Flaw in the reward structure of Bitcoin and other cryptocurrencies?

[markm]

The burden of proof is on you, surely?

-MarkM-

[Rothgar]

It would've kept mining feasible for a longer time for the average Joe, possibly helping boost interest.

But bitcoin is not about mining.  People today should find a different way to earn their bitcoin income.

Bitcoin today is not about mining, but if the reward structure was reversed it could've been. Perhaps the official client would've mined for you by default, strengthening the network at the same time to survive 51% attacks (opt-in of course).

Think about it, we've had an exponential increase in number of people getting into bitcoin, but the biggest chunk has already been generated. We're probably at 0.1% of total global potential as far as bitcoin is concerned, but more than 50% of the coin is already out there.

While the number of adopters is exponentially increasing, the supply is potentially exponentially decreasing. While this is a good thing for hoarders, I don't consider it healthy. Would've been a lot healthier if the two curves were heading the same direction rather than battling head to head.

The network is secure enough, and having a few hundred CPU's mining as well would not help on bit.  The mining structure is working very well.  I was worried that the hashrate would half when the reward halved.  That did not happen in fact, the network much more secure today then it has ever been.  The reward structure was genius the way it was set up.  It's a shame that you don't see that beautiful fact. 

[codro]

It would've kept mining feasible for a longer time for the average Joe, possibly helping boost interest.

But bitcoin is not about mining.  People today should find a different way to earn their bitcoin income.

Bitcoin today is not about mining, but if the reward structure was reversed it could've been. Perhaps the official client would've mined for you by default, strengthening the network at the same time to survive 51% attacks (opt-in of course).

Think about it, we've had an exponential increase in number of people getting into bitcoin, but the biggest chunk has already been generated. We're probably at 0.1% of total global potential as far as bitcoin is concerned, but more than 50% of the coin is already out there.

While the number of adopters is exponentially increasing, the supply is potentially exponentially decreasing. While this is a good thing for hoarders, I don't consider it healthy. Would've been a lot healthier if the two curves were heading the same direction rather than battling head to head.

The network is secure enough, and having a few hundred CPU's mining as well would not help on bit.  The mining structure is working very well.  I was worried that the hashrate would half when the reward halved.  That did not happen in fact, the network much more secure today then it has ever been.  The reward structure was genius the way it was set up.  It's a shame that you don't see that beautiful fact. 

That's entirely false, there are a few mining pools which have the majority of the power right now. They decide exclusively what protocol changes are adopted, not the actual end-users.

That's not working as intended, Satoshi intended for everyone to have equal voting rights, instead of delegating them to a few super powers (the pools).

[Rothgar]

That's entirely false, there are a few mining pools which have the majority of the power right now. They decide exclusively what protocol changes are adopted, not the actual end-users.

That's not working as intended, Satoshi intended for everyone to have equal voting rights, instead of delegating them to a few super powers (the pools).

I don't think you quite understand how mining works.  Go ahead and start your own block chain and show us how well it will work.  I'll be surprised if the price doesn't take a dive before your reward doubling event. 

[codro]

That's entirely false, there are a few mining pools which have the majority of the power right now. They decide exclusively what protocol changes are adopted, not the actual end-users.

That's not working as intended, Satoshi intended for everyone to have equal voting rights, instead of delegating them to a few super powers (the pools).

I don't think you quite understand how mining works.  Go ahead and start your own block chain and show us how well it will work.  I'll be surprised if the price doesn't take a dive before your reward doubling event. 

I don't think you understand how mining and feature adoption works. You might want to look at things like P2SH and its voting process before you post. https://bitcointalk.org/index.php?topic=60829.0

[Soros Shorts]

That's entirely false, there are a few mining pools which have the majority of the power right now. They decide exclusively what protocol changes are adopted, not the actual end-users.

The mining nodes can decide whatever they want but they still rely on the rest of the network to propagate the blocks they create.

