The deflationary problem

[Sweft]

Sweft:  I think you over estimate the depth of thought of your opposition

If anything, he under estimates it.  For the most part, his opposition isn't interested in convincing him of anythin, most who post here are just trolling him.  In the long run, not only are we all dead, our grandchildren will receive the benefits of our foresights.  If Sweft is correct, and he actually does something about it beyond arguing about it with people on the Internet, then his grandchildren will benefit and they will be thankful for it.  If we are correct, our grandchildren will be thankful.  In the near term; however, there is no point in us arguing about it, since Bitcoin is presently, and will continue to be for long after my natural life span, a rather inflationary currency.  

There's no reason you cannot become rich, since you can also mine stablecoins.  The only thing i'm trying to create is an economic algorithm that has the fewest number of flaws.

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[firefop]

The only thing i'm trying to create is an economic algorithm that has the fewest number of flaws.

You'll never win on the inflation vs deflation thing... (sorry).

As I've already pointed out, your law is flawed in that it depends on Moore's law... which is already breaking down.

[JoelKatz]

I proposed a Bitcoin-like scheme but were the mining reward is controlled by a blend between proof of stake and proof of work. Basically, transactions propose a mining reward which is weighted based on bitcoin days destroyed, but miners have to include the transaction in a block for it to count. Here's the proposal:

With a Bitcoin-like system, the only way to agree on something is to include it in a mined block. The miners have a combined interest in devaluing existing currency. So likely you'd have to change it into something more based on proof of stake or combined in some way to balance the competing interests.

Those who hold Bitcoins have an interest in assuring there's sufficient mining to keep the currency secure. And miners already have an incentive to include transactions that include fees. One can leverage this as follows:

1) Bitcoin transactions can include a desired block reward.

2) Bitcoin blocks can track the "votes" on the changes in the desired block reward.

3) Votes can be weighted based on Bitcoin days destroyed to act as a proof of stake system.

4) A miner can be bribed to include a block that includes a block reward vote he disagrees with just by ensuring the transaction fee is adequate.

5) Part of the block validity test can be to ensure the weighted voting information is correctly updated based on votes in the block.

6) Every so many blocks, perhaps at the same time the difficulty is changed, the reward would also be changed slightly based on the votes summarized in the block.

This balances power between miners and Bitcoin holders and the voting algorithm can be adjusted to avoid rapid changes. All it would require was some extra fields in the block which could be held in a pseudo-transaction.

[townf]

Is that like ppcoin? They use a combined proof or work/proof of stake.

Sorry for asking without having really studied it myself, im just asking in case you haven't heard of it or in case you want to expound on the differences for all of us who are vaguely familiar with the concept of proof of stake and know of the existence of ppcoin, like me.

[m3ta]

pay off debts, pay for wars and buy prostitutes.  

You don't "buy" whores, you rent them. And they get more income per hour than most miners.

[Impaler]

I proposed a Bitcoin-like scheme but were the mining reward is controlled by a blend between proof of stake and proof of work. Basically, transactions propose a mining reward which is weighted based on bitcoin days destroyed, but miners have to include the transaction in a block for it to count. Here's the proposal:

With a Bitcoin-like system, the only way to agree on something is to include it in a mined block. The miners have a combined interest in devaluing existing currency. So likely you'd have to change it into something more based on proof of stake or combined in some way to balance the competing interests.

Those who hold Bitcoins have an interest in assuring there's sufficient mining to keep the currency secure. And miners already have an incentive to include transactions that include fees. One can leverage this as follows:

1) Bitcoin transactions can include a desired block reward.

2) Bitcoin blocks can track the "votes" on the changes in the desired block reward.

3) Votes can be weighted based on Bitcoin days destroyed to act as a proof of stake system.

4) A miner can be bribed to include a block that includes a block reward vote he disagrees with just by ensuring the transaction fee is adequate.

5) Part of the block validity test can be to ensure the weighted voting information is correctly updated based on votes in the block.

