Why Satoshi did minting RIGHT

[Realpra]

Okay so lots of people over the time have complained about how unfair Bitcoin is to the early adopters and that in fact this is such a big problem it may limit Bitcoins potential.

As we know Satoshi decided to halve the block reward every ~4 years which leads to something of a ponzi-like early distribution. Morally I don't think there is anything wrong with this:
1. Without the early adopters or Satoshi there would BE no Bitcoin. If Bitcoin stops just ONE future government from going to war because they can't print the money for it, I would have been happy if Satoshi had given himself all damn 21 million coins in the beginning!

2. Gold, stocks and most things in life act similarly - get in early to do well. Surely no one can argue that life is not viable because it is not "fair".

However what ARE the alternatives?

(0. Down-scaling over time/what we have)
1. Satoshi gets all the coins and no new ones are made.
2. Reward goes steady for ~20 years then drops to zero.
3. Reward scales UP, but then cuts off entirely after ~20 years.
4. Some kind of inflation/redistribution scheme.

Scenario 1:
Economy-wise
This would obviously be slightly unfair and likely Bitcoin would have grown very very slowly as people only slowly started to accept Satoshi's Bitcoins.
Bitcoin in this case would very likely have been overtaken by an alt-currency with better minting distribution.

Security-wise
With no incentive to mine beyond rare transactions from Satoshi/friends, mining would likely be lower than it was for Bitcoin; theoretically leading to rampant 51% attacks.
Until the real Bitcoin economy scaled up vastly security would be low, perhaps to the point of making this Bitcoin unworkable in its critical start-up phase.

Scenario 2:
Economy-wise
This would seem slightly more fair to later adopters, but would not reward early adopters for their hard work leading to slower adoption.
Some very very powerful miners would also have a great incentive to continue the reward after the 20 years mark and the hashing power to bring down challengers or users trying to stay original.

This is not such a problem with the current system because the reward slowly fades away over many years - there is both less shock and temptation.

Security-wise
Security wise it should be safe.

So scenario 2 might have done just fine, but we would very likely not be half as far as we are today and there would be some risk of getting a scenario 4 later on.
Lets be honest; ~90% of what is driving Bitcoin today is speculation - without it, Bitcoin could conceivably have spread ~90% slower or been outright replaced due to its slowness leading to temporary a crypto-currency war.
With the way Satoshi took we were spared that.

Scenario 3:
Economy-wise
This would be more "fair" in the eyes of late adopters, but early adopters would not be rewarded as I think they should be. However with this system the miners would become very dependent on such rewards and an entire industry might spring up around it. This industry would be heavily incentivized to continue the rewards leading to a fiat like currency.
Some might oppose this and keep their original clients, but such a powerful industry could feasibly kill alt/original-chains with their sheer mining power.
Scenario 2 would thus likely end up as a scenario 4.

Of course this system would also be adopted very slowly as early comers know there is no incentive to get in early and thus might wait.

Security-wise
In terms of security this system should do just fine.

Scenario 4:
Economy-wise
Some feel this ("this" often as in THEIR system) would be much more "fair" to either late adopters or all users or better for the economy.

Now I simply don't think that something bad for individual users, but good for the economy would catch on without any government or group backing it.

Now perfect money is: An IOU that you can ALWAYS get by doing some USEFUL work/investment and that you can ALWAYS trade for an equal amount of work.
Since NO Bitcoin/alt client devoid of super human AI could tell what "useful work" IS, ANY inflation or redistribution scheme would lead to less than perfect money as it would give IOUs to people/activities who/that did not deserve it.

Bitcoin instead assumes that people will trade their Bitcoin's TO those that do useful work and hence stops printing new coin once a few have been initially distributed through early mining rewards.
Hence Bitcoin is the second-best to a client with in-built godly wisdom or simply "as-perfect-as-can-get-in-real-life".

(Perfect money is not the same as a perfect MARKET mind you: In a perfect market money, whether from inflation, loans, purchases or investments, would always go where it was deserved and needed the most.
This however requires even more godly wisdom than determining what useful work is and as such trying to achieve it by blindly printing money is retarded.
You might get the reasonable idea that governments invest better than a free market of many people, but history and today's events would tell you that that theory is simply wrong.)

