When the majority decides to change the rules

[jon_smark]

Hi,

Let's be optimistic and suppose that Bitcoin does take off in a big way and goes mainstream to the point of becoming a significant actor in the world economy.  In this scenario, the early adopters -- those of you who populate this forum today -- will necessarily become a minority.

Since in Bitcoin the policy is dictated by the majority of nodes (weighted against hash/sec), how would you guys react if a future majority were to decide that the current policy needed tweaking?  I am thinking in particular of the policy that the total number of bitcoins is capped at 21 million.  It could very well happen that the majority comes to the conclusion that the builtin cap is having nefarious effects and decides to upgrade the software such that Bitcoin will switch to a controlled inflation system (say 2%/year).  How many of you would "fork" in such a scenario?

On a related note, it seems that many of you see the builtin cap as good thing.  What evidence would be required to change your mind about this?

Jon.

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[kiba]

Those who save will have a strong disincentive to inflate the money supply.

[mndrix]

Since in Bitcoin the policy is dictated by the majority of nodes (weighted against hash/sec), how would you guys react if a future majority were to decide that the current policy needed tweaking? I am thinking in particular of the policy that the total number of bitcoins is capped at 21 million.

Violating the inflation policy requires broader consent than 50% of the network.  Essentially, a vast majority of Bitcoin-accepting vendors must agree to the change.  See an earlier discussion for more details.

How many of you would "fork" in such a scenario?

I think such a scenario is very unlikely, but I wouldn't personally "fork" on inflation grounds alone.  Bitcoin inflation caps are just one of the many benefits Bitcoin provides.

On a related note, it seems that many of you see the builtin cap as good thing.  What evidence would be required to change your mind about this?

The Bitcoin supply cap models real world commodities like gold and silver of which there is a fixed supply in the universe (nuclear trickery, notwithstanding).  Comparing the performance of unlimited paper money and fixed supply commodity money over the last 1,000 years of history suggests that a currency with a fixed supply provides a more stable price level.  For me to change my mind, I suppose someone would have to convince me that that interpretation of history is incorrect.

[kiba]

The Bitcoin supply cap models real world commodities like gold and silver of which there is a fixed supply in the universe (nuclear trickery, notwithstanding). 

Or asteroid mining!

[FatherMcGruder]

Or asteroid mining!

The Bitcoin supply cap models real world commodities like gold and silver of which there is a fixed supply in the universe (nuclear trickery, notwithstanding).

I think the universe pretty much covers everything.

10,000 Internets to whomever can name that reference.

[bitanarchy]

blocks will be produced at a constant rate of 1 every 10 minutes. Bitcoins are actually represented by these blocks. Right now the software does not allow people to decide which bitcoin one wants to spend. I believe that there are already a number of reasons identified on this forum why that feature would be useful. Bitcoins have a date of creation, and are therefore not all identical.

As soon as this feature is added to the bitcoin client this will allow people to trade bitcoins of a different age at a different price. In other words the geometric series: 50, 25, 12.5 BTC etc will no longer be "enforced". Bitcoins, or more clearly, bitcoin blocks with different ages will then be traded at their relative market value. So the relative value of blocks may then become a smooth function w.r.t. age.

[Jered Kenna (TradeHill)]

Or asteroid mining!

The Bitcoin supply cap models real world commodities like gold and silver of which there is a fixed supply in the universe (nuclear trickery, notwithstanding).

I think the universe pretty much covers everything.

10,000 Internets to whomever can name that reference.

Shutup woman get on my horse?

[BitterTea]

blocks will be produced at a constant rate of 1 every 10 minutes. Bitcoins are actually represented by these blocks. Right now the software does not allow people to decide which bitcoin one wants to spend. I believe that there are already a number of reasons identified on this forum why that feature would be useful. Bitcoins have a date of creation, and are therefore not all identical.

As soon as this feature is added to the bitcoin client this will allow people to trade bitcoins of a different age at a different price. In other words the geometric series: 50, 25, 12.5 BTC etc will no longer be "enforced". Bitcoins, or more clearly, bitcoin blocks with different ages will then be traded at their relative market value. So the relative value of blocks may then become a smooth function w.r.t. age.

Why? This would work against Bitcoin by violating one of the fundamental properties of money, that each unit is worth the same as any other (fungibility).

[bitanarchy]

Right now the software does not allow people to decide which bitcoin one wants to spend. I believe that there are already a number of reasons identified on this forum why that feature would be useful. Bitcoins have a date of creation, and are therefore not all identical.

Why? This would work against Bitcoin by violating one of the fundamental properties of money, that each unit is worth the same as any other (fungibility).

It is not a question of why. This feature can easily be implemented. So it is just a matter of time before it is there. After that the market will decide the relative value of bitcoins with different ages.

