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Author Topic: The deflationary problem  (Read 30814 times)
Vladimir
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June 05, 2011, 02:09:42 AM
 #61

People assume wrongfully that inflation is bad.   To respect to security, inflation is not only beneficial but necessary.  Otherwise a declining hash will compromise the security of the network.

Let's preserve this for posterity. Now read this again. Now we bring up deflation in combination with decreasing by a fraction of % hashing power 30 years from now. That's a new level of ...


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marcus_of_augustus
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June 05, 2011, 02:11:32 AM
 #62

Pure genus isn't it?

Yeah, the more you dig the more you find ... satoshi must have had some exposure to control system theory (not to mention the myriad other topics). The stability during boot-strapping (what we are experiencing now) is actually harder to achieve than in the stable case ... and then it combines a system that caters for both.

Wonder if there were any design notes on that aspect of it?

Aside: in the middle of the financial crises in 2008 Henry Paulson placed Neel Kashkari, a recruit also from Goldman Sachs with prior training and experience in multi-variate aerospace control systems, in charge of monetary systems at the Treasury. (i.e. the exchange stabilisation slush fund, the PPT).

http://abcnews.go.com/Business/neel-kashkari-tarp-bailout-czar-leaves-washington-california/story?id=9269413

"According to the Washington Post, Kashkari, who left his post at the interim assistant secretary of the treasury for financial stability in May 2009, is enjoying his new life, a move he told the paper he's dubbed the "Washington detox."

Today, Kashkari's daily routine includes chopping wood found on his property near the Truckee River and building a shed, ..."

Quantumplation
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June 05, 2011, 02:26:09 AM
 #63

This issue hadn't been addressed, please stop saying that.  It's a lie.

If it had been addressed someone would have Provided a sufficient explanation in this thread.  I have yet to see one.
Thus to me this issue is problematic for bit coin.

People assume wrongfully that inflation is bad.   To respect to security, inflation is not only beneficial but necessary.  Otherwise a declining hash will compromise the security of the network.

Please, point out your problems with the issues as I have presented them.  [hypocritical ad hominem]Or did you not read my posts because they were too long and hard to understand? [/hypocritical ad hominem]


Against my better judgement... 1ADjszXMSRuAUjyy3ShFRy54SyRVrNDgDc
kstepyra
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June 05, 2011, 02:31:41 AM
 #64

@thread poster - at first it is going like 1/2 of the amount generated every 4 years, so it will simply go really low amount in 2100's. About transaction fees and mining - simple math man..

if now we have fees around 0.1 - 1 BTC / block - let's call it 0.3 BTC.
Let's say we have 50 transactions per block (just took a look for couple last blocks on blockexplorer) - so it's 0.006 btc / transaction. - lets even call it 0.005 BTC (~10c)

If visa really have 4000 transactions / s (and that's only VISA) then it will be at CURRENT! fee rate 12000 BTC / block   - which is about $210000 / 10 minutes for mining for all miners - which is about $30.000.000 per day for all hashing guys. So where's the problem man? Let's even say that power consuption is like $0.1 /kwh and miners mine only when they have $0.9(probably current ratio) in return for every 1kwh lost. That's about 2,500.00 Thash/s  which is like 500 times our current hash rate! If there will be need then fees will increase to get enough miners running. Remember also about block rewards till 2100 yr. To attack network someone will need to put in the machines like $1.000.000.000 dollars minimum, and it will be traceable as big power consumption on specific area, someone buying like ~5 000 000 computers of same type etc etc. - it's not that easy as you think.

Maybe i did some mistakes in calculations, or information specified is not completly proper - but for sure FEEs can be readjusted to meet network requirements.

One thing is sure -> more people in the system - safer system.
ryepdx
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June 05, 2011, 02:48:06 AM
 #65

This issue hadn't been addressed, please stop saying that.  It's a lie.

No. It's not a lie. It simply hasn't been addressed in a way that is satisfactory to you. I'm beginning to wonder what it is you're looking for in terms of a response. If you understand the system so well and find it wanting, what more could we possibly say to you? You've already decided on an answer, it seems.

If it had been addressed someone would have Provided a sufficient explanation in this thread.  I have yet to see one.

We've given you a lot of reasons why the removal of a base block reward will be a non-issue. I haven't seen you address a single one. How can we give you a satisfactory explanation if you won't tell us what your problems with the ones we've already given are? All you've done so far is call us all idiots and reiterate the points you made in your original post, points which, I might add, a number of people aside from you feel they've satisfactorily addressed. Give us something more to go on and maybe we'll get somewhere.

