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Author Topic: Early speculators' reward  (Read 6896 times)
Mike Caldwell
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The Casascius 1oz 10BTC Silver Round (w/ Gold B)

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June 01, 2011, 04:15:57 PM

You should talk to unk. He proposed a chain with a block reward of 50 coins forever and said he would create it himself if no one else was interested. I think that would still create heavy deflation and wouldn't stop the whining about early adopters so I proposed a chain in which the reward grows with difficulty. I was just mocking unk evidently since that would produce hyperinflation but if you added diminishing returns to my method then I really think you could have a viable chain which solves both "problems" of deflation and late adopter jealousy.

A few months ago I lobbied for the exact same thing, which was derisively referred to (and still is) as "inflatacoin".

I was successfully persuaded that that's not a good idea, and for an unexpected reason.  Although "inflatacoin" may make sense from an economic perspective, one thing that is critical to the success of cryptocurrency including Bitcoin is getting the whole world to take a serious look at it.  And the 21 million limit and the "ponzi scheme" aspect help to give it a significant level of virulence - people are motivated to spread it and entice people to toy with it, who ordinarily wouldn't be geeky enough to ever consider such a thing.

What I feel I didn't realize while promoting "inflatacoin" is that the 21 million limit is an important part of that virulence.  I am persuaded that if you take that element out, it becomes much less enticing to the person hearing about it for the first time.

When people hear about Bitcoin, I believe they think, "that's stupid, how could that ever work?  if it's on a computer, no one can stop people making counterfeits any more than they can stop people from trading MP3's".  Then when they are told there is a hard limit to the number that can be created, and that it actually works it almost provokes them into arguing why they think they're right, which leads to them learning why they are wrong.  It is essentially a gimmick that helps overcome the hardest hurdle: learning the damn thing.

I have indeed bitched and moaned about the "ponzi" nature of Bitcoin.  But there is one huge bright side for the world.  If as a Ponzi scheme, it spreads to ubiquity, and if Bitcoin grows exponentially to the point that its "pyramid" collapses due to the inevitable end of potential participants, what this will mean is we'll have a world full of people who know about cryptocurrency and nobody who hasn't heard of it yet to sell it to.  In spite of some big winners and some big losers in the so-called "pyramid", in the end, we'll have a world familiar with Bitcoin with faith in cryptography, and a society empowered to create and willing to adopt a new cryptocurrency that is perhaps not so unfair (relatively speaking), but still is enough for the world to tell the Federal Reserves and other central banks of the world (not to mention PayPals, MasterCards, etc.) to jam it up their rear end and that they're not needed (or at least need to be far more competitive with the public)... a feat which as of today is impossible.

So... from an advocate of "inflatacoin"... I would suggest that for the good of the spread of the cryptocurrency concept, inflatacoin be shelved.  For the time being, with the first block halving a ways away, it won't even make any difference now.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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June 01, 2011, 11:39:43 PM

casascius: you are right on two really good points there ... the 21 million limit works really well as a 'hook'. I do not know if the number was intentional or not but it works.

The decimal point could have been put in any number of places, e.g. now it is proposed to moved so that 21 million number will no longer be strictly true. To the first glance a number like 210 billion would have been "forget about it" ... it is purely psychological but if the number is low enough a second look is warranted. The fact that it is a hard limit is more important than the actual value but the value of that limit is psychologically effective as a hook.

Second good point is that if nothing else, bitcoin will create a wide debate about what money is and how it is the bankers have screwed society over for so long by hiding behind the ignorance of the wider population. A widespread debate and people just re-evaluating what has value in their lives will be disruptive enough. After 15 years of trying to tell people why gold is important to their economic freedom, a wide debate on nature of money and why control is the hands of the powerful few would be mana from heaven.

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