[SimonL]

It is like 2011 all over again with everybody thinking they found the "critical deathblow" to Bitcoin.  Why is it rational discussion and USD price are inversely correlated?

To OP simple version is:
There aren't more than a handful of people with hundreds of thousands of BTC, and they have a vested interest in not destroying their own wealth.  Even if they act irrationally they can only do so once.

Personally I think the number of imaginary multi hundred thousands BTC early adopters is probably close to zero but let say he/she exists and for some asinine reason decides to tank the market.  Ok.  A drop from $32 to $2 didn't kill Bitcoin.  A drop from $50 to $1 won't either. The value is in what Bitcoin can DO not it's current price.

Still even if such adopter exists one would have to suspend disbelief that he/she would act so irrationally.  He mined them over the course of a year for fun.  Then suddenly they were worth a $1.  $311K for something fun.  Yet Joe Early doesn't sell.  He watches the price climb to $32 making him a millionaire ten times over but doesn't sell.  Why?  Maybe he believe BTC is worth a lot more.  The price crashes and he doesn't sell on the way down.   He doesn't sell at the bottom despite seeing the paper value evaporate.   Over the next two years the price slowly rises and he COULD have sold a thousand or so coins a week without affecting the price and pocketed millions of dollars if that was his goal.  However 4 years later he hasn't done any of that.  Why?  Really the only plausible scenario is that he is a diehard true believer, "A bitcoin will change the world as we know it" type.

So Joe Early is now Joe the Apostle.  Yet for some reason he decides to cripple adoption (at least in the short term) by crashing the market.  Hurting his own net worth, hurting his credibility, and hurting the thing he is a diehard believer in.   Does that even sound close to plausible?

Still time will solve even this non-problem.  I remember the same "doomsday scenarios" except at one time it was tens of thousands of BTC, then a hundred thousand BTC.  Now it is a beyond silly hundreds of thousands of BTC, someday it will be "well if someone accumulated over a million BTC they could crash the market below $100".

I think D&T has it sewn up as usual, and since it pretty much mirrors my own feelings on the subject, I'm reposting it here because I think codro has cateracts or something. And codro, I've enjoyed your trolling, now please go back to the beginning of your own thread and reread all the explanations for why you are wrong. I have, and your asinine (thanks for the choice of words D&T) reasoning is going to give you a stroke if you continue to claim you can walk through walls with your own personalised form of logic.

[SimonL]

The way I see it is if the inverse had occurred. With tiny amounts first, then ever greater amounts, this can easily be construed as a classic example of the already existing inflationary cycle in existing finance. It disincentivises adoption. Ask yourself this, why acquire and use a currency that will be at least guaranteed to be worth half it's value in 4 years as the subsidy doubling kicks in. And imagine the havoc 100+ years down the track when the doubling hit the 21mil limit. What then?

A doubling system of this nature, at every step, disincentivises risk taking, early adoption, and use in general. Bitcoin is already pushing against several hundred years of financial tradition, suspicion, and entrenched reasoning, when it attempted to create a completely new system of value exchange. It needed some huge carrots to get it going. Yes, I guess you could say some early adopters were "lucky", but they are also the evangelists that had a vested incentive because they wanted to not just spread their discovery, they were financially inclined to work for Bitcoin, so Bitcoin could work for them.

Selfish and selfserving? Absolutely.

A brilliant way to bootstrap a totally untested, brand new disruptive currency from nothing for the good of all that adopted it? Absolutely.

Punishing early adopters with this halfbaked, communist-like asshattery makes me feel like you guys are taking crazy pills.

[codro]

The way I see it is if the inverse had occurred. With tiny amounts first, then ever greater amounts, this can easily be construed as a classic example of the already existing inflationary cycle in existing finance. It disincentivises adoption. Ask yourself this, why acquire and use a currency that will be at least guaranteed to be worth half it's value in 4 years as the subsidy doubling kicks in. And imagine the havoc 100+ years down the track when the doubling hit the 21mil limit. What then?

