what happens if all bitcoins are mined

[shibaji]

Processing fees. No need to worry for next 200 years.

[DannyHamilton]

An author on Slate wrote on this. I'm not sure what to think about it, but I'll leave you to interpret what you will:

Felix Salmon and many others have pointed out that a currency cannot succeed with a supply that is fixed, or if it grows too slowly. A currency is used to enter transactions; the more transactions there are, the more of the money you need. As the economy grows, a fixed-supply currency becomes worth more in terms of goods and services, and people begin to hoard it—expecting that if they wait a little longer, they will be able to buy more. Once hoarding takes over, circulation ends, and with it the function of the currency. Hoarding accounts for the large increase in the value of bitcoins[...].

An even more fundamental problem with bitcoins, and indeed any private currency, is that there is no way to limit its supply. True, bitcoins cannot be manufactured beyond the limits set by Nakamoto. But there is no way to prevent future Nakamotos from creating bitcoin substitutes—say, bytecoin, or botcoin. If merchants are willing to accept bitcoins, they will be willing to accept the substitutes, especially as bitcoins become scarce and consumers scramble for substitutes. Nakamoto must have realized this because there are not enough bitcoins to substitute for the currencies around the world. The currency can only succeed if it is expanded or supplemented. But if there are no constraints on substitute digital currencies—and there aren’t—then the value of bitcoins will plummet as the subs begin to circulate. And once it becomes clear that there is no limit, people will realize that their holdings could become worthless at any moment, and demand for bitcoins and the other currencies will collapse, ending the experiment.

You can read the entire thing here:
http://www.slate.com/articles/news_and_politics/view_from_chicago/2013/04/bitcoin_is_a_ponzi_scheme_the_internet_currency_will_collapse.html

So the first paragraph says it will fail because there is no way to expand the supply, and the second paragraph says it will fail because there is no way to keep the supply from expanding.

Sorry.  I can't debate someone who appears to be in the middle of debating themselves.  Which is it?  Is a fixed supply fatal, or is an expandable supply fatal?

[alexh]

I don't we will be alive until all bitcoins are mined. Afaik it is about 2140 then.

[DannyHamilton]

I think a good way to circumvent this problem

What problem?  I haven't seen anything about a problem yet.

is to not to limit the amount of BTC to 21M. Instead it should have a deterministic inflation rate of let's say 1%.

Inetersting idea.  You should create your own cryptocurrency that uses that design and see how many people you can get to adopt it.  If it is a better design, then it will be more popular and will replace bitcoin.  You won't be able to change the design of bitcoin though.  It would require a consensus of all users to implement your idea.  Do you really think you can convince every paranoid, tinfoil-hat wearing, consipracy theory believer out there to accept a change that will lead to inflation?

First the concept of mining as it works today could go on for ever.

The concept as designed today can already go on "forever" (well, nothing lasts forever, but I get what you mean).

Secondly, deflationary forces such as loss of BTC, could be compensated for.

They are already compensated for.  When bitcoins are lost, everyone elses bitcoins become more valuable. If they become so valuable that it doesn't make sense to price things in bitcoins, we simply price them in millibitcoins, or microbitcoins, or nanobitcoins.  No problems there.

I general inflation as it is today is not a good thing cuz it takes monex from the savers to the speculaters, but if the inflation rate is small and deterministic it would be a good compromise.

I'm not sure what you mean by "deterministic", but why would inflation be good?

[DannyHamilton]

- snip -
BTC deleting/accidental loss will be the thing that would really hurt in the long run, IMO.

Why?

I think having some plan for that where the total of BTC can rise eventually is a solid one, though like others have said, we may not need to worry about this for some time.

And it is unlikely that you could form a consensus to implement it anyhow.

[DannyHamilton]

I'm a newb as well, but I have thought something along similar lines before.  A small, steady amount of inflation as you suggest seems like a good thing.  From my understanding, I think only deflation or inflation are possibilities; it's either one or the other.  I'm not sure about that, but since coins will inevitably be lost, and more and more people use Bitcoin, right now it's set up to be deflationary, and the only other way to counteract that is to make it inflationary in some way.  I suppose that you could try to make it result in 0% inflation, but that would be difficult.

Why do you think inflation is better than deflation?

