A modest amount of inflation should be part of bitcoin

[ribuck]

Different block chains would be encoding a different set of transacations on the different networks right? So they would be hashing different blocks ... No free lunch.

For a miner to "get a free lunch" by mining another block chain simultaneously with Bitcoin, that other chain must be designed for this purpose, by incorporating an extra field that will make the hashing problem the same as the one being solved for the Bitcoin chain.

Also, if the other chain has a different difficulty level, you will get different numbers of blocks mined on the two chains.

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[marcus_of_augustus]

Different block chains would be encoding a different set of transacations on the different networks right? So they would be hashing different blocks ... No free lunch.

For a miner to "get a free lunch" by mining another block chain simultaneously with Bitcoin, that other chain must be designed for this purpose, by incorporating an extra field that will make the hashing problem the same as the one being solved for the Bitcoin chain.

Also, if the other chain has a different difficulty level, you will get different numbers of blocks mined on the two chains.

That's quite a clever idea, adjust the adjoint network problem so that it becomes the same problem to be solved as the one bitcoin is doing anyway. Supposedly this would be done in real-time and need to be synced with the bitcoin network?

Btw, I'm not talking about the miner getting the free lunch, he's the guy doing the work, it is whoever is hoping to get their problem solved for free by piggybacking onto the block-chain hashing that would be getting a free lunch .... would it require any mods to the miner hashing code or does it just need to sync up with the inputs and outputs to the hashing? If they have different difficulty levels then somehow you have to tell the miners that they have to also report to the adjoint network solutions to the "lesser difficulty" problems and you would need code to be checking for that .... what is the miner's their incentive to do that?

[ribuck]

Supposedly this would be done in real-time and need to be synced with the bitcoin network?

This shouldn't be a practical problem with Bitcoin's 10-minute target block rate.

If they have different difficulty levels then somehow you have to tell the miners that they have to also report to the adjoint network solutions to the "lesser difficulty" problems and you would need code to be checking for that .... what is the miner's their incentive to do that?

The pooled mining operators already have access to "lesser difficulty" solutions and could easily contribute those to the adjunct network, in return for whatever reward the adjunct network provides.

[amincd]

Be careful when you said that. I agree in that bitcoin could be considered fiat because fiat just means "let it be done", but most people require money to be issued by a government/state to be considered fiat.

Oops, I didn't mean that Bitcoin is fiat. I was thinking 'the U.S. dollar and all other fiat currencies' and just wrote 'all other currencies' mistakenly instead, which obviously implies that Bitcoin is fiat as well. I agree, Bitcoin isn't fiat, as its value doesn't come from any government mandates.

[marcus_of_augustus]

Supposedly this would be done in real-time and need to be synced with the bitcoin network?

This shouldn't be a practical problem with Bitcoin's 10-minute target block rate.

If they have different difficulty levels then somehow you have to tell the miners that they have to also report to the adjoint network solutions to the "lesser difficulty" problems and you would need code to be checking for that .... what is the miner's their incentive to do that?

The pooled mining operators already have access to "lesser difficulty" solutions and could easily contribute those to the adjunct network, in return for whatever reward the adjunct network provides.

Okay, so the pool operators code would be the main target for these efforts. I imagine there must be some super-computer houses looking at deepbit.net for instance (360GHash/s and it was put together in less than 4 months) and thinking far out ... how do we get our hands on that kind of power?

The latent potential in the installed hardware base that bitcoin has tapped is a sight to behold for the big iron people, I can tell you. Tailoring a new problem to suit the network as it is configured now could be too hard to implement though. Bitcoin shows that if the right incentive structure is put in place the nodes will figure out best how to optimise to solve the problem, decentralised growth based on few simple rules beats centrally planned clusters and huge blocks of cabinets.

[ShadowOfHarbringer]

Okay, so the pool operators code would be the main target for these efforts. I imagine there must be some super-computer houses looking at deepbit.net for instance (360GHash/s and it was put together in less than 4 months) and thinking far out ... how do we get our hands on that kind of power?

Botnet-powered bitcoin mining starts in 3..2..1...

[jtimon]

Is anyone working on a different chain that shares computing power with the bitcoin network?

[CoinOperated]

Nice chart amincd.  Good observations all round.

