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Author Topic: Currency idea: Block reward based on mining difficulty  (Read 2021 times)
Explodicle
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October 05, 2011, 04:01:57 PM
 #21

If we assume constant number of miners and constant spending on hardware and electricity, difficulty can be modeled d=c*2^(t/18), where t is time in months and c is some arbitrary constant. Plot the log of that to see payoff over time, it's linearly increasing, not exponential.

That's not to say we really want linearly increasing payoffs - one would further modify this function to set how the money supply increases over time. How exactly depends on your economic school. We could even aim to slowly reduce money supply increase similar to Bitcoin.
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October 05, 2011, 05:02:06 PM
 #22

I think this would be a major improvement. However, if the market cap is falling, the proposal has very little power to maintain price stability. Consider mandatory txn fees. In the event of a difficulty decline, I would suggest txn fee destruction to maintain the price level. In the event of difficulty growth, I would suggest collection of txn fees in a centrally administered development fund. The fund could be used for merchant and developer subsidies ("bounties"). This system would allow for more stable prices in the event of a difficulty decline.

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October 06, 2011, 05:03:37 PM
 #23

The price level is the intersection of a demand curve and a supply curve. If the demand curve shifts downwards a little, you can maintain a stable price by reducing the growth rate of supply. This is your idea as I understand it. However, if the demand curve shifts downwards a lot, then price will still fall even with 0 coin generation. In this case, the only way to maintain a stable price is to take coins out of circulation, that is, destroy them.

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Explodicle
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October 06, 2011, 06:00:11 PM
 #24

I would prefer to have no central authority for bounties. Other cryptocurrencies do that and it's really sketchy and I would not trust them.

That being said, if you're willing to centralize to maintain stability, you should at least run with it and have a chairman who decides when to increase the money supply.
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October 07, 2011, 12:47:43 AM
 #25

We've been using a logarithm curve since before you started posting so I assumed you had at least bothered to skim through the whole thread before posting. Removed the chart to avoid further confusion.
The derivative of number of coins would increase as the difficulty increased.

if you're using log2(x) as the number of coins per block and the number of blocks per time unit should be constant, then the formula for the number of coins per time unit as a function of difficulty would be

y' = log2(x)

The anti-derivative of that would be

x*(ln(x)-1))
-------------
ln(2)

Conclusion:

The number of coins per time unit wold be growing.

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Explodicle
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October 07, 2011, 01:16:16 AM
 #26

We've been using a logarithm curve since before you started posting so I assumed you had at least bothered to skim through the whole thread before posting. Removed the chart to avoid further confusion.
The derivative of number of coins would increase as the difficulty increased.

if you're using log2(x) as the number of coins per block and the number of blocks per time unit should be constant, then the formula for the number of coins per time unit as a function of difficulty would be

y' = log2(x)

The anti-derivative of that would be

x*(ln(x)-1))
-------------
ln(2)

Conclusion:

The number of coins per time unit wold be growing.

You're right, my bad, I misunderstood you a little while ago and thought you meant coins per block would increase exponentially when you were really saying total coins in circulation would.
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