Is there merit to a fixed supply increase rather than fixed supply cap?

[brainactive]

Global population growth is about 1% every year.

A fixed total supply means the currency is deflationary, after accounting for population growth and lost coins. Could this system potentially over-incentivise saving?

Would it be better to have a fixed supply increase of 1% every year instead? Under this system, it would be only mildly deflationary due to lost coins. This means that in the long term, $1 today would still be worth more slightly more than $1 in the future (a "reward" for delaying gratification and still satisfying positive time preference). I know 1% pa is probably not much in the scheme of things, but wouldn't this be a more neutral choice which doesn't over-incentive saving nor over-incentivise investment?

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[DooMAD]

The tricky thing with questions like this is that some people will like the idea, while others won't.  In order to implement the idea, it would involve a hard fork.  Many would opt to stay on the original chain.  In effect, you end up creating a weaker chain with fewer users than you would have if you just left things alone.  Yet another forkcoin like BCH/BSV/BTG/etc.  It doesn't really get you anywhere.  Sticking with the status quo will generally result in a stronger network.

Whether an idea has merit or not isn't sufficient justification in my view.  Upgrades have to be regarded as necessary if they are to be successfully implemented via hard fork.  

Personally, I would prefer to look at increasing the number of decimal places, allowing for greater divisibility.  Increasing overall supply above 21 million is a red line for me.

[brainactive]

Increasing overall supply above 21 million is a red line for me.

Why do you think a fixed supply cap is better?

I understand the "move slow, don't break things" mentality that surrounds Bitcoin developers, but I don't understand the resistence to change. If there is something small that can be improved why not just do it. An example is certain parts of the code erroneously require certain fields to be in "reverse byte order" while other fields don't. This was clearly a coding error from Satoshi. Why not just change it?

[DooMAD]

Why do you think a fixed supply cap is better?

Credibility isn't to be underestimated.  If we start breaking guarantees that were made at the start, where do we draw the line?  A few vital fundamentals need to remain set in stone for Bitcoin to be credible.  No one will take it seriously if we set a precedent that we can just move the goalposts whenever and that certainty isn't assured.

[Theones]

AFAIK, current popularity and sky high price of bitcoin is because of its fixed supply of 21 million coins. There are successful hard forks of BTC but none even came closer to break the popularity of BTC. BTC despite all odds still has confidence of its community. After every halving we see change in BTC price, which clearly tells that this controlled inflation has worth.

[Kittygalore]

Why do you think a fixed supply cap is better?

Because with a fixed supply cap, we don't have to worry about the price of the coin going down, with a limited supply and close to infinite demand, we will see a high price for each of the coins in the supply because it's limited and it's getting scarce each day. An increase in supply cap is going to make the prices go down since there's a lot for many to go around.

[o_e_l_e_o]

If there is something small that can be improved why not just do it.

Because I reject the notion that removing the fixed limit is either "something small" or an "improvement".

Bitcoin is well known for having a fixed supply. Even people who know little else about bitcoin, know it has a fixed supply. Removing the fixed supply and moving to an inflationary model is not something small, but rather is changing one of the fundamentals of bitcoin; a fundamental that many people based their decision to buy bitcoin on. The uproar would be massive. I can just see all the low quality clickbait headlines now about how there are now potentially "infinite bitcoin" and therefore it is guaranteed to be worthless in the future. If we can change something so fundamental to bitcoin, something that Satoshi himself set, then what stops us changing anything else? What stops us making it 10% a year, or 100% a year?

As DooMAD has said, if you need "more" coins, then you can simply divide them in to small denominations. Changing the fixed supply is fundamentally changing bitcoin.

[hatshepsut93]

On practice it's irrelevant to the world, because Bitcoin has so little users that you can't observe its macroeconomic effects. With the current level of adoption it would take hundreds of years until Bitcoin will start having some wait, and not only because so little people use Bitcoin (estimated 30-50 million right now), but also because these users mostly just bought it and hodl without using it as a payment method.

The thing we will be worrying about in 20-30 years is if transaction fees will be enough to guarantee enough security against 51% attacks. If not, then that could be an incentive to adopt uncapped supply and block rewards, but it's still too early to theorize about it.

[pinggoki]

A fixed supply cap only assumes that there should be a set amount of money within circulation, the bad thing about this set up is, money lost within the circulation would still incur value and since rendered unusable, the central bank must make up for the lost banknote by creating another of that denomination. Thing is this will negatively affect the value of the currency, which in turn could cause inflation due to overprinting of money. On the other hand, having a total fixed supply ensures that no money can be made after all have been released into the public, keeping its value and importance intact, and even if some of the money gets lost in circulation, knowing that there's no way to create more money means that the coin's value stays relatively the same, at the expense of less hands who can get to use the money which is not that good either.

Global population growth is about 1% every year.

A fixed total supply means the currency is deflationary, after accounting for population growth and lost coins. Could this system potentially over-incentivise saving?

