Decreasing rewards

[whtchocla7e]

Why was Bitcoin designed in such a way that the rewards from mining decrease over time?

The current system is designed to give a lot to very few in the beginning
and then continue to give less and less rewards as the network grows.

After N years, who makes up the backbone of the network? The first few (assuming they didn't cash out)? Or the thousands or millions of new miners? That's a rhetorical question by the way.

A system in which the reward increases over time (relative) could still be designed in such a way to benefit the early adopters and at the same time spread the wealth among more users (I don't have a specific proposal off the top of my head before someone asks). But maybe such concept was beyond the brilliant mind of Satoshi.

[gollum]

I believe the S-curve would be the most fair reward model for a crypto currency
X-axis = time
Y-axis = block reward

Phase 1: few early adaptors, low reward totally but still huge reward per miner
Phase 2: many new users and higher reward, still huge reward per miner
Phase 3: stabilization and curve going down to low inflation, many miners and users, low reward per miner



Number of total miners:

[BitcoinBobbeh]

But maybe such concept was beyond the brilliant mind of Satoshi.

Or maybe you're just butthurt you didn't start mining in 2011.

Which do you think is most likely?

[StevenS]

Minors will always collect transaction fees. In the future, the transaction fees will become a bigger part of the block reward.

[grunt]

Without decreasing rewards bitcoin wouldn't be deflationary; we would all be a lot poorer. Decreasing rewards boost the price, and in turn increase rewards relative to fiat currencies.

[gollum]

The optimal crypto currency should have a built in algorithm for price stability, just like central banks try to target 1-2% inflation.

It can be done by letting an algorithm base the reward on:
*number of transactions per day
*number of addresses
*number of miners
*price of XYZ_Coin vs XAU...

[Luckybit]

Without decreasing rewards bitcoin wouldn't be deflationary; we would all be a lot poorer. Decreasing rewards boost the price, and in turn increase rewards relative to fiat currencies.

Bitcoin isn't deflationary, it's inflationary because new coins are always being generated by PoW. Please stop spreading that meme.

[empoweoqwj]

The optimal crypto currency should have a built in algorithm for price stability, just like central banks try to target 1-2% inflation.

It can be done by letting an algorithm base the reward on:
*number of transactions per day
*number of addresses
*number of miners
*price of XYZ_Coin vs XAU...

Yeah, good luck with designing that algorithm ...

[gollum]

The optimal crypto currency should have a built in algorithm for price stability, just like central banks try to target 1-2% inflation.

It can be done by letting an algorithm base the reward on:
*number of transactions per day
*number of addresses
*number of miners
*price of XYZ_Coin vs XAU...

Yeah, good luck with designing that algorithm ...

Or we could assign Ben Shalom Bernanke as the chairman of Central Bank of Bitcoinistan to handle the monetary policy of Bitcoin. Central banks are not as bad as people in this forum believes, the Fed has actually been pretty good at keeping prices of goods in USDollars more or less stable year to year.

[odolvlobo]

Why was Bitcoin designed in such a way that the rewards from mining decrease over time?

The current system is designed to give a lot to very few in the beginning
and then continue to give less and less rewards as the network grows.

After N years, who makes up the backbone of the network? The first few (assuming they didn't cash out)? Or the thousands or millions of new miners? That's a rhetorical question by the way.

A system in which the reward increases over time (relative) could still be designed in such a way to benefit the early adopters and at the same time spread the wealth among more users (I don't have a specific proposal off the top of my head before someone asks). But maybe such concept was beyond the brilliant mind of Satoshi.

Bitcoins aren't "given" to anyone. Ask any bitcoin miner, and they will tell you that it takes a lot of time, effort, and money to earn just a tiny share of the block reward. It has been that way since the beginning. No miners have gotten rich from mining, and they never will.

The people that have gotten rich are the people that have accumulated bitcoins regardless of whether they mined them, traded for them, or earned them. What you are really complaining about is the fact that some people risked their time and money on Bitcoin, and that they have been rewarded for that risk.