A doubling system of this nature, at every step, disincentivises risk taking, early adoption, and use in general. Bitcoin is already pushing against several hundred years of financial tradition, suspicion, and entrenched reasoning, when it attempted to create a completely new system of value exchange. It needed some huge carrots to get it going. Yes, I guess you could say some early adopters were "lucky", but they are also the evangelists that had a vested incentive because they wanted to not just spread their discovery, they were financially inclined to work for Bitcoin, so Bitcoin could work for them.

Selfish and selfserving? Absolutely.

A brilliant way to bootstrap a totally untested, brand new disruptive currency from nothing for the good of all that adopted it? Absolutely.

Punishing early adopters with this halfbaked, communist-like asshattery makes me feel like you guys are taking crazy pills.

You truly are clueless about what drives value. Please stay away from replying to things you don't have the mental capacity to understand.

In a real economy the population and adoption doesn't increase at the rate it does in a new economy/currency that becomes successful. Inflation in Bitcoin, for the short to medium term actually makes sense and is desirable. 100 people with 100 coins is the same as 1 million people with 1 million coins - it is not inflation. In a fiat inflationary economy, the number of coins arbitrarily increases without major population changes, the billion people with a gajillion dollars today are the billion people with two gajillion dollars tomorrow..

The way the wealth was distributed is plain wrong and leads to people controlling the market extremely easily. It could be argued that it's just an honest mistake however, Satoshi only had one shot at getting this right.

The flaw is that: You only need a few thousand coins to initiate a crash, have everyone else panic sell then buy back in at lower prices, essentially growing your portfolio every time and gaining more and more control. Basic economics and this is exactly what happened last night. A steady supply of new coins as adoption increases would have prevented that.

Regarding havoc in 21 years when the limit hit, there wouldn't be any - you fail at doing the math again. Assuming a generous 7200 coins generated per day and hundred of millions of users (at the very least), that's less than 0.000072 new coins per person per day being generated at that time.

You have to be extremely closed minded to not see the wealth distribution as a big problem for the foreseeable future, in regards to trading and market stability. I ensure you that I'm not crying here that I didn't buy in early, perhaps I did and am holding a sizable amount of coins - perhaps I didn't, that's not the point.

If there's one big flaw that has the potential of destroying Bitcoin's credibility and hinder its long term success, it's this. People control the market way too easily. Is there anything that can be done now about it? Probably not, which is the scary part.

[nwbitcoin]

If there's one big flaw that has the potential of destroying Bitcoin's credibility and hinder its long term success, it's this. People control the market way too easily. Is there anything that can be done now about it? Probably not, which is the scary part.

There is something that can be done, play the system and see what happens.

Bitcoin isn't a one shot deal.  It can easily fail, and a new phoenix grow out of the ashes. Let's see what breaks as things start to scale and remember where it all goes wrong! Eventually, it might get so broken that it can't continue.  At that point, we start again with something like Litecoin - safe in the knowledge that we won't make the same mistakes again.

Eventually, the problems will no longer be technical and the role of the geek in the bitcoin project will dwindle to very little.  That will upset a few people too!

The question is, if this is a real problem or not, and if it is it a technical one or a business one?

[codro]

Actually if Bitcoin were to fail because of this, Litecoin would fail as well because its generation curve is the same. It's a business problem, not a technical one.

[codro]

It is like 2011 all over again with everybody thinking they found the "critical deathblow" to Bitcoin.  Why is it rational discussion and USD price are inversely correlated?

To OP simple version is:
There aren't more than a handful of people with hundreds of thousands of BTC, and they have a vested interest in not destroying their own wealth.  Even if they act irrationally they can only do so once.

Personally I think the number of imaginary multi hundred thousands BTC early adopters is probably close to zero but let say he/she exists and for some asinine reason decides to tank the market.  Ok.  A drop from $32 to $2 didn't kill Bitcoin.  A drop from $50 to $1 won't either. The value is in what Bitcoin can DO not it's current price.

