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Author Topic: "There can be only 21,000,000 bitcoins" is myth => How to secure the blockchain?  (Read 8057 times)
Come-from-Beyond
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April 13, 2013, 06:21:24 PM
 #1

Everyone who thinks that there will be not more than 21,000,000 bitcoins IS WRONG.

1. Fractional Reserve Banking. For example, MtGox, they do FRB. (I'm wrong? They don't do it? C'mon, even small kids know that MtGox loves FRB.)
2. Altcoins. Litecoin, Bytecoin, whatever. (I'm wrong? These are other currencies? C'mon, it's Bitcoin with other names, look at their source code.)

What do these 2 points mean?

Bitcoin is not deflationary  =>  One BTC will never be $1,000,000  =>  When the block reward becomes too low, miners will switch to other currency, because fees won't cover burnt electricity

So, how are we going to secure the blockchain in the future?
There are several different types of Bitcoin clients. The most secure are full nodes like Bitcoin-Qt, but full nodes are more resource-heavy, and they must do a lengthy initial syncing process. As a result, lightweight clients with somewhat less security are commonly used.
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April 13, 2013, 06:28:04 PM
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This is a horribly formatted argument.

I don't know what you're trying to say. Include some facts to back up what you're presenting, and maybe clarify your question at the end (are you actually looking for an answer? Do you have an idea of your own? You didn't even explain why the block chain needs to be "secured")

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April 13, 2013, 06:32:36 PM
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Altcoins aren't Bitcoins.  If I launched quadrilla-a-coin which mints 1 quadrillion coins a day forever with no block reward reduction do you think it would massively drop Bitcoin price?  Gold is a store of value, so is silver, and to a lesser extend a handful of other metals.  If people started hoarding uranium it doesn't increase the amount of gold that has been mined.

Fractional reserve "credits" (and you have shown no proof MtGox isn't engaged in it) doesn't increase the supply.  One can also "opt out" by not keeping funds on MtGox (or other hypotehtical fractional reserve bitcoin banks).  Without a central bank (and the ability to print unlimited amounts of funds) any significant fractional reserve bank will eventually fail and when they fail the number of Bitcoin will still be <= 21M.

Transaction fees as a % of miner compensation have increased by a factor of 10x in the past two years.  While still small at ~2% we have a lot of halvings before the reward goes to zero.  It isn't incocievable that fees and transaction volume will slowly rise to fully compensate miners.   Right now if miners received no subsidy the fee would be ~1% of transaction volume.

http://blockchain.info/charts/cost-per-transaction-percent

The blocks (looking at last 2016) are roughly 20% of the 1MB limit so even with no subsidy and only 1MB blocks it seems likely Bitcoin could reach an equilibrium with fees being ~0.2% of transaction volume.  I doubt that is the end game but Bitcoin would still be an impressive value transfer system under those metrics.  Worst case scenario Bitcoin becomes a sort of reserve currency for other lower cost day to day transaction systems.
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April 13, 2013, 06:34:11 PM
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This is a horribly formatted argument.

I don't know what you're trying to say. Include some facts to back up what you're presenting, and maybe clarify your question at the end (are you actually looking for an answer? Do you have an idea of your own? You didn't even explain why the block chain needs to be "secured")

Sorry. I used to write TL;DR versions only as noone reads anything with 100+ words.

I mean that we should think what to do in 5-10 years. Should we kill all altcoins to secure Bitcoin? Should we increase fees 10-100 times?

The blockchain needs to be secured by design. This doesn't need to be explained.
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April 13, 2013, 06:40:41 PM
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Altcoins aren't Bitcoins.  If I launched quadrilla-a-coin which mints 1 quadrillion coins a day forever with no block reward reduction do you think it would massively drop Bitcoin price?  Gold is a store of value, so is silver, and to a lesser extend a handful of other metals.  If people started hoarding uranium it doesn't increase the amount of gold that has been mined.

