Cryptocurrency Proposal: Econcoin

Bitcoin is an innovative technology that paved the way to a brand new economic system that will change the way market economies work forever. While Satoshi's design was brilliant, many problems arose that he could not fore see. As Bitcoin is the first of its kind, it's bound to have flaws in its design that could not have been predicted prior to its use by millions of people. It will certainly be remembered throughout history as the initial creation that began the push towards decentralized digital currencies.

   Econcoin is a new cryptocurrency that is designed to resolve many problems with the Bitcoin protocol, many of which are either impossible to resolve or ones that would be extremely difficult to change without distrupting the system. While the Bitcoin protocol can be adjusted and updated to deal with many of these problems, doing so would be extremely difficult. As Bitcoin is a multi-billion dollar economy that sees millions of dollars worth of transactions a day, any hard fork would cause severe issues. Many potential changes would be controversial, so forking the chain has the potential to completely destroy the currency if the decision isn't accepted by an overwhelming majority.

   The first issue with Bitcoin is early miner incentive. Early on in Bitcoins life, the transaction fees included in a block are negligible compared to the block reward. Because larger blocks take longer to travel across the network, and therefore become a greater risk of orphaning, many miners opt to severely limit the size of their blocks. The slight risk of an orphan block outweighs the benefit of increased transaction fee revenue. Due to miners including fewer transactions, the network will be unable to support massive amounts of volume, and the network will either fall significantly behind, or transaction fees would become extremely high. Many Bitcoin developers believe that most Bitcoin transactions should occur outside of the blockchain, through 3rd party services such as Coinbase; the blockchain should only be used for storing and moving large amount of money. If Bitcoin continues to grow and miners refuse to include more transactions in a block, the miner fee will need to continually be raised until it is only used for moving large sums of money.

   By forcing users to use online services such as Coinbase for ordinary purchases such as a meal at a restaurant or an online purchase in order to avoid a high flat(and soon floating) transaction fee, many of Bitcoins perks are lost. The service theoretically could run away with your money or lose it to being hacked, so it requires trust. The service could track every purchase you make, so there is no longer privacy. They could block transactions to merchants or addresses they do not approve of, so there is less freedom. It would likely use a standard authentication system(combined with 2FA), so the security would become greatly reduced. They also could include a percentage based fee of their own that would still be cheaper than the miner fee for small amounts. Nearly every single perk associated with the Bitcoin technology is lost when people need to use these services to avoid high fees, to the point where it is no better than paying through Paypal/Credit Cards or another fiat based service.

   The second issue is the centralization of the currency to ASIC(Application specific intergrated circuit) devices. When Satoshi designed Bitcoin, it was thought that CPUs would be the primary means of mining. Everyone with access to a computer would be able to mine the currency, so mining would be spread out across millions of people. However, ASIC devices now mine thousands of times faster than CPUs and GPUs, and continue to grow more powerful. Manufacturers often hold onto these devices before selling and make a large profit, then sell them once they become unprofitable to the consumer. Many end up as scams or ship much later than promised.

   They also could decide not to sell them, and instead use them for their own benefit. KNCminer, a leading manufacturer of high end ASIC devices, plans to build a 10 Megawatt mining facility in Sweden. at 2.1 Kilowatts per 3 TH/s, thats over 14 PH/s of hashing power that the facility alone would generate, which if added now would take over 33% of the network-enough for a selfish mining attack. KNC miner likely limited themselves to 10 Megawatts because they do not intend to ruin trust in the network by gaining more than 50%, though they probably could if they choose to. While KNCminer may have good intentions, it is possible that in the future some manufacturers may not. The next problem demonstrates how easy it is for ASIC manufacturers to develop a monopoly in the distant future.

   Once all of the Bitcoins are mined, miners will be mining for transaction fees alone. Ideally competition would exist, so miners would be forced to keep fees relatively low. If one required high fees, people would simply use a lower fee accepted by another mining pool. The problem is that the largest miners could develop a monopoly. If they already possess a large amount of money, they could temporarily include all transactions regardless of fees. This would force other less powerful miners to mine at a loss, and likely go bankrupt. Once these other miners back out, the monopoly owner could then charge as high of fees as they would like, as no one can afford to compete with them. ASIC technology makes this monopoly even easier. The richest miners can afford to develop the most efficient ASICs for themselves, while startups would stuggle to compete. You would need an enormous amount of funds to develop your own ASIC that even comes close to competing with theirs, and even if you do they will drive you bankrupt by temporarily reducing fees. Millions of people mining at home with a CPU or GPU to try and fix the problem would have little to no impact.