Would it be better to have a fixed supply increase of 1% every year instead? Under this system, it would be only mildly deflationary due to lost coins. This means that in the long term, $1 today would still be worth more slightly more than $1 in the future (a "reward" for delaying gratification and still satisfying positive time preference). I know 1% pa is probably not much in the scheme of things, but wouldn't this be a more neutral choice which doesn't over-incentive saving nor over-incentivise investment?

Bitcoin may not be able to make up for the additional humans who would have to use the currency as he/she grows up. This could result to people resorting to a much more abundant currency to accomodate their purchases. This is one downside of a deflationary currency like bitcoin, it only ensure the value of the coin, never the amount of people who can use it.

[franky1]

maybe certain people dont understand fixed supply..(two other network fans suggesting dividing bitcoin(facepalm))

when someone says increase the decimals. they are actually advocating to increase the supply.
when these people learns about sharable units(doubt they know) and understand increasing sharable units=increasing the supply they might learn that whether its increasing it at the top or bottom is the same thing.

the unit btc. is not existent in the blockchain, nor raw tx data..
its just a multiplication for human easy reading.
the actual rule of supply is at the lowest unit of measure. not the basket/box term of convenient math multiplication

at code level there is only one unit of measure.. (sat)
and since 2009 it had 5000000000 units every block produced which halved every 210,000 blocks
that is the real scarcity rule..

by increasing the units per block is increasing the supply
it does not matter if you call this new supply
6.25000000000 btc
or 625000000000 msat
at user graphic interface level..

at the code level its the same amount of sharable units being created per block
(1000x more than current)
..
lets stick with the scarcity rule
625000000 halving in a couple years.. not becoming:
625000000000(1000x less scarce)

the only reason a certain few people in this topic is advocating for an 'increase in the decimals' is because they are a fan of another network created less than 6 years ago that uses 11 decimal tokens and they want bitcoin to become more compatible to this other network.
destroying bitcoins scarcity code (units of measure limit) purely to pump the ideology that people should use this other network instead.


in short. no one should change the units of measure of bitcoin..
if you want a different measure go play with another network and leave bitcoin alone

[DaveF]

How about because you don't need to.
There are tons of alt-coins out there with different options and coin amounts and features.

But think about this as of now BTC is #1 in market cap.
Adding the market cap of #s 2 through 20 you still don't get to the BTC market cap.

So keeping it the way it is really seems to work better then mucking about. You want more coins / more decimals / something else go to the altcoin section.

-Dave

[ranochigo]

The truth is no one probably knows. Cryptos in general are a totally new concept to economist and there is no way to prove those theory correct or wrong. What you've suggested is essentially a tail emission model, where there is a steady monetary inflation rate after a period of time. This ensures stability by providing miners with a stable block rewards, and isn't like Bitcoin where miners have to rely on the fees.

Bitcoin as a currency is very different from fiat, where financial institutions are able to introduce measures to manipulate the economy.

[brainactive]

Most of the responses in this thread seem to boil down to "that's how it was from the start, so that's how it should be". I'm keen to understand why it was like this from the start. Did Satoshi (and other developers) not consider the impacts of lost coins and population growth? Did they feel that we should incentivise saving more than investment? Did they feel that the fixed 21m approach doesn't in fact incentivise saving more than investment? Has there been any meaningful discussion by the developers about the implications of the various options apart from "this is just the way it is"?

[Rainbow-queen]

Most of the responses in this thread seem to boil down to "that's how it was from the start, so that's how it should be". I'm keen to understand why it was like this from the start. Did Satoshi (and other developers) not consider the impacts of lost coins and population growth? Did they feel that we should incentivise saving more than investment? Did they feel that the fixed 21m approach doesn't in fact incentivise saving more than investment? Has there been any meaningful discussion by the developers about the implications of the various options apart from "this is just the way it is"?

Someone said: "Although the supply of Bitcoin is constant, the population is growing. As more and more people start to join the buying ranks, the rigid money supply will lead to deflationary pressure."

This is the wrong idea of ​​not understanding the status quo. With the continuous improvement of the level of social and economic development and the level of education, the aging of the population will become more and more serious, which is caused by the decline in population growth. At present, some regions, especially developed countries, have seen negative population growth. In fact, our second-child policy was proposed in response to the slowdown in population growth. With the increase in the degree of industrialization in areas with the highest level of population growth (poor or underdeveloped), this downward pressure will continue.

[Obito]

Yes, there's a merit to a fixed supply. It makes the crypto or the item that you're talking about much more expensive as time goes by and the demand goes up, not to mention that some will get lost thus causing it to go up much more in the process.

[o_e_l_e_o]

-snip-

We each have a banana. We each cut our banana in to 10 pieces. I then cut each of those pieces in half, giving me 20 pieces. You buy a second banana and cut it in to 10 pieces too, giving you 20 pieces as well. I keep cutting my banana in to smaller and smaller pieces, whereas you keep buying more bananas. Only I have the same amount of banana as we started with, whereas you have increased the total amount of bananas.

Subdividing 21 million bitcoin in to smaller pieces is not the same as raising the cap of 21 million bitcoin, regardless of what units you are considering.

Did Satoshi (and other developers) not consider the impacts of lost coins and population growth?

