The deflationary problem

[greyhawk]

[1713570427]

1713570427

[1713570427]

1713570427

[1713570427]

1713570427

[1713570427]

1713570427

[marhjan]

Wow this thread is full of stupid...   and what's up with the crazy necro-threads lately?

[JoelKatz]

"We're all going to die because our car is heading straight for a cliff ten miles ahead."

Umm, no. We'll probably turn the wheel sometime between then and now.

[mccorvic]

"We're all going to die because our car is heading straight for a cliff ten miles ahead."

Umm, no. We'll probably turn the wheel sometime between then and now.

You don't know me!

*Continues to drive straight ahead*

[whitenight639]

(Mining profit = block reward + fees)
 
(Mining profit = (block reward)/2 + fees) in 1 year

(Mining profit = (block reward)/4 + fees) in 5 years

(Mining profit = (block reward)/8 + fees) in 9 years

It should be obvious that if you remove a source of mining income, miners will profit less.

You are incorrectly treating "fees" as a constant.

The issue with your presentation, and everyone else that has explained this, is that "transaction fees will support mining."  

1) There's no proof of this.

There is strong evidence to suggest that fees will increase significantly over time.

2) It really does not matter.

I think I am finally beginning to understand your misunderstanding. You seem to think that:

• Incentives only work if they are "new" coins
• Therefore, inflation is necessary to provide an incentive
• Therefore, anyone disagreeing you must be afraid of inflation

Your premise (first point) is wrong.

Your second point is wrong due to relying on the first point.

Your obsession with point three is baffling.

+1000 killed off OPs Trolling, also reading this thread i was amazed to actually learn something, the whole deflationry thing and the velocity of money correcting itself as tx / block reward changes very interesting, also as the value of a currency rises people will still spend, if there Btc goes from $300 to $400 overnight and they need there weekly shop then they will just buy there weekly shop and keep $100 to appreciate in value, the only hoarders will be those that can afford to hoard and there appreciation will be the same per bitcoin as everybody elses.

I think when the mining of new coins ends we could see (as some suggested) smaller companies take on Tx processing as they have interests to keep the network alive, this seems to be a good thing as any centralisation of miners over time could be reversed, and that would put Tx processing back in the hands of everybody.

[Sweft]

(Mining profit = block reward + fees)
 
(Mining profit = (block reward)/2 + fees) in 1 year

(Mining profit = (block reward)/4 + fees) in 5 years

(Mining profit = (block reward)/8 + fees) in 9 years

It should be obvious that if you remove a source of mining income, miners will profit less.

You are incorrectly treating "fees" as a constant.

The issue with your presentation, and everyone else that has explained this, is that "transaction fees will support mining."  

1) There's no proof of this.

There is strong evidence to suggest that fees will increase significantly over time.

2) It really does not matter.

I think I am finally beginning to understand your misunderstanding. You seem to think that:

• Incentives only work if they are "new" coins
• Therefore, inflation is necessary to provide an incentive
• Therefore, anyone disagreeing you must be afraid of inflation

Your premise (first point) is wrong.

Your second point is wrong due to relying on the first point.

Your obsession with point three is baffling.

+1000 killed off OPs Trolling, also reading this thread i was amazed to actually learn something, the whole deflationry thing and the velocity of money correcting itself as tx / block reward changes very interesting, also as the value of a currency rises people will still spend, if there Btc goes from $300 to $400 overnight and they need there weekly shop then they will just buy there weekly shop and keep $100 to appreciate in value, the only hoarders will be those that can afford to hoard and there appreciation will be the same per bitcoin as everybody elses.

I think when the mining of new coins ends we could see (as some suggested) smaller companies take on Tx processing as they have interests to keep the network alive, this seems to be a good thing as any centralisation of miners over time could be reversed, and that would put Tx processing back in the hands of everybody.

I most certainly understand the transaction fee scenario, but you don't.

For BTC to to have value, miners must secure the network.  If miners do not constantly increase hash, Moore's law will catch up to the network and it will become prone to attack.  This should be easily accepted as fact.  If you don't accept this premise i can't possibly help you understand the deflationary flaw in bitcoin.

If you don't understand, let me try to explain it again.   If hash remains constant and doesn't increase for a number of years, technological advancements (Moore's Law) will make an 51% attack more likely.

Now what some people seem to argue is that tx fees will support mining growth.

This is true in two scenarios.

1) bitcoins are sent/received more frequently (velocity)
2) tx fees increase

I will addresses the problems with both scenarios.

The problem with #2 is that there is a cap on maximum fee the miners can charge, at 100%.  So velocity remains constant, miners cannot increase profit beyond 100% tx fee.  So this cannot create increasing profit.