Thus to me this issue is problematic for bit coin.

Q.E.D.

People assume wrongfully that inflation is bad.   To respect to security, inflation is not only beneficial but necessary.  Otherwise a declining hash will compromise the security of the network.

Wrong. The Keynesian economic model you refer to is based on indivisible units. Bitcoins are, in theory, infinitely divisible. In practice we only allow transfers of at least 0.00000001 bitcoin. This can be changed, though, as smaller transactions become necessary. Thus deflation in the Bitcoin economy will look quite different from deflation in any other economy. At worst it will eventually reverse and result in inflation when someone breaks ranks and spends more than usual. But liquidity traps are not possible with bitcoin, at least not in theory. (And there is no reason at present to suspect that theory is wrong, from where I stand.)
em3rgentOrdr
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June 05, 2011, 03:17:24 AM
 #66

Reward for blocks will stop in 2040.  Yes or no?  If rewards for new blocks stop, miners will depend on transaction fees.   This decreases the revenue of the mining.  Thus mining is less profitable.  Only a fucking retard can't see this.

If mining is less profitable, hash will fall.  If hash falls the network is less secure.

Are you really having trouble understanding this?

Block generation doesnt stop on 2040.  The bitcoin per block reward decreases in half every few years, but doesn't stop.  Economics will dictate a value for bitcoin.  A miner will produce a block in exchange for the value of the bitcoin reward.  If there are not many people interested in mining due to low reward, then the difficulty rate will be decreased in accordance.  As it is easier to produce bitcoin, then a miner will be more likely to solve the hash problem to generate a block, so the reduced reward rate is compensated by the lowered difficulty rate.

"We will not find a solution to political problems in cryptography, but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of a centrally controlled networks, but pure P2P networks are holding their own."
MoonShadow
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June 05, 2011, 04:15:03 AM
 #67

 If hash declines the value of bitcoins will decline.  The hash determined the value of the bitcoin, nothing else.  The hash gives the bitcoin security.

Once hash decreases vale decreases.  The hash has to keep growing for value to icrease.

You have your cause and effect backwards.  Difficulty follows price, and averages a six week lag.  So the difficulty that would match the current rally won't show up for about six weeks.  The exchange price of a bitcoin is independent of the security level of the blockchain, but the security level (difficulty) is dependent upon the value.
He exchange price is independent of security of the network?

Are you joking?  I hope so.

No, not joking.  It's already been shown extensively by others in other threads that difficulty follows price, and that  price is not responsive to changes in difficulty.  Note the search function, it does really work.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
MoonShadow
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June 05, 2011, 04:18:20 AM
 #68

Pure genus isn't it?

Yeah, the more you dig the more you find ... satoshi must have had some exposure to control system theory (not to mention the myriad other topics).

If Satoshi is really a single person (as opposed to a front for an organization) the s/he is a true polymath.  There is simply to many areas of expertise s/he would have required to produce something of this degree of elegance on the first try.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
marcus_of_augustus
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June 05, 2011, 04:21:20 AM
 #69

Pure genus isn't it?

Yeah, the more you dig the more you find ... satoshi must have had some exposure to control system theory (not to mention the myriad other topics).

If Satoshi is really a single person (as opposed to a front for an organization) the s/he is a true polymath.  There is simply to many areas of expertise s/he would have required to produce something of this degree of elegance on the first try.

Ociam?

MoonShadow
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June 05, 2011, 04:22:30 AM
 #70

Pure genus isn't it?

Yeah, the more you dig the more you find ... satoshi must have had some exposure to control system theory (not to mention the myriad other topics).

If Satoshi is really a single person (as opposed to a front for an organization) the s/he is a true polymath.  There is simply to many areas of expertise s/he would have required to produce something of this degree of elegance on the first try.

Ociam?

What?

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
getrichquack
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June 05, 2011, 08:44:12 AM
 #71


You have. The way I understand it, the Bitcoin algorithm always seeks to have 10 6 blocks an hour solved.1 If everyone were to stop mining tomorrow, the difficulty would eventually plummet.

Well thanks for setting me straight Smiley ...That certainly makes a difference then !!
FreeMoney
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June 05, 2011, 09:23:37 AM
 #72

Where do these lunatics come from?

I don't know about these ones, but real lunatics come from the moon.