Still even if such adopter exists one would have to suspend disbelief that he/she would act so irrationally.  He mined them over the course of a year for fun.  Then suddenly they were worth a $1.  $311K for something fun.  Yet Joe Early doesn't sell.  He watches the price climb to $32 making him a millionaire ten times over but doesn't sell.  Why?  Maybe he believe BTC is worth a lot more.  The price crashes and he doesn't sell on the way down.   He doesn't sell at the bottom despite seeing the paper value evaporate.   Over the next two years the price slowly rises and he COULD have sold a thousand or so coins a week without affecting the price and pocketed millions of dollars if that was his goal.  However 4 years later he hasn't done any of that.  Why?  Really the only plausible scenario is that he is a diehard true believer, "A bitcoin will change the world as we know it" type.

So Joe Early is now Joe the Apostle.  Yet for some reason he decides to cripple adoption (at least in the short term) by crashing the market.  Hurting his own net worth, hurting his credibility, and hurting the thing he is a diehard believer in.   Does that even sound close to plausible?

Still time will solve even this non-problem.  I remember the same "doomsday scenarios" except at one time it was tens of thousands of BTC, then a hundred thousand BTC.  Now it is a beyond silly hundreds of thousands of BTC, someday it will be "well if someone accumulated over a million BTC they could crash the market below $100".

I think D&T has it sewn up as usual, and since it pretty much mirrors my own feelings on the subject, I'm reposting it here because I think codro has cateracts or something. And codro, I've enjoyed your trolling, now please go back to the beginning of your own thread and reread all the explanations for why you are wrong. I have, and your asinine (thanks for the choice of words D&T) reasoning is going to give you a stroke if you continue to claim you can walk through walls with your own personalised form of logic.

You didn't factor in the equation the fact that Joe Early could actually be Joe Banker or Joe Government who has a vested interest in seeing Bitcoin fail. They can crash the price to nearly nothing, then buy even more cheap coins in the aftermath. And if the coin still refuses to die, do it all over again a couple of years later. It's not rocket science, and people do it all the time for personal gain with smaller amounts (which is what causes the mini crashes).

[Bitcoinpro]

A market order to sell 311000 bitcoins right now would net 4278841.7722 USD and would take the last price down to 1.0000 USD, resulting in an average price of 13.7583 USD/BTC.

I'm not religious but I pray every day this happens

hahahaha  

thats what everyone wants atm  



 

[SimonL]

The way I see it is if the inverse had occurred. With tiny amounts first, then ever greater amounts, this can easily be construed as a classic example of the already existing inflationary cycle in existing finance. It disincentivises adoption. Ask yourself this, why acquire and use a currency that will be at least guaranteed to be worth half it's value in 4 years as the subsidy doubling kicks in. And imagine the havoc 100+ years down the track when the doubling hit the 21mil limit. What then?

A doubling system of this nature, at every step, disincentivises risk taking, early adoption, and use in general. Bitcoin is already pushing against several hundred years of financial tradition, suspicion, and entrenched reasoning, when it attempted to create a completely new system of value exchange. It needed some huge carrots to get it going. Yes, I guess you could say some early adopters were "lucky", but they are also the evangelists that had a vested incentive because they wanted to not just spread their discovery, they were financially inclined to work for Bitcoin, so Bitcoin could work for them.

Selfish and selfserving? Absolutely.

A brilliant way to bootstrap a totally untested, brand new disruptive currency from nothing for the good of all that adopted it? Absolutely.

Punishing early adopters with this halfbaked, communist-like asshattery makes me feel like you guys are taking crazy pills.

You truly are clueless about what drives value. Please stay away from replying to things you don't have the mental capacity to understand.