Altcoins entice miners from Bitcoin. Need proof? After BTC had dropped below $100 hashrate of BTE became much higher.
Altcoins entice fiat from Bitcoin. Need proof? Look at LTC price.

Fractional reserve "credits" (and you have shown no proof MtGox isn't engaged in it) doesn't increase the supply.

Sorry, I disagree. Some guys use [BTC-e/MtGox] redeemable codes as medium of exchange. I can't prove these exchanges do FRB though.
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April 13, 2013, 06:46:53 PM
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Bitcoins have been evolving aside with an altcoin ever since the very beginning:  the test chain is the oldest altcoin, and I don't fear it hurting bitcoin in anyway.

Also, every time the blockchain forks (here I'm talking about the "normal" forks, due to simultaneity of block discovery from different miners), some kind of an alt coin is created.  Yet it does not matter because we all agree to consider only the longest chain.

What I mean is that for the same reasons that people agree to consider only the longest chain as valid, people will agree on considering only bitcoin and not altcoins.  Well, at least I will, and I'm sure I'm not the only one.

Altcoins are fine though.  If people prefer them to bitcoin, I have no problem with it.  I just don't share their preference.  And that's all good.
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April 13, 2013, 06:54:31 PM
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Bitcoins have been evolving aside with an altcoin ever since the very beginning:  the test chain is the oldest altcoin, and I don't fear it hurting bitcoin in anyway.

It's a test chain. Don't count it.

Also, every time the blockchain forks (here I'm talking about the "normal" forks, due to simultaneity of block discovery from different miners), some kind of an alt coin is created.  Yet it does not matter because we all agree to consider only the longest chain.

It's irrelevant to what I wrote.

Altcoins are fine though.  If people prefer them to bitcoin, I have no problem with it.  I just don't share their preference.  And that's all good.

Look at Litecoin. At 0.025 BTC for 1 LTC it's extra 417,000 BTC added to existing 12,000,000 BTC.
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April 13, 2013, 06:57:22 PM
 #8

Look at Litecoin. At 0.025 BTC for 1 LTC it's extra 417,000 BTC added to existing 12,000,000 BTC.

I don't understand why I should count this as an extra.  It's not the same currency.  Otherwise, should I consider that Bernanke also debase bitcoin whenever he prints dollars?  Does not make sense.
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April 13, 2013, 06:57:32 PM
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hi grondilu. we had this argument two years ago, but i still don't understand the basis of your abstract prediction. traditionalists (say, goldbugs) who oppose bitcoin say the same thing of bitcoin as you say of other cryptocurrencies. how are you necessarily right and they necessarily wrong?

one of the amateur bloggers covering bitcoin asked a good question recently: why is any nonzero value a better prediction of bitcoin's value than any other? my own instinct is to answer that question by observing that it's easy to see why relatively small amounts of money would flow into bitcoin. (remember, the 'market cap' figure is just marketing bullshit that nobody in the press seems to have called out. orders of magnitude less have been 'invested' into bitcoin or are in any way involved with bitcoin.) after all, not everyone can easily set up a new block chain, people can benefit from our early efforts and partly pay for the privilege, etc.

but to imagine that a bitcoin could ever be worth $100,000 is to imagine that people (currently bitcoin outsiders) would be willing to transfer billions of dollars to us early adopters instead of setting up an alternative. i'm not saying that's impossible, but in all the posts i've read since 2009 2010 in the forum, nobody has ever given a rational reason for thinking it's remotely plausible. it seems irresponsible, and bordering on fraud, to entice people to buy bitcoins on the thought that it could skyrocket to $10,000 or $100,000, even if that is a technical possibility. (it's also a technical possibility for a single ounce of gold, or a single share of google stock, or anything else).
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April 13, 2013, 07:04:31 PM
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hi grondilu. we had this argument two years ago, but i still don't understand the basis of your abstract prediction. traditionalists (say, goldbugs) who oppose bitcoin say the same thing of bitcoin as you say of other cryptocurrencies.  how are you necessarily right and they necessarily wrong?