As for the possibilities of other currencies supplementing Bitcoin, that's certainly a possible solution, but for the sake of convenience (which is huge in terms of getting everyday people to adopt it), I think having Bitcoin be slightly inflationary is a better solution.

I doubt you'll be able to convince enough people to form the consensus that would be neccessary to make that change.  So you are welcome to wish for it, hope for it, and want it, but you aren't going to get it with bitcoin.  The design is already created.  It is far easier to create a new currency and try to convince people that it is better than bitcoin than it is to make bitcoin inflationary.

[webchris]

- snip -
BTC deleting/accidental loss will be the thing that would really hurt in the long run, IMO.

Why?

Well I'm talking very long-term, obviously. But there is a finite amount of bitcoins, even considering you can pay with uBTC and mBTC, everything is finite. If you are losing 1-2% of your total BTC is existence every year, eventually the value of the remaining mBTC will be so high that it will be a currency for the rich. Something for future generations to figure out, though. But we should remember the lessons of Y2K about not trusting future generations to fix all the problems we leave them.

[DannyHamilton]

I don't think he was proposing a flexible inflation rate, but a fixed rate of around 1%. The fact is that every time someone accidentally deletes or loses their wallet, or someone passes away and no one uses their coins, or people abandon wallets with small fractions of coins that they consider worthless, that is all coins coming out of the system. When coins stops being added (again, not that we have to worry about this anytime soon), it could eventually reduce the amount of coins enough that the value of the remaining coins would be too high for average or below average consumers.

Bitcoin can be divided down to 10 nanobitcoins.  That's 0.00000001 bitcoins.  If we reach a point where 10 nanobitcoins are worth too much to be able to use them for everyday transactions, then I'm sure that either bitcoins will be able to be divided smaller by then, or some other solution will have already been created by the free market.

[DannyHamilton]

Processing fees. No need to worry for next 200 years.

or the next 400 years I suppose.

[anonymous_hero]

An even more fundamental problem with bitcoins, and indeed any private currency, is that there is no way to limit its supply. True, bitcoins cannot be manufactured beyond the limits set by Nakamoto. But there is no way to prevent future Nakamotos from creating bitcoin substitutes—say, bytecoin, or botcoin. If merchants are willing to accept bitcoins, they will be willing to accept the substitutes, especially as bitcoins become scarce and consumers scramble for substitutes. Nakamoto must have realized this because there are not enough bitcoins to substitute for the currencies around the world. The currency can only succeed if it is expanded or supplemented. But if there are no constraints on substitute digital currencies—and there aren’t—then the value of bitcoins will plummet as the subs begin to circulate. And once it becomes clear that there is no limit, people will realize that their holdings could become worthless at any moment, and demand for bitcoins and the other currencies will collapse, ending the experiment.[/i]

Currently people value fiat currency because they trust other people to continue accepting it.  The reason they trust other people to continue accepting it is because the USG tells them to.  It is certainly possible that enough people will, eventually, decide to value crypto-currency because they trust other people to continue accepting it, just because they think it's a good idea.

It is not quite true that "there are not enough bitcoins to substitute for the currencies around the world."  The hard limit of the number of satoshis (which equal .00000001 BTC) is 21x10^5 satoshis, and there 1.178 x 10^12 USD in circulation (source).  Ergo there are roughly 1,781 more satoshis than there are USD in circulation.  This doesn't take into account other currencies, though.

[DannyHamilton]

Something for future generations to figure out, though. But we should remember the lessons of Y2K about not trusting future generations to fix all the problems we leave them.

Sure, but can you imagine people from 1880 trying to decide how to deal with the possibility that phone lines might not have enough bandwidth for all the potential future uses and trying to create solutions for problems that wouldn't exist for another 120 years?

It is impossible to predict what technologies will present the best solution 130 years from now.

[DeathAndTaxes]

Thanks for your replies.
I want to give my opinion here.

I think a good way to circumvent this problem is to not to limit the amount of BTC to 21M. Instead it should have a deterministic inflation rate of let's say 1%. This would have 2 benefits:
First the concept of mining as it works today could go on for ever. Secondly, deflationary forces such as loss of BTC, could be compensated for.

I general inflation as it is today is not a good thing cuz it takes monex from the savers to the speculaters, but if the inflation rate is small and deterministic it would be a good compromise.