6) Every so many blocks, perhaps at the same time the difficulty is changed, the reward would also be changed slightly based on the votes summarized in the block.

This balances power between miners and Bitcoin holders and the voting algorithm can be adjusted to avoid rapid changes. All it would require was some extra fields in the block which could be held in a pseudo-transaction.

This is somewhat similar to proposals by maaku for an extension of FRC, but the factor being decided would be a split between miners and charity.  ElectricMucus also proposed something similar in which miners and stakeholders conflicting interests balance out.  I'm very skeptical of the idea though as I don't see any reason for this to balance out at a point of lower inflation or lower transaction fees then our current monetary regime, for one thing miners are VERY organized compared to normal spenders, miners can simply set their rigs to reject anything that's not in their favor while people trying to make transactions will be under time pressure.  This power dichotomy will generally result in the miners having their way and we end up with a high inflation and or high transaction fee system.  I dose have the benefit of breaking the back of the perpetual deflation expectation which would be good, but it doesn't get us to the ideal situation which is 0% inflation, 0% transaction fees, and 0% interest.  Despite all that I'm willing to endorse this as an experiment, at the very least it would teach us something.

[JoelKatz]

I'm very skeptical of the idea though as I don't see any reason for this to balance out at a point of lower inflation or lower transaction fees then our current monetary regime, for one thing miners are VERY organized compared to normal spenders, miners can simply set their rigs to reject anything that's not in their favor while people trying to make transactions will be under time pressure.

True, but they can just turn up the transaction fees. And not every transaction will be made under time pressure. If you leave transaction fees on the table, someone else will get them.

This power dichotomy will generally result in the miners having their way and we end up with a high inflation and or high transaction fee system.

If you really believe that, then Bitcoin should result in a high transaction fee too, since miners can effectively choose the transaction fee by selecting which transactions to include. We'll see if they can organize to push up the transaction fee as the block reward drops. I hope so, at least a little, because otherwise we're going to have big problems with blockchain security.

I dose have the benefit of breaking the back of the perpetual deflation expectation which would be good, but it doesn't get us to the ideal situation which is 0% inflation, 0% transaction fees, and 0% interest.  Despite all that I'm willing to endorse this as an experiment, at the very least it would teach us something.

With a proof-of-work based system to prevent double spends, we need something to reward miners or it's unlikely the system will remain secure. That can be the block reward, transaction fees, or something else. Essentially, I'm suggesting a blend between a block reward and transaction fees for the long term, rather than just transaction fees. Effectively, the block reward would be managed much the same way the transaction fee is, but with (I think) a bit less power to the miners.

(Of course I'm not suggesting changing Bitcoin. I'm just adding this to the pile of ideas as probably the most sensible way to build in active money supply management to a coin that is otherwise as much like Bitcoin as possible.)

[Impaler]

If you really believe that, then Bitcoin should result in a high transaction fee too, since miners can effectively choose the transaction fee by selecting which transactions to include. We'll see if they can organize to push up the transaction fee as the block reward drops. I hope so, at least a little, because otherwise we're going to have big problems with blockchain security.

Yes I generally think you will see either high transaction fees, or lower hash-rates, in BTC eventually, both are bad but I'm more worried about transaction fees rising and think that's the more likely effect because of an overhang of hardware capacity.

With a proof-of-work based system to prevent double spends, we need something to reward miners or it's unlikely the system will remain secure. That can be the block reward, transaction fees, or something else. Essentially, I'm suggesting a blend between a block reward and transaction fees for the long term, rather than just transaction fees. Effectively, the block reward would be managed much the same way the transaction fee is, but with (I think) a bit less power to the miners.

I'm skeptical of the long term viability of PoW as a concept because of its high cost that someone in the system must ultimately bear.  That said I think the FRC demurrage solution is the best way so far developed to bear that cost for the long term.  I favor keeping transaction fees to a minimum because of the dead-weight loss that transaction fees cause, instead putting it all on the block rewards should give greater economic activity over-which to spread the costs.