I do not pretend my prediction is necessarily better than others.  It's just mine.   Also FYI, I'm a former goldbug.

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but to imagine that a bitcoin could ever be worth $100,000 is to imagine that people (currently bitcoin outsiders) would be willing to transfer billions of dollars to us early adopters instead of setting up an alternative. i'm not saying that's impossible, but in all the posts i've read since 2009 in the forum, nobody has ever given a rational reason for thinking it's remotely plausible. it seems irresponsible, and bordering on fraud, to entice people to buy bitcoins on the thought that it could skyrocket to $10,000 or $100,000, even if that is a technical possibility. (it's also a technical possibility for a single ounce of gold, or a single share of google stock, or anything else).

Not sure I get your point.  Could people decide to start an other blockchain because they think bitcoins are just too expensive?  Of course it's possible.  It's basically happening with altcoins, if you ask me.  I just don't think it's a threat in any way.  It's even healthy, imho.  As far as I'm concerned, I'll just stick to bitcoins.
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April 13, 2013, 07:10:37 PM
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Look at Litecoin. At 0.025 BTC for 1 LTC it's extra 417,000 BTC added to existing 12,000,000 BTC.

I don't understand why I should count this as an extra.  It's not the same currency.  Otherwise, should I consider that Bernanke also debase bitcoin whenever he prints dollars?  Does not make sense.

Let's count together. There are only 1000 USD in the world. And 10 BTC. If BTC replaces USD then 1 BTC = 100 USD.

Now imagine there not only 10 BTC but 40 LTC as well. LTCs are traded at 1/4 of BTCs. There we get 1 BTC = 50 USD.

Let's check it:
10 BTC * 50 USD/BTC + 40 LTC * 12.5 USD/ LTC = 500 USD + 500 USD = 1000 USD.

See? When we add altcoins into the scenario we see that "price" of BTC becomes lower. And we can add infinite number of altcoins. We just need some PR to get people involved.
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April 13, 2013, 07:12:50 PM
 #12

Everyone who thinks that there will be not more than 21,000,000 bitcoins IS WRONG.

1. Fractional Reserve Banking. For example, MtGox, they do FRB. (I'm wrong? They don't do it? C'mon, even small kids know that MtGox loves FRB.)
2. Altcoins. Litecoin, Bytecoin, whatever. (I'm wrong? These are other currencies? C'mon, it's Bitcoin with other names, look at their source code.)

What do these 2 points mean?

Bitcoin is not deflationary  =>  One BTC will never be $1,000,000  =>  When the block reward becomes too low, miners will switch to other currency, because fees won't cover burnt electricity

So, how are we going to secure the blockchain in the future?
Bitcoin does not need to be $1,000,000 to cover electricity.  Right now mining with GPU's most peoples electricity is only 25% of cost.  Far less for people with ASIC and FPGA.  Enough mining for security would happen with a block reward of 6 right now.  As the value of BTC rises this number will drop.  

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April 13, 2013, 07:14:24 PM
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Be fearful when others are greedy, and greedy when others are fearful.

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April 13, 2013, 07:16:31 PM
 #14

Everyone who thinks that there will be not more than 21,000,000 bitcoins IS WRONG.

1. Fractional Reserve Banking. For example, MtGox, they do FRB. (I'm wrong? They don't do it? C'mon, even small kids know that MtGox loves FRB.)
2. Altcoins. Litecoin, Bytecoin, whatever. (I'm wrong? These are other currencies? C'mon, it's Bitcoin with other names, look at their source code.)

What do these 2 points mean?