Security-wise
Security-wise inflation and redistribution would be fine - perhaps even slightly superior to the current Bitcoin in that miners would often be heavily subsidized where the current Bitcoin will lead towards as little mining as possible once the subsidy is gone.

However with 5 super computers crunching away already, customized hardware and the option for big transactors to mine themselves in order to secure their transaction Bitcoin will likely be safe without inflation.


That was my analysis; discuss/flame!

[Etlase2]

As we know Satoshi decided to halve the block reward every ~4 years which leads to something of a ponzi-like early distribution.

The recent threads have had nothing to do about early distribution, but the inability to be economically viable because of the overall scheme of the currency. Red herring.

1. Without the early adopters or Satoshi there would BE no Bitcoin.

Begging the question.

If Bitcoin stops just ONE future government from going to war because they can't print the money for it,

Appeal to emotion.

2. Gold, stocks and most things in life act similarly - get in early to do well. Surely no one can argue that life is not viable because it is not "fair".

Cherry picking. False analogy.

[justusranvier]

Some people are still going to be arguing that Bitcoin "isn't a real currency" and "can't form a viable economy" long after it already has.

[evoorhees]

Well said OP.

Early adopters have a higher likelihood of making lots of money precisely because they took proportionately more risk. This is how all financial markets work (or, at least, how they are supposed to work).

And it is illegitimate to claim this system is "unfair" in any way. Why illegitimate? Because it's voluntary. Nobody is forced to use Bitcoin in any way whatsoever. So anyone who doesn't like the release schedule of the coins can simply choose not to participate. This is thus PERFECTLY fair, because it's perfectly voluntary and transparent.

[Realpra]

<Basically me saying I don't like Etlase or his style of (incorrectly) using attacks against my arguing style instead of actually arguing with me>

[Come-from-Beyond]

Sorry for the swearing other guys, but he attacked first instead of discussing honestly (or shutting up).

U attacked 1st:

Okay so lots of noobs are whining about...

[Domrada]

Sorry for the swearing other guys, but he attacked first instead of discussing honestly (or shutting up).

Yeah, most of us have him on ignore already, so we only saw your reply.  

[Etlase2]

The overall scheme is: Dropping reward and NO redistribution.

The overall scheme is a fixed commodity currency with intent for extreme deflation to support any modest market expansion.

I didn't bother to read much about your alt-currency, but every other alt-currency I have heard of does something to one of those.

I assume by "one of those" you mean one of the alternatives provided by you. I would point out that you did not mention the "ease-in, ease-out" option which was a popular different option and has been mentioned in the past and in the recent threads. But beyond that, my proposal would most similarly apply to part 4, but it isn't worth my time to go into the argumentative or logical fallacies presented there, except this one:

"Now I simply don't think that something bad for individual users, but good for the economy would catch on without any government or group backing it."

How can something good for the economy not be good for the individual? Is it not the individuals that make up the economy? If not, what does? This is a logical fallacy unless you can prove to me that something other than the individuals make up the economy. If you want to argue an actual point, feel free, but no one wins an argument because their statement says they're correct.

Even if no one had been arguing about early distribution, I am in my rights to bring up any issue I want to - and THIS one is HARDLY irrelevant.
Your use of "red herring" to criticize my post is wrong. Either you didn't read your own link or you are attacking me in lame incorrect ways when you can't handle my arguments.

I am only going by the context of the discussions you have recently partaken in. You say "Okay so lots of noobs are whining about how unfair Bitcoin is to the early adopters and that in fact this is such a big problem it may limit Bitcoins potential", but contextual clues can only bring me to believe you are referring to those recent threads. Did we really need yet another thread on early adopters? Or is this just an easy point for you to defend because economic understanding is outside your realm of expertise?

You can disagree with either but it is NOT CIRCULAR, YOU FUCKING MORON!

"Why Satoshi did minting RIGHT:
1. Because Satoshi created it and without him it wouldn't exist"

That is circular fucking logic, moron.

It was not even logic; it was my opinion on morality!

Don't make a premise for an argument unless you can back it up with logic.