[agentbluescreen]

I think the inflation people have a trouble with is fiat fractional reserve lending.

Why?

Because if you fractionally lend money, that original money that was lent should in theory be distinguished from debt by having some essence.  The issue is with fiat the original money and the debt become indistinguishable when they monetize the debt by printing money.

If you lend based on gold, that original loan is still owed to you, so by default every loan that was fractionally created from gold is still the very same original gold. Therefore the money is distinguished from the debt because it must be returned to the lender since you cannot counterfeit it (print).

The metal smiths who originally invented "counterfeit reserve receipt-token fiat-bankstering" were enabled to do so because gold and silver were too fungible, risky and bulky to handle and secure in the marketplace. This technologically-harder to counterfeit stamped-coin "reserve fiat bankstering" actually began with cheaper "private" coinages all much like the Levitican's "Temple Shekels" whose intrinsic values and utility values actually were token for much-larger exchange valued assets as determined by the "fiat" of the "money-changers" currency exchanges. Bronze age coins were the antecedents of (far far cheaper and actually easier to counterfeit) paper phony-receipt-note "currencies" that came along much later.

It was Julius Caesar in 48 BC who first set up a "central" publicly owned for public profit "counterfeit reserve receipt-token fiat-bankstering" system for Rome that put the smiths out of business, making a single, common public currency standard and plentiful to facilitate commerce and industry, and (by public lending) to thus finance public projects free of armed-marauding public-shakedown "taxations". This was why he was assassinated.

The simple fact is that the "original debt" in "reserved" gold always was, is and always becomes continuously more and more irrelevant. Sure gold has an inescapable "exchange value" (due solely to it's ever-increasing rarity) but it's intrinsic and utilitarian values are actually squat, save as a decorative or luxury plating metal. It never or very, very seldom if ever needs to be "paid back", because that is why the pretty junk was all laboriously and hazardously carted-over and dumped-off into a "reserve" in the first place! It ends up there because nobody can bear with the nasty bothers of dealing with it.

You see many people with wheelbarrows full of gold out car shopping? Or truckloads of gold looking for a new house? As a "money" gold has been practically obsolete for well over 3 hundred years.

Reserve bankstering works and has always worked just fine, because a Medium of Labour Exchange is actually backed by the labours that it's earning has, or spending will, represent, ALONE!

In other words, it (a "money") is simply an Exchange Tokenage representative of Labour Values performed or performable, period. It does not ALSO have to be anything else that it is not!

As Julius Caesar, Henry 1st, George Washington and Abe Lincoln (and JFK might also have) proved all you need is a good token supply that is publicly owned, issued and rented-out, who's (hopefully growing) supply keeps up with (hopefully growing) labour force quality and size demands, in order to have perfectly fine "money" and a perfectly fine Freed Market economy (freed from counterfeit private gold-receipt slavery to private gold-Pharaohs)

The same applies with bitcoin fractional lending as does with gold.  Pre-programmed inflation in bitcoin should behave nothing like fiat inflation, because the debt cannot be monetized.  The debt must be returned to the lender.

And if you notice throughout history gold has inflated and will continue to inflate, but since gold mining requires energy, as bitcoin mining does, the inflation is beneficial to its value because it allows for a larger adoption base and solves the first adopter problem.  

Inflation is not the enemy of bitcoin.

A Bitcoin is a fiat digital high security internet game casino gambling token of excellent utilitarian value and marginal intrinsic value but it has no exchange value AT ALL. It's inflationary and deflationary "assigned fiat exchange value" properties have nothing whatsoever to do with the supply of them, nor the growth or shrinkage of that supply, and they never ever will! Mining Bitcoins merely finances it's transaction network, period.

A Bitcoin is an "deregulated" Over the Counter derivative. The "exchange-value" (price) inflation and deflation of Fiat Bitcoins has squat to do with any "monetary supply" of them and (foreseeably) never, ever will!