Gold has many good properties for a currency - it is scarce, it is a bearer currency, anonymous, relatively easily authenticated, impossible to counterfeit, reasonably easily divisible.  It's value-to-weight ratio is pretty good, however storage, transport and security are a problem especially for large amounts over long distance.  Bitcoin equals or far exceeds gold on all counts, so rather than just "egold" it should probably be "e super-gold" or something. 

The reason behind the Au/Ag idea was that because bitcoin is so good in these categories, demand to hold it as money is extremely high.  Bimetallic currencies were used extensively over the ages, it is easy to read up on how they worked.  I do not know why people started using Ag in history since in theory the Au price can go as high and you can just divide it down.  Maybe it was simply a physical issue, Au coins became too small or you had to mix them with too many other metals and they became difficult to validate the gold content easily.  If the only reason was divisibility, then in theory if someone starts a 210M cap chain with a 500 BTC block nobody is going to be interested in it, they'll want only the scarcest stuff.  If it is a more fundamental issue of demand for more stable pricing, then Ag will flourish.  However, it will not make the AuBTC go away - of that I have confidence.

I think Au/Ag is worth exploring, however at the moment I am more intrigued by the ECC idea (1kWh = 1 BTC) in the other thread.  Conceivably both an Ag and ECC chain could be started, and let the market decide.  If both fall flat, then that may tend to prove the AuBTC to be the best design and will probably dampen all the arguments about deflation.  Competition makes the survivor stronger.

I suspect that regardless of all our opinions some other chains will be attempted as the market cap of all BTC continues its skyward trend.

[abyssobenthonic]

I suspect that regardless of all our opinions some other chains will be attempted as the market cap of all BTC continues its skyward trend.

The most interesting alternative chain, IMO, would be one that kept the 50 unit per block production rate constant (with difficulty adjustments to keep the 1 block/10 min ratio... perhaps even with some mechanism to keep longer-term solving rates at 1 block/10 min).  Such a chain may be more likely to have a constant amount of currency as time approaches infinity than the current chain as it will [at least] almost surely reach an equilibrium state where the average rate of currency losses due to lost wallets will be 5 units per minute (assuming, as is probably reasonable, that the long-term average rate of currency in newly-lost wallets will be a reasonably constant percentage of total currency that has been mined but not lost).  Of course, currency in lost wallets will eventually be rediscovered, but the probability of it happening anytime soon is effectively nil.

Parenthetically, I'm starting to come to the view that lost wallets are effectively demurrage.  There's a non-zero chance of your wallet being lost, no matter how much you back it up.  You can take that risk yourself (e.g. by not making lots of backups), you can take steps (at non-zero cost) to reduce the risk (e.g. by paying for cloud backups, CD-Rs, backups to paper and putting it in a safe-deposit box, etc.), or you can pay someone else to take on the risk (e.g. taking out insurance, but a more interesting (and probably realistic, considering that I can't see how an insurance firm would know that a wallet had been lost) case is depositing the money into an institution that you trust to take sufficient steps to reduce the risk of it being lost and whose promise to, even if the wallet with your account in it is lost, make you whole... such a bank would of course probably charge you money to deposit your funds).  In all cases, there's some cost to holding the bitcoins to infinity and a negative interest rate, so long as it's still greater than, for instance, the cost of cloud backup it would be more rational to lend at a loss than hold and pay for the backup.  It may not be much demurrage, but it is there.

[amincd]

Nice chart amincd.  Good observations all round.

Thank you for the compliment.

The reason behind the Au/Ag idea was that because bitcoin is so good in these categories, demand to hold it as money is extremely high.

I don't believe it will be any where near as attractive to hold on to it in the future as it is now. Right now it is going through a rapid growth phase, which has a natural limit due to the finiteness of the global economy. Whether that limit is 100%, 50% or 1% of the global economy, it will inevitably reach it one day, and when it does, the rate of value increase will slow to the rate of growth of the global economy.

Even now, with value growth of 100% a month, it is still being sold and traded in the tens of thousands of BTCs a day.

Bimetallic currencies were used extensively over the ages, it is easy to read up on how they worked.  I do not know why people started using Ag in history since in theory the Au price can go as high and you can just divide it down.  Maybe it was simply a physical issue, Au coins became too small or you had to mix them with too many other metals and they became difficult to validate the gold content easily.  If the only reason was divisibility, then in theory if someone starts a 210M cap chain with a 500 BTC block nobody is going to be interested in it, they'll want only the scarcest stuff.  If it is a more fundamental issue of demand for more stable pricing, then Ag will flourish.  However, it will not make the AuBTC go away - of that I have confidence.