A rational counter could have been: "Someone ELSE, COULD have created Bitcoin, Satoshi is nothing special"

I don't need to counter a fallacy with anything.

That is not emotion, if Bitcoin stops a war or other wasteful spending that is good seen from many points of view - not just emotional.

Appeal to consequences.

Why SHOULDN'T we appeal to emotion?

Because it means you aren't appealing to reason. If I want to deal with religious fervor I can go to church.

Justice, freedom, safety and fairness - these are all pretty damn important to humans, so is anyone that mention them instantly making fallacious arguments?

No, it means you're spewing rhetoric.

AGAIN you are attacking my posts instead of what is IN them, because you are too stupid to win a single argument WITH me and you KNOW it.

AGAIN if you presented logical arguments I would have something worth attacking. You have serious trouble with this, though, and would rather champion bitcoin like a religion.

Getting born to the right parents can be very rewarding, yes?

What does this have to do with getting in early? You can't even follow your own train of thought.

Not fair maybe, but viable indeed and life is FULL with that stuff.

Ergo, "what's one more thing that isn't fair?" Rationalization

These are quite decent analogies in fact, but maybe YOU just can't see them because your brain has malfunctioned to the point of inability to do basic pattern recognition.

Ad hominem

Sorry for the swearing other guys, but he attacked first instead of discussing honestly (or shutting up).

If by "attacking" you mean, "pointing out flaws in logic", then you are absolutely correct. I can't discuss your emotions in any logical way. I can't make an argument to disprove your premise because it is based on emotion rather than logic. But think of the children!

[Dalkore]

Well said OP.

Early adopters have a higher likelihood of making lots of money precisely because they took proportionately more risk. This is how all financial markets work (or, at least, how they are supposed to work).

And it is illegitimate to claim this system is "unfair" in any way. Why illegitimate? Because it's voluntary. Nobody is forced to use Bitcoin in any way whatsoever. So anyone who doesn't like the release schedule of the coins can simply choose not to participate. This is thus PERFECTLY fair, because it's perfectly voluntary and transparent.

+1  - Yes, yes and yes.  I lost a bundle of coins because when I first started, I didn't think it would make it this far.   I only blame myself but I am not too hard on myself either.  It happens, just try and find wisdom in mistakes and move on.

[Realpra]

Sorry for the swearing other guys, but he attacked first instead of discussing honestly (or shutting up).

U attacked 1st:

Okay so lots of noobs are whining about...

In my defense it is not the first time he does that.

You can't mention one of Etlases arguments in your post without quoting every comma or he will whine about you making a "straw man" argument. (as if you would need to, to knock down his "logic"  )
etc. etc.

[Jutarul]

I think the exact reward mechanism is actually less important than other features of the cryptocurrency.

The reward has to function as an incentive. Early adopters face a decision whether they want to participate in the mining or not. The rules are laid out and it's a fair but highly competitive game from that point on.

Thus the only unfair aspect is the information about the EXISTENCE of bitcoin. Not everyone can adopt early, because they are not faced with the decision. But that's life - not everyone gets to be first on top of every mountain. Also the majority of people who hear about bitcoin DO NOT adopt!

Also, early adopters usually partially cash out at some point. This gives cryptocurrency value, because early adopters and late adopters negotiate the price. This also gives early adopters a reason to expose themselves to risk, and by cashing out they can mitigate any further risk to 0 (break even).

[Gabi]

I would like to add that we are the early adopters.

People should either invest NOW or stfu tomorrow once bitcoin reach 10.000$ 

[justusranvier]

Okay so lots of people over the time have complained about how unfair Bitcoin is to the early adopters and that in fact this is such a big problem it may limit Bitcoins potential.

It's not lots of people - it's a statistically insignifigant, but very vocal, minority.

https://bitcointalk.org/index.php?topic=110625.0

A small handful of people who feel threatened by Bitcoin stir up trouble and try to create the appearance of a controversy where there is none in fact.

[knight22]

Okay so lots of people over the time have complained about how unfair Bitcoin is to the early adopters and that in fact this is such a big problem it may limit Bitcoins potential.

It's not lots of people - it's a statistically insignifigant, but very vocal, minority.

https://bitcointalk.org/index.php?topic=110625.0

A small handful of people who feel threatened by Bitcoin stir up trouble and try to create the appearance of a controversy where there is none in fact.