Penny Stock-Market (pretend-exchanges) speculators and their greedy and mischievous fiat-antics capriciously determine the latest (stale) fiat exchange-value of the last fiat Bitcoin that past their way.

The actual "price" of any given Bitcoin remains forever unknown and unknowable until after it has been re-sold (re-exchange valued) to the next guy, in the future.

A Bitcoin functions exactly in much the same way as a "funded" Credit Default Swap (fCDS). You fund it's former owner's "loss" (costs) on it, and the next owner funds yours.

A Bitcoin is a commercial "over the counter (OTC) derivative" of the current-past value and future possible values of itself and it's network, which are only (at best) completely deregulated commercial resources, and neither "commodity futures" nor "securities" as per the CFMA of 2000. This is why, with it's "market" exchange-value changing every two seconds, it is useless as a "money" because you need an hour to accept and/or spend it. It's exchange-values are really only very useful as a delayed-exchange "funding" medium.

The intrinsic and utility values of the "futures derivative swap-contract token" no matter how attractive or quantitatively prearranged, are materially too small to be any more than a very, very minor factor in it's (inflationary or deflationary) exchange-value (aka price)

Buying a Bitcoin futures derivative swap-contract token is simply gambling that the value of it's current "fiat" exchange-value will be close to or less than the value of it's future "fiat" exchange-value.

Yes inflation (and deflation) are ALWAYS everybody's and everything's enemy!

[Adrian-x]

Reserve bankstering works and has always worked just fine, because a Medium of Labour Exchange is actually backed by the labours that it's earning has, or spending will, represent, ALONE!

Fractional Reserve Banking worked to bring about a power shift from feudal monarchs to the merchant class. FRB is in itself dishonest when you think of money as a commodity (say wheat) it is a flawed human construct. FRB also creates money inflation which is a cause for malinvestment in an economy, the net byproduct of inflation is continued economic growth, (the result of the additional Labour needed to offset the increase in the money supply)   which is now unsustainable.

Yes inflation (and deflation) are ALWAYS everybody's and everything's enemy!

Price inflation and deflation is not in itself good or bad, it is natural market feedback, information provided to members of an economy to make optimal use of resources available. It should be respected not feared and manipulated if the goal is to live sustainability and in peace.

[Spendulus]

pay off debts, pay for wars and buy prostitutes.  

You don't "buy" whores, you rent them. And they get more income per hour than most miners.

I dunno.  Watching Deadwood series there was one night a week that was nickel whore night.  I guess they was rented, though.

[spartacusrex]

Hello. This is a lively debate..  

I'll be honest, I kinda agree with Sweft, that the txn fees are NOT going to sustain as secure a network as I would like..

I don't want more than 21 million coins, I like the whole FIXED-amount-of-coins thing, so that only leaves the txn fees.

What I'm wondering is : If txn fees were set to a percentage of the transaction, say 0.1%, would this not fix the 'potential' problem ?

1 1-thousandth seems a fair price to pay, for a functioning super secure network.. no?

I don't know why everyone is so against paying the miners A LOT. They are the backbone of the whole network and should be rewarded..

I am working on a new coin, and would like to put a fixed percentage as the fee. Remove confusion and doubt.  

You would of course also need a minimum TXN fee, to stop DOS attacks.
..

[cough] Don't all shout at me at once.

[myrkul]

I don't know why everyone is so against paying the miners A LOT. They are the backbone of the whole network and should be rewarded..

FWIW, I agree. But the market should decide exactly how much, not the programers.

[molecular]

I don't know why everyone is so against paying the miners A LOT. They are the backbone of the whole network and should be rewarded..

FWIW, I agree. But the market should decide exactly how much, not the programers.

Isn't there a "tragedy of the commons" problem involved here, though?

While everyone using bitcoin will want the blockchain to be as secure as possible, maybe "the mass of people" on average will be too selfish to pay a high enough fee?