The problem with #1 is that bicoins can be permanently lost, and there is a hard cap on the amount of bitcoins.  That means that there will eventually be more bitcoin lost than is generated by block reward.  This should be known as the 'Sweft point' where bitcoin turns into a deflationary currency from an inflationary one.  Thus, to believe that transactions will increase as coins are lost, aka deflation, is not a sound proposition.

Another issue is that rogue miners can mine the network, charging tx fees and sending the coins to the trash.  This would further exaggerate the deflationary tendency of the bitcoin design.  

Thus it should be obvious to anyone that understands the issues to also understand that there exists a simple solution which will make the person who implements it rich.

Make an alt currency with a cap minimum 3% inflation.  This will satisfy the profits of the miners and hash of the network.

[Kettenmonster]

Who cares for 2040? The world ended already last year, thus why worry? 

[marhjan]

Make an alt currency with a cap minimum 3% inflation.  This will satisfy the profits of the miners and hash of the network.

Wow...   please just go and do this, and don't bother your pretty little head about bitcoin ever again.  It's truly staggering how little you understand, and how utterly unaware you are of your lack of understanding.  But seriously, please go design your alt-chain, I wish you luck with it.

[markm]

Make an alt currency with a cap minimum 3% inflation.  This will satisfy the profits of the miners and hash of the network.

Wow...   please just go and do this, and don't bother your pretty little head about bitcoin ever again.  It's truly staggering how little you understand, and how utterly unaware you are of your lack of understanding.  But seriously, please go design your alt-chain, I wish you luck with it.

At least two altcoins already keep issuing the same number of coins per block forever, which is a big step in the "desired" direction, so how about go promote those for now as the best so far and maybe as you become a major investor in those their makers might listen to your arguments that even that is not enough and a coin must be made that increases the nubmer of coins issued per block...

-MarkM-

[Sweft]

Make an alt currency with a cap minimum 3% inflation.  This will satisfy the profits of the miners and hash of the network.

Wow...   please just go and do this, and don't bother your pretty little head about bitcoin ever again.  It's truly staggering how little you understand, and how utterly unaware you are of your lack of understanding.  But seriously, please go design your alt-chain, I wish you luck with it.

At least two altcoins already keep issuing the same number of coins per block forever, which is a big step in the "desired" direction, so how about go promote those for now as the best so far and maybe as you become a major investor in those their makers might listen to your arguments that even that is not enough and a coin must be made that increases the nubmer of coins issued per block...

-MarkM-

I don't believe that will provide the necessary level of inflation necessary to keep increasing hash.  The inflation rate will continuously decrease.

My proposal is a constant block reward until that rate of inflation approaches 3%, then you adjust block reward to annually create 3% inflation.

Whoever implements this and adopts this will be rich because I am certain that at some point BTC will fail.

[markm]

Well we shall see I guess. Let us know when our constant minting coins reach 3% so we can watch the transition to the point at which your modification will be needed to keep them at the top of the heap.

Meanwhile its not clear people are even seeing the value in just the never decreasing minting, maybe you need to push that so people catch on to it first, if you can do that maybe they will then be prepared to believe it should also be modified when it reaches this magical 3%.

By the way, have you graphed how the usefulness / adoption / value / anything changes at 2.9%, 3.1%, 2.99%, 3.01% and so on to prove 3% is truly the peak point?

-MarkM-

[Sweft]

Well we shall see I guess. Let us know when our constant minting coins reach 3% so we can watch the transition to the point at which your modification will be needed to keep them at the top of the heap.

Meanwhile its not clear people are even seeing the value in just the never decreasing minting, maybe you need to push that so people catch on to it first, if you can do that maybe they will then be prepared to believe it should also be modified when it reaches this magical 3%.

By the way, have you graphed how the usefulness / adoption / value / anything changes at 2.9%, 3.1%, 2.99%, 3.01% and so on to prove 3% is truly the peak point?

-MarkM-

The problem is that I don't understand why Satoshi designed the protocol to be deflationary.  Gold has been mined for 7000 years.  The amount of gold in the universe is almost infinite.  Most people accept that gold is a store of value.  For BTC to be almost fully mined in almost 20 years means that early adopters have a huge advantage that is unlike any commodity on earth.

Every year more gold is discovered yet hardly anybody would claim that gold was inflationary.  In fact, most people claim that gold protects against inflation.  Why?  Because it takes work to produce gold, just like it does to mine bitcoins.  If all the gold on earth was mined in 20 years, gold would be valueless.

[markm]

Well maybe you just don't understand people, if there aren't enough variant altcoins out there yet for you to empirically watch which do best by all means offer some bounties to have more made to empirically test your theories / serve to empirically teach you about people.