+1

I hope people will stop complaining for not being aware enough to join bitcoin in earlier stage.

[Dan The Man]

What about the option for constant flat reward. 50 btc forever? You still get a decreasing inflation rate because the inflation rate as a percentage of total coins is always shrinking as the total coins increases.

[Realpra]

I think the exact reward mechanism is actually less important than other features of the cryptocurrency.

Once the crypto-currency is established I completely agree with you, but in the early stages I think its important (as long as other core functions are good as you say of course).

Take a scheme that rewards more as time passes and then drops off suddenly - this would allow most people to get a "fair" chunk of the minting-pie.
However think about that for a second: Early adopters would be relatively richer the LONGER they could keep knowledge of the currency scarce!

The longer they could delay adoption the greater a piece of the rewards they could get.

This is not so with Bitcoin where you are likely to get a significant part of the rewards early (whenever you join) and then gain the most if the VALUE of that chunk increases by you spreading the word.


So yeah, minting is trivial next to the importance of cryptocurrency, but Satoshi really did minting right - otherwise his client might actually have been outpaced by an altchain by now OR we would be in the middle of a chain war right about now!

What about the option for constant flat reward. 50 btc forever? You still get a decreasing inflation rate because the inflation rate as a percentage of total coins is always shrinking as the total coins increases.

That would also work I think. Personally I thought about dropping the reward to 1-10 satoshis then continuing that forever, just to avoid moving the decimal when coins are lost.

A good argument against it is that the whole minting phase, no matter how it is done, is basically market noise - hence the faster it is over, the better.
With a constant 50 it would take exponentially longer than for Bitcoin which will be entirely done in ~140 years.

A constant 50 at this point would double the BTC amount in the next 4 years and then again in 8 more years, with the Bitcoin scheme it will take said 140 years to do just the first doubling.

I think 140 years is a decent number because it subsidizes security in the important early phase - and then some - while still decreasing the subsidy rapidly and then ending it.

[Come-from-Beyond]

So yeah, minting is trivial next to the importance of cryptocurrency, but Satoshi really did minting right - otherwise his client might actually have been outpaced by an altchain by now OR we would be in the middle of a chain war right about now!

I'm sorry, but I'd like to point that Bitcoin uses "mining" not "minting". Minting is used in other coin.

[Realpra]

I'm sorry, but I'd like to point that Bitcoin uses "mining" not "minting". Minting is used in other coin.

Minting is an English word referring to the creation of new coinage, the mining subsidy is how Bitcoin mints its initial units.

Mining however continues after the minting phase with transaction fees to secure the blockchain. They are separate concepts.

[dree12]

I do not think Satoshi did minting right, because of the many issues that it brings:

• A mature Bitcoin deflates during economic growth and inflates during economic decline
• The initial minting artificially inhibits free-market transaction processing mechanisms
• Not all coins are created equal; i.e. bitcoins are not truly fungible: PPPool or Eligius coins are worth less than solo-mined coins
• Very early adopters are unfairly rewarded (I admit I am in this category); indeed, this slows adoption in the middle and later phases of adoption
• Currently, Bitcoin's money supply is hyperinflating at unrealistic rates, and this will continue for a while

[Jutarul]

Very early adopters are unfairly rewarded (I admit I am in this category); indeed, this slows adoption in the middle and later phases of adoption

But that truth holds for every other SUCCESSFUL project which ends up in an IPO.
You NEGLECT to mention all the other projects which bite the dust in the meantime. Then being a very early adopter means you lost your investment (time and money, maybe some opportunity cost as well).
So just like ABBA sings... the winner takes it all. So you should complain about life - not about bitcoin.

Turns out the minting algorithm seems to be specifically important to attract miners and secure the network. So the reward SHOULD be proportional to the state of security of the network:
- if the security is low: throw out big rewards
- if the security is high: throw out small rewards

That is indirectly achieved in bitcoin through the competition effect. Also, it is interesting to see that PPcoin adds another aspect to that equation: the reward is a function of difficulty.
So miners are even more rewarded in case the difficulty of ppcoin drops to critical levels!