In a real economy the population and adoption doesn't increase at the rate it does in a new economy/currency that becomes successful. Inflation in Bitcoin, for the short to medium term actually makes sense and is desirable. 100 people with 100 coins is the same as 1 million people with 1 million coins - it is not inflation. In a fiat inflationary economy, the number of coins arbitrarily increases without major population changes, the billion people with a gajillion dollars today are the billion people with two gajillion dollars tomorrow..

The way the wealth was distributed is plain wrong and leads to people controlling the market extremely easily. It could be argued that it's just an honest mistake however, Satoshi only had one shot at getting this right.

The flaw is that: You only need a few thousand coins to initiate a crash, have everyone else panic sell then buy back in at lower prices, essentially growing your portfolio every time and gaining more and more control. Basic economics and this is exactly what happened last night. A steady supply of new coins as adoption increases would have prevented that.

Regarding havoc in 21 years when the limit hit, there wouldn't be any - you fail at doing the math again. Assuming a generous 7200 coins generated per day and hundred of millions of users (at the very least), that's less than 0.000072 new coins per person per day being generated at that time.

You have to be extremely closed minded to not see the wealth distribution as a big problem for the foreseeable future, in regards to trading and market stability. I ensure you that I'm not crying here that I didn't buy in early, perhaps I did and am holding a sizable amount of coins - perhaps I didn't, that's not the point.

If there's one big flaw that has the potential of destroying Bitcoin's credibility and hinder its long term success, it's this. People control the market way too easily. Is there anything that can be done now about it? Probably not, which is the scary part.

Your appeal to authority is amusing. This carefully crafted scenario you've made up is completely and utterly baseless. It's also rather bemusing that you think the Bitcoin would've stood a chance without providing large incentives for early users. Additionally, do you honestly think people scatter like mice when trouble brews? In a free market there are those that take risks for gain, and there are those that are ready to maximise on others' losses. This in itself cushions against volatility if the market isn't tampered with. Messing with distribution of coins would just makes the effects worse. All you want to do is secure people's wealth (people already holding Bitcoins), you want to minimise risk by protecting the risk averse that step into the ring early and consolidate value first. You want a system that cushions those that are already using the system against any volatility. Funnily there is already a system that does this exactly, it's called the federal reserve, and it's "cushioning" (also called bailing out of wall-street, governments et al.) is about to launch itself over a cliff. Look up the 1907 crash, and what happened post-crash. Do some historical reading.

For all your bluster, hand-waving, patronising attitude, and doomsday scenarios, your depth of reasoning is rather shallow.


I shouldn't be too harsh though. I have a proposition for you, just like every other competing chain that has absolutely failed on it's own "merits", I would love to see you start an alt-chain with the properties you mention just so you can prove us all wrong here. You don't have any excuse, lots of people have launched their own. Litecoin did a bang up job pandering to everyone's doubts about Bitcoin's original parameters, they even pandered to your fears that the wealth was unevenly distributed and released the client to all at a specified time so as many miners as possible got on board at the same time. If you truly think your argument bears out, then I reckon your chain will be welcomed and adopted by the rest of the community. Healthy competition is good for everyone. Or if you are all just talk, move to Litecoin, I'm sure they'll be glad to have you.

Y'know, cos you're right and all... don't disappoint us now.

[codro]

Your early incentives point makes no sense. What you fail at understanding in your reasoning is that the so called early incentives were not as big of a deal as you make them out to be. Bitcoin would've survived and slowly grown regardless - for the same reason people compete in Angry Birds and its market cap is as big as bitcoin's, or the reason they spend money on powerups in various pointless games - mining was fun.

A huge majority couldn't have known that they would eventually trade for actual dollars - proof stands in all the coins lost in the early days. And if they did, as early adopters they would've still had amassed a lot more coins than the late adopters. Logic.

A more gradual build up of wealth, rather than majority controlling stakes from the get-go would've helped tremendously in stabilizing the market.

In "Satoshi's Grand Design" the transaction fees were supposed to be 0.01 not 0.0005.