Yes that is the reason. Gold and silver have different properties that give them distinct advantages. Gold is difficult to make small value purchases with, because the mass that's needed to transfer is small and easily lost. Silver is more difficult to make large value purchases with, because it becomes heavy and costly to transfer large value in silver form.

A gold bitcoin will have no such differences in its quality as a currency from a silver or copper bitcoin, because any amount is easily transferred (e.g. 0.1 gold bitcoins versus 1,000,000 copper bitcoins is equally easy to transfer).

Right now, the biggest short-coming of bitcoin is that it's not widely adopted and thus a coincidence of wants involving bitcoins is rare. Promoting one type of bitcoin is better at over-coming this than different variations which will fork efforts and make each less effective.

[jtimon]

[OFFTOPIC]

Yes that is the reason. Gold and silver have different properties that give them distinct advantages. Gold is difficult to make small value purchases with, because the mass that's needed to transfer is small and easily lost. Silver is more difficult to make large value purchases with, because it becomes heavy and costly to transfer large value in silver form.

This was because there was much more silver than gold.
Is that true today?

[/OFFTOPIC]

A gold bitcoin will have no such differences in its quality as a currency from a silver or copper bitcoin, because any amount is easily transferred (e.g. 0.1 gold bitcoins versus 1,000,000 copper bitcoins is equally easy to transfer).

I agree.
And if other chain has to be created, it should be int hte way satoshi and mike describe (which I'm not sure I understand). That way, the new currency would enjoy the current security from the beginning (much more than if a new completely parallel chain were started) while not competing for CPU power with bitcoin.
If another currency have to be started, it has to be for a better reason that a smaller denomination. That's not needed at all since bitcoins can be easily divided.

Right now, the biggest short-coming of bitcoin is that it's not widely adopted and thus a coincidence of wants involving bitcoins is rare.
Promoting one type of bitcoin is better at over-coming this than different variations which will fork efforts and make each less effective.

If another bitcoin-like currency is created, I think most of its users (probably all) would also accept bitcoin. If there's people that accept some newcoin and not bitcoin, they would need a very good reason. In this case maybe we should support newcoin instead of bitcoin.
I don't think, for example, that anyone accepting timecoin or freicoin would reject bitcoin.

[jtimon]

I suspect that regardless of all our opinions some other chains will be attempted as the market cap of all BTC continues its skyward trend.

The most interesting alternative chain, IMO, would be one that kept the 50 unit per block production rate constant (with difficulty adjustments to keep the 1 block/10 min ratio... perhaps even with some mechanism to keep longer-term solving rates at 1 block/10 min).  Such a chain may be more likely to have a constant amount of currency as time approaches infinity than the current chain as it will [at least] almost surely reach an equilibrium state where the average rate of currency losses due to lost wallets will be 5 units per minute (assuming, as is probably reasonable, that the long-term average rate of currency in newly-lost wallets will be a reasonably constant percentage of total currency that has been mined but not lost).  Of course, currency in lost wallets will eventually be rediscovered, but the probability of it happening anytime soon is effectively nil.

Parenthetically, I'm starting to come to the view that lost wallets are effectively demurrage.  There's a non-zero chance of your wallet being lost, no matter how much you back it up.  You can take that risk yourself (e.g. by not making lots of backups), you can take steps (at non-zero cost) to reduce the risk (e.g. by paying for cloud backups, CD-Rs, backups to paper and putting it in a safe-deposit box, etc.), or you can pay someone else to take on the risk (e.g. taking out insurance, but a more interesting (and probably realistic, considering that I can't see how an insurance firm would know that a wallet had been lost) case is depositing the money into an institution that you trust to take sufficient steps to reduce the risk of it being lost and whose promise to, even if the wallet with your account in it is lost, make you whole... such a bank would of course probably charge you money to deposit your funds).  In all cases, there's some cost to holding the bitcoins to infinity and a negative interest rate, so long as it's still greater than, for instance, the cost of cloud backup it would be more rational to lend at a loss than hold and pay for the backup.  It may not be much demurrage, but it is there.