Play Bitcoin Poker at sealswithclubs.eu. We're active and open to everyone.
benjamindees
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June 05, 2011, 09:27:33 AM
 #73

You know, when I clicked on this thread, I was expecting something on the order of Bitcoin becoming self-aware and placing a monolith on the moon.

And what I got instead was "oh noes deflation!"

Civil Liberty Through Complex Mathematics
kstepyra
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June 05, 2011, 02:08:16 PM
 #74

Everything leads us to 2 thoughts:

1) everything is hard to understand in bitcoin or

2) part of society became so stupid that those people don't know how to search and read before writing such stuff?

Where did he got that 2040? From picture on wiki?


Btw. maybe lets create an easy to understand big FAQ on any often used websites such weusebitcoins or so? There is a lot of information to be explained in easy steps to prevent such misunderstanding.


my 0.02 btcs : )
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June 05, 2011, 02:42:38 PM
 #75

2040 is the new 2012? Tongue

seriously though, bitcoins really are not THAT hard to comprehend!

it /is/ a complex system but with very basic checks and balances wrapped around some rather brilliant math.

even my 80 year old grandmother understands it and is actually kinda fascinated. Tongue

ZOMG Moo!
theboos
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June 05, 2011, 02:44:54 PM
 #76

Pure genus isn't it?

Yeah, the more you dig the more you find ... satoshi must have had some exposure to control system theory (not to mention the myriad other topics).

If Satoshi is really a single person (as opposed to a front for an organization) the s/he is a true polymath.  There is simply to many areas of expertise s/he would have required to produce something of this degree of elegance on the first try.

Who says Bitcoin is/was his/her/their first try? Tongue

I don't agree that Bitcoin could not have been invented by a single person. In another thread, someone pointed out that the critical breakthroughs that make Bitcoin possible (Merkle trees, asymmetric cryptography, and the like) had been around for at least 5 years before Bitcoin was created. If Satoshi is a single person, he is undoubtedly very intelligent, but Bitcoin is more the product of clever composition of concepts than of expert knowledge of all subjects involved.
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June 05, 2011, 07:44:28 PM
 #77

Please.  Enough circle jerking.  That doesn't help this problem. 

Sure, the program is elegant but the creator obvious he isn't an economist.  Without inflation the network will become insecure.  I'm not worried about the ramifications of a deflationary currency with respect to anything besides hash.  Hash secures the network.

This is pretty much a fact at this point.  There's no way around it.  At some time bitcoins will begin to devalue after hitting a peak.  People will wonder why.  It's because miners were punished by removing inflation.  This is an inescapable conclusion.

I'm sorry people are having trouble understanding this.
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June 05, 2011, 07:48:18 PM
 #78

Please.  Enough circle jerking.  That doesn't help this problem. 

Sure, the program is elegant but the creator obvious he isn't an economist.  Without inflation the network will become insecure.  I'm not worried about the ramifications of a deflationary currency with respect to anything besides hash.  Hash secures the network.

This is pretty much a fact at this point.  There's no way around it.  At some time bitcoins will begin to devalue after hitting a peak.  People will wonder why.  It's because miners were punished by removing inflation.  This is an inescapable conclusion.

I'm sorry people are having trouble understanding this.
It's not the rest of us having trouble understanding.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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June 05, 2011, 08:10:17 PM
 #79

Please.  Enough circle jerking.  That doesn't help this problem. 

Sure, the program is elegant but the creator obvious he isn't an economist.  Without inflation the network will become insecure.  I'm not worried about the ramifications of a deflationary currency with respect to anything besides hash.  Hash secures the network.

This is pretty much a fact at this point.  There's no way around it.  At some time bitcoins will begin to devalue after hitting a peak.  People will wonder why.  It's because miners were punished by removing inflation.  This is an inescapable conclusion.

I'm sorry people are having trouble understanding this.


Sweft, I think you haven't factored in as much as you need to the replacement of the block bounty with the increase in tx fees. Granted it remains to be seen how that will play out.

Also the security of the network is just one aspect that i believe feeds into the value of BTC. When the block bounty decreases we may see a decrease in hash rate thus making the network theoretical less secure but network security is not the only factor that determines the value. If the total net-hash halves (which I don't predict will happen, will decrease but not by half) when the block bounty decreases from 50 to 25BTC, I don't expect the value of BTC in $ to half - which I think is what you are trying to imply. I believe that when the block bounty halves that even if the network hash halves it will still be prohibitively difficult for an attacker to destroy the system.
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June 05, 2011, 09:33:17 PM
 #80

ban this troll please ; - ) waste of KBs on server space. He don't even read what we write.
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