interest" for the network. I wouldn't be surprised to see bitcoin monopolized by a cartel of ASIC miners once block rewards disappear. Network monopolization is the one thing that threatens to destroy a virtual currency. Nobody can argue against that.

With Peercoins the 1% gain by participating in the proof-of-stake network acts like a GIC, or T-Bill. It is the safest place to store your money and get a guaranteed return.

Disagree.

I think Bitcoin has 3 fundamental problems:

1) The 22 million cap.
For good economic reasons you always want a very low level of inflation in a currency.

2) The decline in incentive to mine at the 22 million cap.
The fear is that, especially with the invention of ASICs, the network will become monopolized by a few big players once the rewards become prohibatively small for the "hobbiest".

3) The 10 minute transaction confirmation.
This of course is not acceptable for point of sale transactions.

Several alt-coins have been developed to address these issues. The best of which (imo) is Peercoin. With Peercoin's proof-of-ownership scheme it ensures the currency always grows at a steady 1%. This means the currency both has no cap, and consequently always ensures miners receive at least 1% interest. This alone solves problem 1 and 2 with bitcoin.

Peercoin does have the same 10 minute transaction confirmation as bitcoin but I don't believe is as big of a problem. I find it highly unlikely that any government will use a decentralized virtual currency as the official medium of exchange. I think best case scenario virtual currencies will be used to back, or provide value, to a countries currency in replace of the US dollar. This will isolate direct virtual currency transactions to the online world, in which a 10 minute confirmation is completely acceptable.

Just my 2 cents... and my newbie post