Taking Down Bitcoin

[Forp]

Once again money is an abstraction. 

The goal of any venture is to maximize wealth not money. 

Yes. Agreed. Fine. That's not the point where we lost our communication. 

Our discussion starts where your posting ends. If you want to provide some kind of mathematical model for maximizing wealth - you need a unit to measure wealth in. There is none - or, rather, it is arbitrary or dependent on the miner.

You could chose a gold standard, a dollar standard, a whopper standard, whatever. It will always be relative and different from person to person. And this is EXACTLY the problem I see here.

So, let us pick some mathematical model for the behavior of a miner (whoppers or Zimbabwe dollars - your choice). The wealth function (and thus the function the miner wants to maximize) will not only depend on todays conversion rate into your chosen wealth standard but also on his belief how this conversion rate will change during the near future. Again, the concept of "near future" is different from miner to miner.

Coming back to the original example: Some miners will be conservative and considerate of inflation - they will not switch to a 51 BTC per block chain. Others are more greedy - they will not switch to a 80 BTC per block chain but might consider switching to a 55 BTC block chain, giving it a try. So what we are likely to see is an interesting form of random mixture (and the same, as another poster pointed out, will be the case for the non-mining participants in the system).

The question I am interested is no one of structural stability. IF all miners are strictly conservative and refuse to change...the system will be stable. IF all miners are stupid and ignore inflation...the system will drift to chains with higher and higher block bounties. Some where in between these two extremes we will find the "real" Bitcoin network. What can we say about this real Bitcoin network? Right now we are (as we can observe daily) in a stable domain. How far away are we from an unstable area? Or, is the beginning of the instability domain ridiculously far away? I do not know. I probably will set up a simulation on this if a have a bit more time during summer. the ongoing discussion stimulates my curiosity.
 


 

[Forp]

by crime.

Define crime. 

Short of unauthorized login and stealing keys - what could possibly define "criminal" behavior for Bitcoin? Deviation from the official protocol standard? And, btw, what would that be?

The more I think it over, BTC looks to me like an interesting form of speculation on future behavior of other people. At a more close look, every economic endeavor probably is like that 

[DeathAndTaxes]

It isn't about inflation.  Your "analysis" seems to suggest that the two chains are "equal" other than their dillution effect.

i.e. 50 BTC chain and 51 BTC have roughly the same value except the 51 BTC has maybe a 5% long term dillution effect.  If that were true you may see miners leave.

The reality is any alt chain (even an exact copy of Bitcoin 50 BTC block reward and all) will have a tiny tiny tiny tiny tiny tiny amount of value.

Say current chain is worth $5 per BTC and a 1 GH/s miner earns ~ $3 per day.  The alt chain likely earns that same miner $0.10 per day.  Why would the miner switch?  The inflation/dillution effect is immaterial compared to the fact that the alt-chain has no value and a miner joining that chain doesn't materially change that value.

We have seen it with other alt-chains.  There is a small amount of hype, a token amount of hashing, a lot of pump and dump and the chain dies off.  NOMINAL AMOUNT OF COINS doesn't create value/wealth.  Switching to an alt-chain any alt-chain decreases the future wealth of the miner.  Miner's won't switch unless the new chain CREATES REAL VALUE in excess of Bitcoin.   

It will require real innovation to make a superior product that attracts real capital, investment, and enterprise.   Merely changing the block reward doesn't do that.

[Forp]

We have seen it with other alt-chains.  There is a small amount of hype, a token amount of hashing, a lot of pump and dump and the chain dies off.  

AH. That's a good argument!

I was considering a world with a large number of alt-chains (1000 and more) and a large number of miners (some 100M) and I was studying the theoretical stability. Of course these are unrealistic assumptions. With some 10 alt chains and some 12 guys working on them, social inertia is way large enough to stabilize the system. We'll see down the road if this changes as soon as bounty drops to 1 BTC or lower. Then, probably, new incentives could come up, if Bitcoin does not pick up as fast as most of us hope.