[whtchocla7e]

Why was Bitcoin designed in such a way that the rewards from mining decrease over time?

The current system is designed to give a lot to very few in the beginning
and then continue to give less and less rewards as the network grows.

After N years, who makes up the backbone of the network? The first few (assuming they didn't cash out)? Or the thousands or millions of new miners? That's a rhetorical question by the way.

A system in which the reward increases over time (relative) could still be designed in such a way to benefit the early adopters and at the same time spread the wealth among more users (I don't have a specific proposal off the top of my head before someone asks). But maybe such concept was beyond the brilliant mind of Satoshi.

Bitcoins aren't "given" to anyone. Ask any bitcoin miner, and they will tell you that it takes a lot of time, effort, and money to earn just a tiny share of the block reward. It has been that way since the beginning. No miners have gotten rich from mining, and they never will.

The people that have gotten rich are the people that have accumulated bitcoins regardless of whether they mined them, traded for them, or earned them. What you are really complaining about is the fact that some people risked their time and money on Bitcoin, and that they have been rewarded for that risk.

No, I'm not talking about the people who accumulated bitcoins by trading or earning them. I'm talking about rewards from solving blocks. And my point was... it didn't take much time or effort or money to mine blocks # 1, 2, 3...

Yes, NOW it takes a lot of time, effort, and money to mine a small amount a of bitcoin.

So looking at historical data up to this point, one could say, in essence, that the system was setup to:
A) give big rewards for putting minimal time, effort, money into mining
B) give small rewards for putting a lot of time, effort, money into mining

as time went on. Why was time chosen to be a variable?

[empoweoqwj]

The optimal crypto currency should have a built in algorithm for price stability, just like central banks try to target 1-2% inflation.

It can be done by letting an algorithm base the reward on:
*number of transactions per day
*number of addresses
*number of miners
*price of XYZ_Coin vs XAU...

Yeah, good luck with designing that algorithm ...

Or we could assign Ben Shalom Bernanke as the chairman of Central Bank of Bitcoinistan to handle the monetary policy of Bitcoin. Central banks are not as bad as people in this forum believes, the Fed has actually been pretty good at keeping prices of goods in USDollars more or less stable year to year.

I hope you were being ironic, but I fear not ..... you want the Fed to control the price of bitcoin? Let me out of here 

[Holliday]

A system in which the reward increases over time (relative) could still be designed in such a way to benefit the early adopters and at the same time spread the wealth among more users (I don't have a specific proposal off the top of my head before someone asks). But maybe such concept was beyond the brilliant mind of Satoshi.

Perhaps Bitcoin would have never bootstrapped had the reward scheme been different than Satoshi's? Perhaps something as new and different as Bitcoin needed a group of early adopters who would keep pushing regardless of how many times they were told, "It will never work"? Perhaps they needed a reason beyond simply shaking things up? Perhaps profit is fantastic motivation to succeed?

[empoweoqwj]

A system in which the reward increases over time (relative) could still be designed in such a way to benefit the early adopters and at the same time spread the wealth among more users (I don't have a specific proposal off the top of my head before someone asks). But maybe such concept was beyond the brilliant mind of Satoshi.

Perhaps Bitcoin would have never bootstrapped had the reward scheme been different than Satoshi's? Perhaps something as new and different as Bitcoin needed a group of early adopters who would keep pushing regardless of how many times they were told, "It will never work"? Perhaps they needed a reason beyond simply shaking things up? Perhaps profit is fantastic motivation to succeed?

+1

The proof is in the bitcoin pudding

[cp1]

You're welcome to make your own version if you don't like this one.  It was designed this way because the designer thought it was a good idea, so he tried it out.  Try yours out and see how it goes.

[odolvlobo]

No, I'm not talking about the people who accumulated bitcoins by trading or earning them. I'm talking about rewards from solving blocks. And my point was... it didn't take much time or effort or money to mine blocks # 1, 2, 3...

Yes, NOW it takes a lot of time, effort, and money to mine a small amount a of bitcoin.