Note that old physical coins also have a collectors value. Bitcoin differs from old physical coins in:
1. that it does not have a weight in metal. Note that the coinage is only a certificate of authenticity. Note that all atoms of a metal are quantum mechanically completely identical.
2. that it is not subject to legal tender laws
3. they do not wear out.

[FatherMcGruder]

Or asteroid mining!

The Bitcoin supply cap models real world commodities like gold and silver of which there is a fixed supply in the universe (nuclear trickery, notwithstanding).

I think the universe pretty much covers everything.

10,000 Internets to whomever can name that reference.

Shutup woman get on my horse?

We have a winner!

Too bad that Satoshi didn't call bitcoins internets instead.

[Jered Kenna (TradeHill)]

Or asteroid mining!

The Bitcoin supply cap models real world commodities like gold and silver of which there is a fixed supply in the universe (nuclear trickery, notwithstanding).

I think the universe pretty much covers everything.

10,000 Internets to whomever can name that reference.

Shutup woman get on my horse?

We have a winner!

Too bad that Satoshi didn't call bitcoins internets instead.

Yeah real bummer, would have made things a little confusing though.

[BitterTea]

It is not a question of why. This feature can easily be implemented. So it is just a matter of time before it is there. After that the market will decide the relative value of bitcoins with different ages.

Note that old physical coins also have a collectors value. Bitcoin differs from old physical coins in:
1. that it does not have a weight in metal. Note that the coinage is only a certificate of authenticity. Note that all atoms of a metal are quantum mechanically completely identical.
2. that it is not subject to legal tender laws
3. they do not wear out.

I meant why would older Bitcoins be more valuable as a currency? It makes no sense at all. If two denominations of 50 BTC are not worth the same as each other, it's a huge strike against Bitcoin as a currency.

[Jered Kenna (TradeHill)]

It is not a question of why. This feature can easily be implemented. So it is just a matter of time before it is there. After that the market will decide the relative value of bitcoins with different ages.

Note that old physical coins also have a collectors value. Bitcoin differs from old physical coins in:
1. that it does not have a weight in metal. Note that the coinage is only a certificate of authenticity. Note that all atoms of a metal are quantum mechanically completely identical.
2. that it is not subject to legal tender laws
3. they do not wear out.

I meant why would older Bitcoins be more valuable as a currency? It makes no sense at all. If two denominations of 50 BTC are not worth the same as each other, it's a huge strike against Bitcoin as a currency.

They shouldn't, there's no justification except to maybe the super nerd if you could prove you had the first block or something but that's a separate issue.
I suppose if there was some enhanced level of anonymity that went along with it or something maybe but they're going to get passed around plenty anyways. 

[Jim Hyslop]

blocks will be produced at a constant rate of 1 every 10 minutes. Bitcoins are actually represented by these blocks.

No, bitcoins are represented by transactions. A block has no value in and of itself. You need to go back and learn the basics of how bitcoin works https://en.bitcoin.it/wiki/Introduction#Creation_of_coins.

[theymos]

I meant why would older Bitcoins be more valuable as a currency?

If the chain splits, then older coins will be spendable on two different chains, and they will therefore be more valuable. It's not "older is better", though -- coins would be divided only into categories of "before the split" and "after the split".

[carp]

I meant why would older Bitcoins be more valuable as a currency?

If the chain splits, then older coins will be spendable on two different chains, and they will therefore be more valuable. It's not "older is better", though -- coins would be divided only into categories of "before the split" and "after the split".

I believe that is only one of the issues with forking the chain.

Consider this, if you were to fork the chain at some time point, you would also need to change the transaction format going forward, or else, your spend in one chain could be replicated to the other too.

Think of the confusion it would cause if you could post an address and have it a usable address in both chains? Best you could do, I think, would be to allow addresses from the previous chain only as inputs to transactions, and use a whole new address format going forward... to prevent each system from validating eachother's coins.

Not to say that it can't happen, or it wont ever be tried (hell I know a guy who had $500 and needed $1k tomorrow so he figured his best bet was to buy scratch tickets), but I can't see it turning out well, or being useful for very much.

Maybe as a game currency or something where you just want to give people an incentive to play. Of course, to "play" they would need the private key info from their real bitcoin wallets to sign transactions... which would be pretty safe if you used a new format that differed from real transactions but.... your game idea had better be damned good if you think many people are just going to let it grab the private keys from their wallets for in game use.

Really, if someone wants to change the rules, its best to start a whole new parallel block chain (or implement some of what was talked about with bitdns of using related block chain that can be simultaneously mined)

I go back and forth on whether I like the fixed total money supply of bitcoin but, thats what bitcoin is, change that and you really do have a different beast.