Sure. Here are some quotes from Satoshi regarding lost coins and population growth:

To Sepp's question, indeed there is nobody to act as central bank or federal reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because I don't know a way for software to know the real world value of things. If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that.

In this sense, it's more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.

Lost coins only make everyone else's coins worth slightly more.  Think of it as a donation to everyone.

[avikz]

Global population growth is about 1% every year.

A fixed total supply means the currency is deflationary, after accounting for population growth and lost coins. Could this system potentially over-incentivise saving?

Would it be better to have a fixed supply increase of 1% every year instead? Under this system, it would be only mildly deflationary due to lost coins. This means that in the long term, $1 today would still be worth more slightly more than $1 in the future (a "reward" for delaying gratification and still satisfying positive time preference). I know 1% pa is probably not much in the scheme of things, but wouldn't this be a more neutral choice which doesn't over-incentive saving nor over-incentivise investment?

It's quite an interesting discussion, I must say! 1% increase in fixed supply every year may not sound huge but it will bring the inflation game into bitcoin! It wouldn't hurt the price growth of bitcoin because it entirely depends on the granular level adoption that creates demand which in turn drives the price growth.

For me, it's a good idea. Instead of having a fixed cap, it makes sense to increase the cap by 1% each year. But the current halving pattern must stay as it is to compensate the inflationary nature of fixed percentage increase. It's interesting to see what others are thinking about this proposal.

[franky1]

-snip-

We each have a banana. We each cut our banana in to 10 pieces. I then cut each of those pieces in half, giving me 20 pieces.

bitcoin code does not grow banana's that are then split.....
bitcoin code grows pieces/cells that are then for human linguistics is refered to as a banana when grouped together in a certain allotment(100,000,000 cells)

if i told you that fruit grow biologically cell by cell and a "banana" is defined as 100,000,000 cells.
and you wanted to Genetically modify it so that a "banana" has 100billion cells instead of a 100million

you would spend years stamping your foot "its still a banana" while everyone else is saying no its a GM banana that traditional banana's would be split by your measure into 20 slices of 0.3inch³
where as the new GM banana can be sliced into 20,000 slices of 0.3inch³
meaning 20,000 people can get to taste banana which broke the hard rule even at your human expression. where only 20 people could have a 0.3inch³ slice

.
having a GM banana with more slice capacity. at your human expression level(facepalm)
or having 1000x more cells at DNA code level but you trying to call it a normal banana(facepalm)..
both result as the same thing..

they both allow more people to have a taste. meaning less scarce

..
oh and remember your block reward halving understanding.. where the halving is not btc halved.. but one less binary bit from the smallest unit measure thats actually programmed into the code..!!!

yep even you previously knew(but pretend to forget) that its not a banana sliced. but instead cells combined and human expressed as a 'banana'
where every 4 years the dna of cells is programmed to create half as many cells as previous. growing less per season

you know.. the:
5,000,000,000sat(50btc)
=100101010000001011111001000000000
and to half the reward you just remove the last bit
=10010101000000101111100100000000

well you want to break that hard limit DNA from 2009 and turn
100101010000001011111001000000  ( you refer to it as 8decimal 6.25btc)
into
1001000110000100111001110010101000000000 (11 decimal 6.25btc)

pretending your GMO banana that is 1000x bigger is the same sharable scarcity of slices as a traditional banana is very mis-informing..
giving out 20,000 0.3inch³ slices of a 60inch tall by 10 inch thick GMO banana.
pretending its as rare as giving out twenty 0.3inch³ of a 6inch³ traditional banana
is very very mis-informing and not even factually or practically or biologically or logically correct


you seem to have forgotton the rule of remove one binary bit every 210,000 blocks. hard rule supply limit
and you want to change it to add several binary bits

do you really want to act naive about the concept of the binary limit being broke just to pretend the human linguistics is the same. even though there are more sharable units and what is created is not the same natural rules of what what was the hard DNA code of bitcoin

[pooya87]

Fixed supply is by far the superior choice because it can be set in stone and everything will work automatically from there. But any other alternative can not be automated and be as good.

For example you said "1% increase per year". Why 1%? What happens when 1% increase is not enough or if it is too much? The problem is that you can't come up with any design that can automatically match the supply with demand to reach an equilibrium so that it can make the price stable. You will either have inflation or deflation. The later is what we prefer in bitcoin hence the fixed supply.

Another thing is the "lost coins" which you mentioned twice. You don't know and have no way of knowing how much bitcoin is lost and will be lost. So again there is no way you could come up with an automatic way of setting a predefined rules to increase the supply based on that.

There is one simple solution to all of this: centralization. In a centralized system the central authority decides how much "money" should be in circulation and prints more of it when needed and decide how much more.
But this system is the fiat system and is tried and failed. Bitcoin won't go that route since one of the main principles of it is decentralization.

[MKings]

Because of the rarity of Bitcoin, the value of Bitcoin has risen.
If there is no upper limit on Bitcoin's supply, then it is no different from ordinary coins.
Others invest in Bitcoin because they have taken a fancy to the scarcity of Bitcoin. If it becomes less scarce, then it has no investment value for these people.