Bitcoin Inflation or a way to increase number of Bitcoins

[Kazimir]

We all know the number of bitcoins are hard coded into the software at around 21 million.

Well, yes, but not explicitly - what is hardcoded is the 50 BTC reward per block that is being halved every 210,000 blocks. The theoretical limit is therefore 210,000 × (50+25+12.5+6.25+... until infinity) = 21 million.

Miners often wonder if mining is a long term viable activity because eventually all the bitcoins will be mined.

Nope. Currently, the Bitcoin software supports 8 decimals (i.e. up to one hundred millionth of a Bitcoin) but this precision can be easily increased. There is no fundamental reason or protocol limit why bitcoins couldn't be divided up to 50 decimals, for example.

So as long as the precision is being increased, the mining reward for each block will always become smaller, but never zero.

Only transaction fees are left.  Transaction fees may or may not even cover the power cost to keep the miners running.  And miners are important to bitcoin's network integrity.

You seem to miss the fact that this balances itself out. Difficulty vs number of miners (and their combined computing power), you know.

The mining earnings (block reward + transaction fees) will by definition cover the power cost to keep miners running. If not, some miners will quit, difficulty will decrease, and it will become easier (thus cheaper in terms or power cost) for others to keep mining.

As an incentive to keep the miners online, the community can increase the number of Bitcoins to be mined.  So how do we increase the number of Bitcoins?

Completely unnecessary. But more importantly, you seem to think that it would make a fundamental difference if there are 21 million or 42 million bitcoins. The exact number doesn't matter, it's completely arbitrary! Bitcoins are digital, therefore divisible, and it doesn't make ANY difference whether there are 21 million, or 600 quadrillion, or just 3.14 bitcoins in total.

Conclusion:

1. Should we increase the number of coins to start with? 
2.  How to modify the software?

1. No (it wouldn't make ANY difference whatsoever)
2. We shouldn't - well, eventually we can increase the precision to support more decimals, if the need ever arises, but not for now.

[Eastwind]

The OP suggested increasing the amount of coins via the stock split principle, thus in reality nothing will change.

If 1 BTC = $100, then 0.5 BTC = $50, and there would be twice the number of bitcoins as prior to the split worth the same exact amount. In case I presented it incorrectly, the Market Cap will remain the same with with twice as many bitcoins in the wild worth exactly half as much at the moment of the split.

Hell, you can do a reverse split all the down to 1 BTC = The Current Market Cap.

That said, ideally a 10:1 split would be better, with each unit seemingly easier to obtain at ~$10 each (ain't got a clue as to what the current exchange rate is, hence the ~).

I agree with the above post. We are using mBTC, uBTC. That is effectively an increase the number of BTCs.

[Bytas]

you sir are an idiot.
Doubling the amount of coins would halve their value and still give miners the same value when they mine, solving exactly squad!

It's so frustrating to see how people don't get the basic principle behind bitcoin, difficulty and transaction fees! Even after 46 posts on this forum.
It's a SELF REGULATING system. You don't have to solve any problems because there are NONE.
Miners will always get tax fee that is profitable for them. If they don't, they will stop mining and difficulty will decrease making it more profitable for the rest to mine -> incentivising mining.
At the same time people will up their transaction fee because if they don't their transactions will not be confirmed. -> making mining profitable.

You just can't knock the bit coin system of it's feet. If it gets a bump it will straighten itself out and find a new point of stability.
Educate yourself and stop coming up with problems that don't exist.

[ShadowOfHarbringer]

We all know the number of bitcoins are hard coded into the software at around 21 million.  Miners often wonder if mining is a long term viable activity because eventually all the bitcoins will be mined.  Only transaction fees are left.  Transaction fees may or may not even cover the power cost to keep the miners running.  And miners are important to bitcoin's network integrity.

As an incentive to keep the miners online, the community can increase the number of Bitcoins to be mined.  So how do we increase the number of Bitcoins?

I think the solution is to a fixed exchange rate for old Bitcoin from version 1 to version 2.  Where the exchange rate is voted on by the community. 

The analogy in the real world would be a stock split.  Microsoft had split its stock several times in the past.  We can copy the methodology.  For example, if we want to increase the number of coins from 21 million to 42 million, then we can do a 1 to 2 split, where as each version 1 of the coin and exchange for 2 version 2 of the coin.

If Bitcoins is truly useful and is widely adopted in the future, then there would be no problem for version 2 Bitcoins to retain its fiat exchange rate.  Usually following a stock split, the underlying stock price increases.