Bitcoin is not deflationary  =>  One BTC will never be $1,000,000  =>  When the block reward becomes too low, miners will switch to other currency, because fees won't cover burnt electricity

So, how are we going to secure the blockchain in the future?
Bitcoin does not need to be $1,000,000 to cover electricity.  Right now mining with GPU's most peoples electricity is only 25% of cost.  Far less for people with ASIC and FPGA.  Enough mining for security would happen with a block reward of 6 right now.  As the value of BTC rises this number will drop.  

SATOSHI GOT IT RIGHT.



And now imagine that EVERYONE has an ASIC. How much coins will u get? I'm not sure it will be enough to cover the electricity.
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April 13, 2013, 07:21:42 PM
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See? When we add altcoins into the scenario we see that "price" of BTC becomes lower. And we can add infinite number of altcoins. We just need some PR to get people involved.

Of course, but if you add more altcoins, then your reasoning applies to previously created altcoins as well (not just bitcoins).  So it's not proportional.   Basically, you can indeed add as many altcoins as you want, but they won't have as many supporters and their price will therefore not be infinite.

Indeed when people prefer to use altcoins rather than bitcoins, it does reduce the value of bitcoin, but same as when people prefer to use gold, silver, freshly printed dollars or whatever.  Just creating altcoins does not ensure any success selling those altcoins.   And I doubt PR is that effective in making people think as you would like them to think.

Again, there is a convention in bitcoin which states that the valid chain is the one which has the most enclosed proof-of-work (I simplify).  All altcoins have lower proof-of-work and are therefore dissmissed as inferior by all true bitcoiners.   You can create as many altcoins as you want, this will not change.
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April 13, 2013, 07:23:54 PM
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Again, there is a convention in bitcoin which states that the valid chain is the one which has the most enclosed proof-of-work.  All altcoins have lower proof-of-work and are therefore dissmissed as inferior by all true bitcoiners.   You can create as many altcoins as you want, this will not change.

but isn't that exactly like saying 'bitcoin is inferior to gold because it's not shiny'?
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April 13, 2013, 07:29:12 PM
 #17

See? When we add altcoins into the scenario we see that "price" of BTC becomes lower. And we can add infinite number of altcoins. We just need some PR to get people involved.
Of course, but if you add more altcoins, then your reasoning applies to previously created altcoins as well (not just bitcoins).  So it's not proportional.   Basically, you can indeed add as many altcoins as you want, but they won't have as many supporters and their price will therefore not be infinite.

I agree. Anyway we should think about ways to secure the blockchain.
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April 13, 2013, 07:30:11 PM
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Again, there is a convention in bitcoin which states that the valid chain is the one which has the most enclosed proof-of-work.  All altcoins have lower proof-of-work and are therefore dissmissed as inferior by all true bitcoiners.   You can create as many altcoins as you want, this will not change.
but isn't that exactly like saying 'bitcoin is inferior to gold because it's not shiny'?

The correct analogy is:  gold is superior to silver because it's shiny.  And it is.  The fact that gold is yellow matters a lot for the value of gold as a currency.  That's why gold is still more important a currency than platinum, for instance.  Yet platinum is more precious.

I don't compare bitcoin to gold on such a criterium because it would not make sense.  I compare bitcoin to gold by the fact that bitcoin can be transferred directly via internet, while gold can't.
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April 13, 2013, 07:30:57 PM
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See? When we add altcoins into the scenario we see that "price" of BTC becomes lower. And we can add infinite number of altcoins. We just need some PR to get people involved.
Of course, but if you add more altcoins, then your reasoning applies to previously created altcoins as well (not just bitcoins).  So it's not proportional.   Basically, you can indeed add as many altcoins as you want, but they won't have as many supporters and their price will therefore not be infinite.

I agree. Anyway we should think about ways to secure the blockchain.

And here I don't understand at all what you are talking about.
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April 13, 2013, 07:34:02 PM
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And here I don't understand at all what you are talking about.

We need a plan to secure the blockchain. Miners won't do it when we switch to fees instead of subsidy, they'll just jump to other altcoin. That's what I'm talking about.
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