Unthinkingbit managed to get help building DeVCoins by offering a mere 100 bitcoins in bounty, who knows maybe you might even be able to some help making your perfect coin for less now that bitcoins trade at a higher exchange rate than they did back then.

-MarkM-

[Killdozer]

The amount of gold in the universe is almost infinite.

What does that have to do with anything? What is important is how much gold there is to be mined in realistic time on earth, and that is definitely not infinite.
Also, what kind of term is "almost infinite" is 10 an "almost infinite" number? 1000? What about 21 million? Because there you go, that's how many bitcoins there are in the universe, almost infinite.

Every year more gold is discovered yet hardly anybody would claim that gold was inflationary.

Very little gold is mined every year, compared to the existing amount.

In fact, most people claim that gold protects against inflation.  Why?  Because it takes work to produce gold, just like it does to mine bitcoins.

No. It's because gold is scarce, so is Bitcoin. Most gold that is actually used does not take any work to produce, because it is already mined and available.

If all the gold on earth was mined in 20 years, gold would be valueless.

This is just nonsense. Let's say no more gold is mined after today. Just in what way is it going to become valueless?

[MoonShadow]

Make an alt currency with a cap minimum 3% inflation.  This will satisfy the profits of the miners and hash of the network.

Wow...   please just go and do this, and don't bother your pretty little head about bitcoin ever again.  It's truly staggering how little you understand, and how utterly unaware you are of your lack of understanding.  But seriously, please go design your alt-chain, I wish you luck with it.

At least two altcoins already keep issuing the same number of coins per block forever, which is a big step in the "desired" direction, so how about go promote those for now as the best so far and maybe as you become a major investor in those their makers might listen to your arguments that even that is not enough and a coin must be made that increases the nubmer of coins issued per block...

-MarkM-

I don't believe that will provide the necessary level of inflation necessary to keep increasing hash.  The inflation rate will continuously decrease.

My proposal is a constant block reward until that rate of inflation approaches 3%, then you adjust block reward to annually create 3% inflation.

Whoever implements this and adopts this will be rich because I am certain that at some point BTC will fail.

Go for it.  There is notihing stopping you from doing it yourself.

[MoonShadow]

Guys, I know the uninformed newbies and their incessant protestations of "OMGZ the network has a FATAL ERROR!!" are annoying, but please, try responding as if you aren't 5 years old.

Yeah, you keep up that mature perspective for another four years of seeing this BS at least once each week.

We shall see how agreeable to it you are in a couple years.

[Piper67]

Guys, I know the uninformed newbies and their incessant protestations of "OMGZ the network has a FATAL ERROR!!" are annoying, but please, try responding as if you aren't 5 years old.

Yeah, you keep up that mature perspective for another four years of seeing this BS at least once each week.

We shall see how agreeable to it you are in a couple years.

Exactly. Sleft has learned very little since this thread was started. That's pretty close to wilful ignorance, if you ask me.

[Elwar]

I agree with the many suggestions to go create your own alt coin and not to use Bitcoin.

Do you often spend time on forums of technology that you do not wish to ever use to tell them why their technology is flawed?

Does Litecoin have a forum? Have you critiqued them yet?

[Sweft]

I agree with the many suggestions to go create your own alt coin and not to use Bitcoin.

Do you often spend time on forums of technology that you do not wish to ever use to tell them why their technology is flawed?

Does Litecoin have a forum? Have you critiqued them yet?

I was a GPU miner of bitcoin, which is no longer economically feasible.

I'm trying to educate people on these forums so that we can produce a cryptocurrency that will be resilient. 

What people don't realize is that bitcoin is currently inflationary.  That's why the price goes up, in accordance to network hash, which secures the network.

When more bitcoins are lost than created, reaching the 'Sweft point', bitcoin will become deflationary. 

Somewhere around the 'Sweft point' bitcoins value will approach 0 and become worthless.

This can all be prevented with an inflationary cryptocurrency.   I'm not a programmer so i don't really know how to develope  an inflationary alt coin, but if i knew, surely i would.

[agath]

When more bitcoins are lost than created, reaching the 'Sweft point', bitcoin will become deflationary. 
Somewhere around the 'Sweft point' bitcoins value will approach 0 and become worthless.
This can all be prevented with an inflationary cryptocurrency.   I'm not a programmer so i don't really know how to develope  an inflationary alt coin, but if i knew, surely i would.

This is just absurd. And this thread is non-sense. Transaction fees will be enough to guarantee mining activity. If you don't agree or if you believe differently, then don't use bitcoin, and stop writing such useless/irrational things.