There will be philosophical and technical challenges. 
1. Should we increase the number of coins to start with? 
2.  How to modify the software?

[Eri]

Just to throw this out there. Allot of people involved in bitcoin seem to fail to notice this one point.

(Examples with totally fake numbers, but youll get the point.)

There are two ways to keep the reward for mining(Edited for clarity) the same now and in 100 years.

if the reward for mining 1 block today is 1,000,000 USD, to keep it the same 100 years from now you can do 1 of two things.

1. Have 10 transaction with a fee of 100,000 USD equaling the 1,000,000 USD
2. Have 1,000,000 transactions with a fee of 1 USD equaling 1,000,000 USD

Allot of people seem to be under the false impression that the cost of transactions MUST go up in order to pay for mining. That is entirely not true, you need only increase the number of transactions as the block reward decreases over time(halves).

Youd need to increase the size of a block and youd need to implement pruning to get rid of dead weight from the blockchain. With time, internet speeds will get faster, memory will get cheaper and hard drives will get larger. you will see dedicated setups with vary fast internet connections to move blocks faster. Even on my internet connection i can move 1MB in less then a second. The problems many people see with this are in fact not problems. but things that will come in their own time as bitcoin grows.

I hope at least some of you get what im trying to say.

[crazy_rabbit]

We all know the number of bitcoins are hard coded into the software at around 21 million.  Miners often wonder if mining is a long term viable activity because eventually all the bitcoins will be mined.  Only transaction fees are left.  Transaction fees may or may not even cover the power cost to keep the miners running.  And miners are important to bitcoin's network integrity.

As an incentive to keep the miners online, the community can increase the number of Bitcoins to be mined.  So how do we increase the number of Bitcoins?

I think the solution is to a fixed exchange rate for old Bitcoin from version 1 to version 2.  Where the exchange rate is voted on by the community. 

The analogy in the real world would be a stock split.  Microsoft had split its stock several times in the past.  We can copy the methodology.  For example, if we want to increase the number of coins from 21 million to 42 million, then we can do a 1 to 2 split, where as each version 1 of the coin and exchange for 2 version 2 of the coin.

If Bitcoins is truly useful and is widely adopted in the future, then there would be no problem for version 2 Bitcoins to retain its fiat exchange rate.  Usually following a stock split, the underlying stock price increases.

There will be philosophical and technical challenges. 
1. Should we increase the number of coins to start with? 
2.  How to modify the software?

well, the idea is stupid. However what your talking about already kind-of exists. In the bitcoin software there is a second chain called the Testnet- everyone with a standard bitcoin client can access it. People mine it, and there are about 4.5 million coins mined. :-)

[bluemeanie1]

you sir are an idiot.
Doubling the amount of coins would halve their value and still give miners the same value when they mine, solving exactly squad!

It's so frustrating to see how people don't get the basic principle behind bitcoin, difficulty and transaction fees! Even after 46 posts on this forum.
It's a SELF REGULATING system. You don't have to solve any problems because there are NONE.
Miners will always get tax fee that is profitable for them. If they don't, they will stop mining and difficulty will decrease making it more profitable for the rest to mine -> incentivising mining.
At the same time people will up their transaction fee because if they don't their transactions will not be confirmed. -> making mining profitable.

You just can't knock the bit coin system of it's feet. If it gets a bump it will straighten itself out and find a new point of stability.
Educate yourself and stop coming up with problems that don't exist.

problem is though we have many digital currency systems that require transaction fees.
 
Try this: replace the term 'mining' with a better descriptor 'transaction processing' and some of the magic seems to wear off a bit doesn't it?

[Piper67]

 The number of BTC is being INFLATED right now.  The supply currently increases by roughly 7200 BTC per day (value at the time of writing: $734,400).

 The layman sees Bitcoin as 'money from nowhere', but really every time a miner solves a block he/she is reducing the total worth of all BTC in existence.  Thus is APPEARS as though there are no transaction fees, when in reality the fees come from anyone who holds bitcoin.

 Very soon it will be possible to take short positions on BTC, making it possible to easily profit from BTC depreciation.  Thus people could easily take positions on technological disruptions, etc.

Uh, no. The supply, at this moment, increases by roughly 3600 bitcoins per day. It was 7200 prior to the halving back in November 2012.

[oakpacific]

On one hand, the system is specifically designed to make what you have in mind crazily difficult to happen, the supply of "Bitcoin" can only be increased when every current user(literally) agree to do so. Otoh, it's also ridiculously easy, you can go fork it right now and change the limit to whatever number you like.

This is Bitcoin.