[Dai]

Hi,

Let's be optimistic and suppose that Bitcoin does take off in a big way and goes mainstream to the point of becoming a significant actor in the world economy.  In this scenario, the early adopters -- those of you who populate this forum today -- will necessarily become a minority.

Since in Bitcoin the policy is dictated by the majority of nodes (weighted against hash/sec), how would you guys react if a future majority were to decide that the current policy needed tweaking?  I am thinking in particular of the policy that the total number of bitcoins is capped at 21 million.  It could very well happen that the majority comes to the conclusion that the builtin cap is having nefarious effects and decides to upgrade the software such that Bitcoin will switch to a controlled inflation system (say 2%/year).  How many of you would "fork" in such a scenario?

On a related note, it seems that many of you see the builtin cap as good thing.  What evidence would be required to change your mind about this?

Jon.

I just can't see bitcoin taking off in a big way, when it is capped at 21 million. Imagine 21 million divided between the facebook population (lets leave country and nationality out of it) 500 million or half a billion users . That's not a lot of bitcoins to go round, it won't buy you a lot. To be honest it mirrors the goldbugs who want to base the real currency of there countries on a gold, or a gold standard. Unless the the world changes it's monetary system from a fractional reserve system to 100% reserves and bit coin does away with the cap, only then could it work.
We live in an exponential monetary system so the money supply has to be exponential in nature and character to fit in with it. If bitcoin were to ever challenge let alone replace our existing money supply it would to change to an exponential currency. The only other way would be to change the worlds money from a fractional reserve to 100% reserve system.

[jgarzik]

I just can't see bitcoin taking off in a big way, when it is capped at 21 million. Imagine 21 million divided between the facebook population (lets leave country and nationality out of it) 500 million or half a billion users . That's not a lot of bitcoins to go round, it won't buy you a lot.

This is a FAQ (or "FMC", frequently misunderstood concept?).

1) Bitcoins can be divided into millionths of a bitcoin, leaving plenty for everyone on Earth.

2) "it won't buy you a lot"  There is no economic reason why 0.000001 BTC cannot be worth $1,000 USD.  It is entirely supply and demand.

Where you place the decimal is completely irrelevant.

[Jered Kenna (TradeHill)]

I just can't see bitcoin taking off in a big way, when it is capped at 21 million. Imagine 21 million divided between the facebook population (lets leave country and nationality out of it) 500 million or half a billion users . That's not a lot of bitcoins to go round, it won't buy you a lot.

This is a FAQ (or "FMC", frequently misunderstood concept?).

1) Bitcoins can be divided into millionths of a bitcoin, leaving plenty for everyone on Earth.

2) "it won't buy you a lot"  There is no economic reason why 0.000001 BTC cannot be worth $1,000 USD.  It is entirely supply and demand.

Where you place the decimal is completely irrelevant.

Exactly, when I was in Romania they went from the old lei to the new lei. It was something like 29000 to 1usd and they just cut 4 digits off and called it 2.9 new lei to the usd.
You could pay with things in new or old lei and it was easy to figure out. It would be the same thing with btc. Just move the decimal over. You and everyone else would have the same value at the end of the day that they did at breakfast.

[carp]

I just can't see bitcoin taking off in a big way, when it is capped at 21 million. Imagine 21 million divided between the facebook population (lets leave country and nationality out of it) 500 million or half a billion users . That's not a lot of bitcoins to go round, it won't buy you a lot. To be honest it mirrors the goldbugs who want to base the real currency of there countries on a gold, or a gold standard. Unless the the world changes it's monetary system from a fractional reserve system to 100% reserves and bit coin does away with the cap, only then could it work.
We live in an exponential monetary system so the money supply has to be exponential in nature and character to fit in with it. If bitcoin were to ever challenge let alone replace our existing money supply it would to change to an exponential currency. The only other way would be to change the worlds money from a fractional reserve to 100% reserve system.

Your thinking is way too rigid here.

Bitcoins can be subdivided to 8 decimal places without any changes except to the client to allow you to use them. The number 1 is just an arbitrary value. Think of it this way.... a common wage used to be in cents per day. Could you imagine being paid even 30 cents per day? There was a time when that wasn't bad money! Hell the US used to mint "mils", which were fractions of a penny!

Think of gold. Its sold in grams right? Well 1 gram of gold is over $300 last I looked (a long time ago). Of course, gold is also divisable. If you only need half that, I can sell you half a gram of gold, you can then spend 1/4 that if you need $75. Makes sense right? All these values are relative, they all float against eachother.

Right now, btc sell for around 70-80 cents each. Clearly 21 million 80 cent pieces, even infinitely divisable ones, are not going to run a whole economy. All that means is that a growing economy should drive up btc values... until they can be subdivided enough to provide enough value to run the economy.

Does it really matter what 1 btc is worth? If 1 btc is worth $100 usd, then, we will trade for $1 values in .01 btc