What do you think of that?

There are pros and cons to that but it is highly unlikely (as in IMHO impossible) the core principals of Bitcoin will be changed this includes things like
* tx are irreversible
* so called "lost coins" are stolen (a variation of reversible txs)
* the mining reward will be altered
* the 21M BTC capped will be removed or raised

Bitcoin may be patched for improved functionality and better security but due to the need for a consensus it is highly unlikely anything controversial change will ever be adopted.  The good news is Bitcoin is open source.  You can always make a competing coin and let the free market decide.

[DeathAndTaxes]

Something for future generations to figure out, though. But we should remember the lessons of Y2K about not trusting future generations to fix all the problems we leave them.

Sure, but can you imagine people from 1880 trying to decide how to deal with the possibility that phone lines might not have enough bandwidth for all the potential future uses and trying to create solutions for problems that wouldn't exist for another 120 years?

It is impossible to predict what technologies will present the best solution 130 years from now.

This. Predictions beyond 20-30 years become highly dubious.  In 1800s someone trying to make railroads future proof would likely have laid down 4 or more tracks in parallel to ensure sufficient train bandwidth and dumped billions into researching a way to build a tunnel under the Atlantic ocean.  Obviously trains will be used for everything so best to prepare for the future.  It will be massively expensive but then we will be future proof.

In hindsight that would have been a horribly bad idea because technology caused innovation to branch into directions the planners in 1800 could possibly have imagined.

[schnuber]

@DannyHamilton

Look, My starting point was the question whether it could become a problem, if all coins are mined (or more specifically, when it is not any more profitable for miners for doing their work because they don't get enough coins for their effort, this could happen well before 2130).

If you tell me now that this wont be the case, because Bitcoin has implemented a Fee system that works and will assure that there will always be enough Hashing power to satisfy the demand of the Bitcoin network, then I am actually very fine with that.

But if you tell me that this could actually be a major problem but I should simply not bother as it will not take place until 2130, then I am actually not sure whether Bitcoin is a good place to enter in the first place. If you take gold for that matter I know that it will be worth something even in 5000 years. Look, money has much to do with psychology.

So if you wanna promote Bitcoin to average people like me you should be able to convince the people that the underlying concept of Bitcoin is sustainable in the long run.

Having said that i wanna mention that I consider Bitcoin a very fascinating and good project. And I hope that Bitcoin will be a success.

[creativex]

Mining reward adjusts based on difficulty. As mining becomes less profitable some portion of miners stop mining and difficulty falls over time. The miners with the least efficient mining hardware and/or highest operating costs will tend to be the first ones to stop mining.

[Geist]

I admit, I'm no expert, but I've lurked around reading every thread I could in the speculation forum and it sounds to me like the development of bitcoin isn't quite finished yet.

Clearly not.  Bitcoin is still very much in its infancy.

Many of the problems that have occurred in just the last week will just repeat themselves over and over again, so something needs to change.

What problems?  I'm not aware of any bitcoin problems in the last week.

I was referring to the exchange services used for Bitcoin. Since the beginning of the month, it has gone from $100 to $260 to $50 to the $97 it is now is a bad thing as far as I know, and the market is just too easily manipulated by just one exchange that has serious problems dealing with lag and high numbers of trades

The last week was a good thing, it just shows that the appeal of bitcoin is spreading and despite some growing pains, it has survived a rather enormous bubble. But it has highlighted the need for better exchange services.

[DeathAndTaxes]

None of which has anything to do with the protocol.  If people find MtGox doesn't provide value they will leave. If people keep using it they are voting with their wallets.

[Geist]

None of which has anything to do with the protocol.  If people find MtGox doesn't provide value they will leave. If people keep using it they are voting with their wallets.

It may not be a part of the protocol, but until every store accepts bitcoin, exchange services are an inseparable part of bitcoin and require just as much development as the bitcoin itself.

What is a better alternative? I know there are other exchange services, but I am not convinced any of them could have handled it better than Mt. Gox.

[naphto]

Huh.
DannyHamilton are you seriously believing that bitcoin is flawless and will last as long as the sun?

[DannyHamilton]

Huh.
DannyHamilton are you seriously believing that bitcoin is flawless and will last as long as the sun?

No.  Where did I say that?