[franky1]

if fee's become too low, the hundreds of thousands of miners would then move onto retail services or other things to make money. making the difficulty change and then leaving maybe 20k miners to take a bigger slice of the rewards pie with less competition so its profitable.

the whole idea that bitcoin needs millions of miners and everyone should be a miner is narrow minded, yes it is good for security but as more people join the mining pools they are just shooting themselves in the foot by not having as mucha big slice of the pie as they would without inviting 10 of their friends each to start mining.

basically, it will sort itself out in the end through natural selection. those that can afford to continue mining even in less profitable times will win, and those that demand profit promptly just to survive will move onto different income making projects.

[QuestionAuthority]

Within 100 years one of three things will have happened. Bitcoin will no longer exist in its current form, it will not exist at all or a government or multiple governments will control the system. If the liberals get their way and they can eventually use Bitcoin as an official government currency then the proof of work system will be performed by the government to ensure the continued operation of the national currency. They would be willing to do it at a loss so there is no worry.

[Kazimir]

Just to throw this out there. Allot of people involved in bitcoin seem to fail to notice this one point.

(Examples with totally fake numbers, but youll get the point.)

There are two ways to keep the block reward the same now and in 100 years.

if the reward for mining 1 block today is 1,000,000 USD, to keep it the same 100 years from now you can do 1 of two things.

1. Have 10 transaction with a fee of 100,000 USD equaling the 1,000,000 USD
2. Have 1,000,000 transactions with a fee of 1 USD equaling 1,000,000 USD

Allot of people seem to be under the false impression that the cost of transactions MUST go up in order to pay for mining. That is entirely not true, you need only increase the number of transactions as the block reward decreases over time(halves).

Youd need to increase the size of a block and youd need to implement pruning to get rid of dead weight from the blockchain. With time, internet speeds will get faster, memory will get cheaper and hard drives will get larger. you will see dedicated setups with vary fast internet connections to move blocks faster. Even on my internet connection i can move 1MB in less then a second. The problems many people see with this are in fact not problems. but things that will come in their own time as bitcoin grows.

I hope at least some of you get what im trying to say.

Read up on Bitcoin. I think you have mixed up 'transaction fee' and 'block reward'.

[Its About Sharing]

We will be find in the future. If we are still using money the way we do now in 2140, then we got much BIGGER problems. We better be closer to a Star Trek model by then. Bitcoin gets is the logical next step away from centralized currencies.

[Eri]

Just to throw this out there. Allot of people involved in bitcoin seem to fail to notice this one point.

(Examples with totally fake numbers, but youll get the point.)

There are two ways to keep the reward for mining(Edited for clarity) the same now and in 100 years.

if the reward for mining 1 block today is 1,000,000 USD, to keep it the same 100 years from now you can do 1 of two things.

1. Have 10 transaction with a fee of 100,000 USD equaling the 1,000,000 USD
2. Have 1,000,000 transactions with a fee of 1 USD equaling 1,000,000 USD

Allot of people seem to be under the false impression that the cost of transactions MUST go up in order to pay for mining. That is entirely not true, you need only increase the number of transactions as the block reward decreases over time(halves).

Youd need to increase the size of a block and youd need to implement pruning to get rid of dead weight from the blockchain. With time, internet speeds will get faster, memory will get cheaper and hard drives will get larger. you will see dedicated setups with vary fast internet connections to move blocks faster. Even on my internet connection i can move 1MB in less then a second. The problems many people see with this are in fact not problems. but things that will come in their own time as bitcoin grows.

I hope at least some of you get what im trying to say.

Read up on Bitcoin. I think you have mixed up 'transaction fee' and 'block reward'.

Incorrect. Miners dont care where their profit comes from. whether its the actual block reward or transaction fees, it makes no difference so long as they get paid.

[Kazimir]

Incorrect. Miners dont care where their profit comes from. whether its the actual block reward or transaction fees, it makes no difference so long as they get paid.

I'm not saying they care. I'm saying you are mixing up transaction fee and block reward.

You said:

you need only increase the number of transactions as the block reward decreases over time(halves).

But the decrease over time (halving) of the block reward that occurs every 210,000 blocks has nothing to do with the number of transactions.

Besides, I don't know why the hell it would be necessary to "keep the reward for mining the same now and in 100 years"...?! It will always be profitable to mine for enough people. Because if not, some people will stop mining (especially the ones who pay more for electricity), difficulty will decrease, and by definition it will be cheaper to mine until it becomes profitable again.

[kwukduck]

This pretty much covers it.]