So looking at historical data up to this point, one could say, in essence, that the system was setup to:
A) give big rewards for putting minimal time, effort, money into mining
B) give small rewards for putting a lot of time, effort, money into mining

as time went on. Why was time chosen to be a variable?

You are correct that it didn't take much time and effort to mine the earlier blocks, but you are missing a very important point. The value of the bitcoins in block 1, 2, and 3 were 0. In fact, the first 70,000 blocks were worth nothing because the value of a bitcoin at that time was 0. You are complaining that it isn't fair that a group of people were able to spend a bunch of time, effort and money mining worthless bitcoins.

Consider Laszlo Hanyecz, who paid 10,000 BTC for two pizzas in 2010. At that time, it would have taken weeks to mine those 200 blocks. Are you are saying that it is not fair that he was able to mine $20 worth of bitcoins in a few weeks?

[empoweoqwj]

No, I'm not talking about the people who accumulated bitcoins by trading or earning them. I'm talking about rewards from solving blocks. And my point was... it didn't take much time or effort or money to mine blocks # 1, 2, 3...

Yes, NOW it takes a lot of time, effort, and money to mine a small amount a of bitcoin.

So looking at historical data up to this point, one could say, in essence, that the system was setup to:
A) give big rewards for putting minimal time, effort, money into mining
B) give small rewards for putting a lot of time, effort, money into mining

as time went on. Why was time chosen to be a variable?

You are correct that it didn't take much time and effort to mine the earlier blocks, but you are missing a very important point. The value of the bitcoins in block 1, 2, and 3 were 0. In fact, the first 70,000 blocks were worth nothing because the value of a bitcoin at that time was 0. You are complaining that it isn't fair that a group of people were able to spend a bunch of time, effort and money mining worthless bitcoins.

Consider Laszlo Hanyecz, who paid 10,000 BTC for two pizzas in 2010. At that time, it would have taken weeks to mine those 200 blocks. Are you are saying that it is not fair that he was able to mine $20 worth of bitcoins in a few weeks?

So true. Its like people mining altcoins now. Solving "puzzles" very quickly but for little reward. Just like it was in the early bitcoin days. There's nothing inherently unfair about it. Seems a pretty decent system to me.

[Ix]

But maybe such concept was beyond the brilliant mind of Satoshi.

Or, it's good to be king. And maybe one of his commanders. The rest, not so much.

I don't know how much time Satoshi spent thinking about the coin distribution, but it seems rather obvious (only in hindsight? nah) how it would play out were bitcoin to become successful. But, you know, he deserves to be king since he said "let there be light." Anyways...

[cr1776]

The optimal crypto currency should have a built in algorithm for price stability, just like central banks try to target 1-2% inflation.

It can be done by letting an algorithm base the reward on:
*number of transactions per day
*number of addresses
*number of miners
*price of XYZ_Coin vs XAU...

Yeah, good luck with designing that algorithm ...

Or we could assign Ben Shalom Bernanke as the chairman of Central Bank of Bitcoinistan to handle the monetary policy of Bitcoin. Central banks are not as bad as people in this forum believes, the Fed has actually been pretty good at keeping prices of goods in USDollars more or less stable year to year.

True, if you define stable to mean losing 95% of its value in a human lifetime (my grandmother live to be about 100).  Ditto for the Canadian dollar etc. Or half it's value in 20-25 years.

[empoweoqwj]

The optimal crypto currency should have a built in algorithm for price stability, just like central banks try to target 1-2% inflation.

It can be done by letting an algorithm base the reward on:
*number of transactions per day
*number of addresses
*number of miners
*price of XYZ_Coin vs XAU...

Yeah, good luck with designing that algorithm ...

Or we could assign Ben Shalom Bernanke as the chairman of Central Bank of Bitcoinistan to handle the monetary policy of Bitcoin. Central banks are not as bad as people in this forum believes, the Fed has actually been pretty good at keeping prices of goods in USDollars more or less stable year to year.

True, if you define stable to mean losing 95% of its value in a human lifetime (my grandmother live to be about 100).  Ditto for the Canadian dollar etc. Or half it's value in 20-25 years.

Someone had to say it