[spartacusrex]

While everyone using bitcoin will want the blockchain to be as secure as possible, maybe "the mass of people" on average will be too selfish to pay a high enough fee?

That's EXACTLY what will happen.

That's why I'd like it built into any new protocols.. 0.1%.

[JoelKatz]

Isn't there a "tragedy of the commons" problem involved here, though?

While everyone using bitcoin will want the blockchain to be as secure as possible, maybe "the mass of people" on average will be too selfish to pay a high enough fee?

A miner will have a tough choice. If he has room, it will be very tempting to include an "underpriced" transaction. If he doesn't, he's just leaving money on the table and doubtless some other miner will grab it.

What will probably happen is that people who need timely transactions will pay the full to ensure the highest percentage of miners will include their transactions. People who aren't in a hurry will pay a much lower fee and wait until a miner who would rather have the fee than not is willing to include it.

I don't think the "percentage of the transaction" fee scheme is a good idea. If you do that, you may have miners who only mine when there are high-value transactions available, choosing to save electricity costs otherwise. That will lead to bursty block creation. That would be a huge problem, an obvious disaster, for a coin that had CPU friendly mining, it's less of a problem with Bitcoin. But I still think it's bad enough to make that kind of fee system a bad idea.

[spartacusrex]

I don't think the "percentage of the transaction" fee scheme is a good idea. If you do that, you may have miners who only mine when there are high-value transactions available, choosing to save electricity costs otherwise. That will lead to bursty block creation.

Hmm.. not if there is a minimum txn fee..

The MINIMUM TXN fee would be the same as bitcoins. The miners would always have the same incentive or MORE.. if 0.1% was more than that txn fee.

[JoelKatz]

The MINIMUM TXN fee would be the same as bitcoins. The miners would always have the same incentive or MORE.. if 0.1% was more than that txn fee.

If they sometimes have more, then they don't always have the same incentive.

If the incentive is sometimes much more than average, then mining will sometimes be more than average. That means it will sometimes be much less, meaning a very long time waiting for a block.

[molecular]

The MINIMUM TXN fee would be the same as bitcoins. The miners would always have the same incentive or MORE.. if 0.1% was more than that txn fee.

If they sometimes have more, then they don't always have the same incentive.

If the incentive is sometimes much more than average, then mining will sometimes be more than average. That means it will sometimes be much less, meaning a very long time waiting for a block.

Also meaning some potential attacker could choose a time with less mining going on to stage his attack (chain only as strong as weakest link as in network only as strong as it is at times with lowest hashrate). So I think I'm against a transaction-amount dependant fee.

So the incentive for someone sending money to include a high transaction fee is not "to secure the network" but to "ensure a speedy transaction". Transacters are competing for scarce space in blocks. However "block space" is not the same resource (in view of miners) as "hashing power".

So is it true that we basically have to "artificially" limit the available block size to ensure miners will receive high enough fees?

[Jobe7]

Concerning miners and mining fees & end of bitcoin generation (mining) with regard to mining income and its continuation:

At such a point in the future, 2040, when bitcoin generation ends, before this time tbh. A majority of businesses and organisations (governments, etc) would be using bitcoin. For a business/corporation, etc, it is in their interest to make a speedier transaction, especially when they are competing against each other.

Part of this speedier transaction will be to include transaction fees with their price models (for whatever they are doing with btc). Seeing as how  at this time (assuming the global adoption of btc) there would be a massive amount of businesses using btc, the amount of transaction fees getting thrown at the miners will be stupidly enormous compared to now. Though keep in mind there will obviously be more miners/mining power at this time.

Basically - the need for speedier transactions because of competitive businesses will ensure a healthy amount of transaction fees that will go to miners. Indeed, businesses may even make it part of their model to publicly state (well, it would be transparent anyway) the amount that they pay in mining fees, thus allowing the customer to know how fast their holiday/car/house/burger/etc will go through.