This would've made each block generate an additional ~12BTC in fees at current volume and probably more going forward, which would've offset some of the problems of the curve. Sure, 0.01 would've been noncompetitive for transactions lower than say 1 coin - so perhaps we're not using the coin as originally intended, and it was never meant to be used for micropayments in its current design. The official website even states: "Bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world."

What I'm trying to promote here is putting some thought into all this, think about what we can learn from it. Try coming up with valid points so we can have a meaningful debate rather than defending early miners' ridiculous rewards - which make no economic sense.

Not trying to diss Bitcoin in any way, I'd really love to see it succeed and I have significant stakes in it - but the fact that people with as few as 10000 coins (0.9% of total coins) can swing the BTCUSD price up and down by more than 10% could scare away the companies getting into it. 10000 is not that much, SatoshiDice makes more than that in profit each month, and someone holding that amount and selling easily triggers a crash and can then buy more than 10000 in the aftermath before it recovers.

This rollercoaster isn't good for credibility. How can we prevent it?

[markm]

I thought the making a profit by deliberate crashes myth was a myth?

Wasn't it argued that they would actually lose by attempting that since all they really do is give away their coins cheap?

On the other hand I have wondered since the $32 days of 2011 how the heck the price was being kept so low so long.

-MarkM-

[codro]

I thought the making a profit by deliberate crashes myth was a myth?

Wasn't it argued that they would actually lose by attempting that since all they really do is give away their coins cheap?

On the other hand I have wondered since the $32 days of 2011 how the heck the price was being kept so low so long.

-MarkM-

It's not a myth. I know someone that sold during the mini crash a few nights ago at $42 and bought back at $35 and made 500 coins profit. This person was probably one of the main reasons for the crash as well, because he sold a sizable amount of coins (several thousands).

I personally sold at $42 and bought at $40 (gox lag...) and made several coins profit as well.

[jl2012]

http://bitcoincharts.com/markets/vcxUSD_depth.html

Here it only takes you 39BTC to crash the exchange rate to $1. Go ahead

[codro]

http://bitcoincharts.com/markets/vcxUSD_depth.html

Here it only takes you 39BTC to crash the exchange rate to $1. Go ahead

Just so your comment doesn't look completely asinine (new favorite word in this thread) by itself, I'm going to help you out by saying that yeah, the fact MtGox is practically a monopoly is also somewhat detrimental. The rest of the exchanges are mainly only good for arbitrages as far as the actual big fish are concerned (if that).

[SimonL]

I feel like I'm wasting my time explaining, but it might be useful to others reading so here goes.

Your early incentives point makes no sense. What you fail at understanding in your reasoning is that the so called early incentives were not as big of a deal as you make them out to be. Bitcoin would've survived and slowly grown regardless - for the same reason people compete in Angry Birds and its market cap is as big as bitcoin's, or the reason they spend money on powerups in various pointless games - mining was fun.

Bitcoin was never pegged at a price, this is precisely what price discovery does, on top of this only miners were rewarded with coins and it was ALWAYS proportional to their contribution to the security of the network. Do you get it yet? these guys were PAID to run the Bitcoin network. There was never a free lunch and never a monopolistic clique that planned it. Nor was if for "fun", it was a job, and these guys got compensated for their hard work, hardware, and electricity. The software was released January 2009, free, available to all. If they got paid more than the latecomers, it's because they propped it up long enough and well enough so that others could get on board and help bear the weight, we should be worshipping these people, KnightMB is a hero in my books, he accrued over 300k in Bitcoins, because he used a cluster of CPUs he borrowed from Amazon (a guy you'd probably deride as an opportunist etc. etc.) and he also was instrumental in helping fix early problems that Bitcoin had https://bitcointalk.org/index.php?topic=823.msg9524#msg9524, he claims he already spent much of it but I sincerely hope he has a spare 50k lying around because he fucking deserves it.