   Econcoin aims to solve these issues. First, the initial surge of coin distribution with Econcoin would happen much quicker than Bitcoin. Block rewards would be halved every 50,000 blocks, until they reach a minimum. Once this minimum is reached, the block reward will be adjusted such that there is a 0.1% increase of existent coins per year. By providing a guaranteed reward for finding a block, it weakens the capability of developing a mining monopoly. Even if a mining organization chooses to require no fees in an attempt to drive less powerful miners bankrupt, they would still survive off of this reward. This amount is designed to develop an equilibrium between block rewards and transaction fees. Miners will want to include transactions to get their fees, but the block reward will be there too. Because a guaranteed mining reward is included, transaction fees should also stay low.

   A 0.1% increase in coins per year is significantly less than the inflation of almost any existent fiat currency, and is almost negligible. In 100 years, likely longer than many will live, coins will have barely lost 10.5% of their value. This also does not account for lost or destroyed coins. Many economists also believe that a deflationary currency creates a stagnant economy, so a slight amount of inflation would help keep commerce active. It may also prove to still be deflationary due to lost coins, since 0.1% is such a small amount. This slight inflation is also necessary to keep transaction fees low and mining monopolies out. In a system where people are punished for spending(TX fees), but rewarded for hoarding(deflation), the economy will not strive.

   Econcoin also will use the proof of work algorithm scrypt-n, originally introduced by Vertcoin. Scrypt-n is designed to be resistant to ASICs by containing a memory requirement that is set to increase on a specific block schedule. High speed memory is extremely expensive to include on dye on an ASIC, so it makes them ineffective. The increasing memory parameter further decreases the incentive to create one, because when technology improves memory will become cheaper. By remaining resistant to ASICs, the currency will remain decentralized since millions of high end GPUs are already scattered across the world to millions of different people.

   Econcoin will not be released until it is both ready and thousands of people are ready to begin mining and using it, so the distribution will be fair. There will be no premine. Because the majority of the coins will be mined within a couple of years, it is important that they are widely distributed. Bitcoin was a brand new idea when it started, so millions of coins went to a small amount of individuals. An estimated 6 million coins belong to less than 1000 people. 3 million belong to less than 50 people. Satoshi alone has almost 1 million Bitcoins. This horribly uneven distribution of wealth poses risks to the currency.

   The time per block will be adjusted such that a block is found at average every 5 minutes. It will use Kimitos Gravity Well to ensure that difficulty adjusts in a more smooth way, and to avoid profit switching pools. Lower times make the system more convenient by allowing for faster confirmations, whereas higher times reduce the frequency of orphan blocks. 5 minutes seems like the ideal time; faster than Bitcoin, but long enough that orphan blocks aren't an issue. The initial block reward will be 500,000; a total of 25 Billion Econcoins will be created. While more coins being distributed offers no advantage from a technical standpoint, psychologically it is much more satisfying. Econcoin can also be abbreviated as E-coin, which sounds quite appealing. Making the coin appealing is important to convincing individuals to adapt it; Many people are turned off from Bitcoin due to it's high price-even when you can buy a fraction of a Bitcoin.

   The beginning of Econcoin will be a speculative period. Miners will mine, investors will buy, and infrastructure will be built. It should already be well known when launched, but not too large such that there is too much hoarding and difficulty in obtaining the currency. As the block reward is reduced, miners will have more incentive to create larger blocks for the fees. Merchant adaptation should grow, and the currency should be able to support large amounts of volume. Econcoin is designed to be stable enough to support heavy usage, and to be sustainable.

Developers are needed to work on this project, as I personally am not capable of coding a new cryptocurrency. As of now it is simply an idea-no work has been done yet. Further technologies such as post-quantum cryptography and the removal of old spent transactions are also considered. This is only a rough idea, it is not a solid design yet. Many things may change, and numbers are not final. Criticism is welcome.