The Bitcoin Printing Press Problem

[the founder]

The Bitcoin Printing Press Problem

It’s fault may not lie with the hacks, scandals and theft, it’s fault may lie with the initial design by Satoshi Nakamoto. It’s strongest strength may turn out to be strongest weakness as well.

http://www.tribbleagency.com/?p=8206

[1715369440]

1715369440

[istar]

There is nothing wrong with that design. Its an experiment and if we would have been able to halt it. Everyone would have wanted to do so to make their coins increase in value, 21 million coins is not that many.

Though a lot of people went in without really thinking about the amount of coins. But people will learn and unless its forbidden all over the world it will pick up in 5-6 years. When there are only 12,5 new coins.

[the founder]

Maybe...  I honestly believe that if it makes it to 2013 then it's going to much smoother... the problem is now and 2013 ...   literally printing 1.5 million worth of BTC every 4 weeks and not having a corresponding investment in it is causing such an extreme inflation rate that it's becoming a problem. 

This thing should go down every year not every 4 years....  the total output by 2140 would be identical,  but every 4 years it's going to have a major boost then correction.

[hugolp]

Maybe...  I honestly believe that if it makes it to 2013 then it's going to much smoother... the problem is now and 2013 ...   literally printing 1.5 million worth of BTC every 4 weeks and not having a corresponding investment in it is causing such an extreme inflation rate that it's becoming a problem. 

This thing should go down every year not every 4 years....  the total output by 2140 would be identical,  but every 4 years it's going to have a major boost then correction.

Yes, probably the rate at which the block reward is adjusted should be more smooth, but still you have a predictable rate which will make it easier for the market to adjust.

Also, its not that bad from a system point of view that the price of bitcoins is going down. The cheaper bitcoins are the easier people will buy them and the more distributed they are.

[allten]

Maybe...  I honestly believe that if it makes it to 2013 then it's going to much smoother... the problem is now and 2013 ...   literally printing 1.5 million worth of BTC every 4 weeks and not having a corresponding investment in it is causing such an extreme inflation rate that it's becoming a problem. 

This thing should go down every year not every 4 years....  the total output by 2140 would be identical,  but every 4 years it's going to have a major boost then correction.

Hi FlexCoin. Thanks for your study and assessment.
As a newly created BitCoin only Bank, I can clearly see why this concerns you so much.
I'm hoping it will inspire you to create something the bitcoin community desperately needs: a bitcoin investment bank.

I will PM you for details.

[bcpokey]

I'd agree that if the only valuation of the coin is in what you can sell it for in another currency, rather than what you can do with it, then this is a problem. And that is how it stands now, though as the article points out this may be an effect of being < 900 days old.

Bitcoin walks a fine line, growth too slow, can't gain any traction or interest and it dies, growth too fast and hyperinflation kills interest in it; gain too much interest and it risks the powers that be stepping in and destroying it in its infancy ala Liberty Reserve. Honestly it seems like it has lucked out thus far by toeing the line, not getting shut down while generating some interest, attention and possible future expansion.

No system is perfect, and unfortunately the decentralized nature of the beast that we all love might be the real long term problem, in that change is quite hard to come by.

[the founder]

We are in the middle of an imploding bubble. However some mechanism for price stability would lead to a less disastrous level of ups and downs.

I almost want to tie the amount printed per block by the current average daily price..

http://www.reddit.com/r/Bitcoin/comments/k7unh/the_bitcoin_printing_press_problem/

[Herodes]

We must also be aware of the fact that SEPA transfers to mtGox from Europe is blocked off at the moment. Once that is reinstated, more funds would come into mtGox imo.

[Anth0n]

I think it would be better if difficulty did not decrease when miners drop out. That way, a decrease in demand is matched with a decrease in supply.

Increasing difficulty is ok with more miners because it represents coins requiring more resources to get while the unmined number of coins decreases. Makes sense.

[ElectricMucus]

Miners do not drop out anyway, as a whole so I don't see difficulty decreasing significantly.
Take a look at this graph


some force is preventing the 14day moving average to cross 0% growth.
I say its when a miner stops he sells his gear to another miner, with no effect on the network except a short downtime during the shipping of gear.

[critmass]

Miners do not drop out anyway, as a whole so I don't see difficulty decreasing significantly.
Take a look at this graph


some force is preventing the 14day moving average to cross 0% growth.
I say its when a miner stops he sells his gear to another miner, with no effect on the network except a short downtime during the shipping of gear.

It could also be that a lot of miners got in expecting the BTC price to be x, but now its lower, so they are operating at or near a loss,

[the founder]

A bunch of them are operating at a loss...  most likely virtually all of them.   We got like 2-3 mining pools taking the majority of all blocks and the majority of all the profit.

That isn't bad... it's bad when it's one doing the majority.