A huge majority couldn't have known that they would eventually trade for actual dollars - proof stands in all the coins lost in the early days. And if they did, as early adopters they would've still had amassed a lot more coins than the late adopters. Logic.

Actually we did know, and most of us are still here. The "proof" is because you're pissy that a vast number of early adopters are "endangering" the value of the coins you own because they hold too many. Logic. Funny, it was never marketed as anything less than a digital cash payment system, they weren't marketed as "internet points", and the second I discovered Bitcoin I was treating it like a cash system too, because like everyone else I had to mine to get them and that meant work, when CPUs were only just still fashionable I actually went and BOUGHT a computer just for mining because I wanted Bitcoins, they certainly weren't passing them out like flyers at a store, I knew I was getting something of value that was difficult to get. So did a lot of other people like Hal Finney, http://www.mail-archive.com/cryptography@metzdowd.com/msg09975.html.

A more gradual build up of wealth, rather than majority controlling stakes from the get-go would've helped tremendously in stabilizing the market.

You want gradual buildup, go to litecoin, theres your out, use it. Liquidate your BTC into LTC and bask in the market stability such a system bestows upon it's users.

Price discovery and adoption will stabilise the market, not manipulation of the supply. How would that work exactly? Does the system know when the market is stable and when it is volatile so it can spit out the "right" amount of coins. Which markets? which currencies are more influential than others? Should we prioritise currencies based on their political stability?  Adoption follows sentiment, and sentiment can only be gauged by price discovery, not some trickle that will slowly turn into a damn flood. Even Satoshi saw that distributing most of the coins quickly was better than any other option , and 4 years is hardly a short amount of time I might add.

In "Satoshi's Grand Design" the transaction fees were supposed to be 0.01 not 0.0005.

This would've made each block generate an additional ~12BTC in fees at current volume and probably more going forward, which would've offset some of the problems of the curve. Sure, 0.01 would've been noncompetitive for transactions lower than say 1 coin - so perhaps we're not using the coin as originally intended, and it was never meant to be used for micropayments in its current design. The official website even states: "Bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world."

"[Bitcoins will] be distributed to network nodes when they make blocks, with the amount cut in half every 4 years. [...] When that runs out, the system can support transaction fees if
needed. It's based on open market competition, and there will probably always be nodes willing to process transactions for free." http://sourceforge.net/mailarchive/message.php?msg_id=21312004

When you speak of "Satoshi's Grand Design" you quote the source, otherwise you look like a fool.

What I'm trying to promote here is putting some thought into all this, think about what we can learn from it. Try coming up with valid points so we can have a meaningful debate rather than defending early miners' ridiculous rewards - which make no economic sense.

"Meaningful" hu? All I've heard from you is the sound of a baby having a fit. Miners from two years ago ARE your betters that ensured Bitcoin survived long enough so you could enjoy it. I'm incredibly grateful, and I also hope Satoshi has a sizable portion of Bitcoins because he damned well deserved every one of them. So did the early developers that got on board, and the early testers, and the ones that helped stimulate the economy by beginning the first exchanges, and the ones that jumped in on mining with their CPUs, GPUs, etc. so that the network remained secure. They ALL deserved every skerrick of value that their Bitcoins now derive.

Not trying to diss Bitcoin in any way, I'd really love to see it succeed and I have significant stakes in it - but the fact that people with as few as 10000 coins (0.9% of total coins) can swing the BTCUSD price up and down by more than 10% could scare away the companies getting into it. 10000 is not that much, SatoshiDice makes more than that in profit each month, and someone holding that amount and selling easily triggers a crash and can then buy more than 10000 in the aftermath before it recovers.

Price discovery and greater adoption will spread more coins into more hands. Stop having kittens over the price, sounds to me you've overreached in your investment in Bitcoin so cash out to something that will allow you to sleep at night.

This rollercoaster isn't good for credibility. How can we prevent it?

See above. We are embarking on a huge experiment full of pitfalls, immense possibilities and unexpected side-roads. Expect volatility or get out while you can.