That chain has been proposed here with the name of timecoin:

http://bitcointalk.org/index.php?topic=2792.0

If you're worried about lost bitcoins, freicoin would warranty a stable monetary base, because the supply would converge over and over again to the maximum:

http://bitcointalk.org/index.php?topic=6549.0

But sincerely I don't understand why are you worried about that and don't complain about the arbitrary 21 million maximum.
If 1 million are lost, is like satoshi would have liked more 20 instead of 21, no big deal. If he had chose 210 millions it would be the same. The market will make more valuable each unit of the currency if it is more scarce, but the currency as a whole won't work better.
There's no need to protect bitcoin from lost wallets.
Is like the Au/Ag bitcoin thing: I just don't see the need.

[amincd]

[OFFTOPIC]This was because there was much more silver than gold.
Is that true today?

[/OFFTOPIC]

I have no idea tbh, but I would imagine that having bulk is advantageous more infrequently today since more every-day-type transactions are transfers of title rather than a physical transfer of the metal. Since gold is less costly to store and transfer in larger amounts, this would increase gold's value as a currency relative to silver.

Quote from: amincd on Today at 07:35:16 am
A gold bitcoin will have no such differences in its quality as a currency from a silver or copper bitcoin, because any amount is easily transferred (e.g. 0.1 gold bitcoins versus 1,000,000 copper bitcoins is equally easy to transfer).

I agree.
And if other chain has to be created, it should be int hte way satoshi and mike describe (which I'm not sure I understand). That way, the new currency would enjoy the current security from the beginning (much more than if a new completely parallel chain were started) while not competing for CPU power with bitcoin.
If another currency have to be started, it has to be for a better reason that a smaller denomination. That's not needed at all since bitcoins can be easily divided.

I'm not familiar with the method Satoshi and mike describe, but if it's more secure, then I would agree it's better and I agree that a new currency would need a quality other than a different number of denominations to be useful.

If another bitcoin-like currency is created, I think most of its users (probably all) would also accept bitcoin. If there's people that accept some newcoin and not bitcoin, they would need a very good reason. In this case maybe we should support newcoin instead of bitcoin. I don't think, for example, that anyone accepting timecoin or freicoin would reject bitcoin.

I think it would just cause confusion for new users, and make people uncertain about investing into it as they wouldn't know which
currency would end up being the more widely adopted one. This is what happens when standards are competing. People sit-out until they know which standard will come out as the winner, like the way they did with Blu-Ray vs HD-DVD.

That being said, experimentation can be beneficial, so it might end up doing good, but I am leaning towards it being to the bitcoin community's advantage to focus on only one variation for now rather than creating a few variations and convincing people to adopt them.



 

[MoonShadow]

This was because there was much more silver than gold.
Is that true today?

There is more than one way to look at that, but if one is restricting oneself to the mass weight of each in an "above ground" (i.e. already mined) and elemental (i.e. refined to an elemental metal) and in a quantifiable form (mostly means it's in bullion or coined form) then there is much more gold in our modern world than silver.  The reason for this is that there are many industrial and commercial uses for silver beyond it's use as a store of value.  Such as, up until the relatively recent takeover of digital photography, silver was a necessary component of photo development chemicals, some trivial amount of which always ended up permanently in the photographs themselves.  Silver also has excellent electrical properties, and is therefore the ideal conductor for mission critical devices that weight is a severe limitation; such as spacecraft, satellites and high-altitude military aircraft.  Silver also has well documented antibacterial properties in it's elemental form, and for this reason is the traditional material that the food implements used by the wealthy.  In today's world, that use isn't as significant, but many surgical materials still contain silver in non-trivial amounts.

All of these uses, and others less significant, tend to 'consume' elemental silver; unlike it's use in jewelry or as a store of value.  On the other hand, gold has relatively few industrial uses that cannot be met by other means.  For example, gold does not corrode, so a gold plated steel hulled ship would be largely immune from saltwater corrosion; but zinc corrodes in a manner that actually protects steel (it's an electro-chemical thing that I don't understand, but I know that zinc used in this fashion is called a "sacrificial anode").  The zinc needs to be replaced periodicly, but over the expected lifetime of such a ship, zinc is by far the better deal.

So, the result of over a century of the industrial age, almost all of the gold ever mined is still known to exist, more or less.  Whereas much of the silver mined, although it's 16 times more abundant in the Earth's crust than gold, no longer exists in any economicly recoverable fashion.

[jtimon]

This was because there was much more silver than gold.
Is that true today?

There is more than one way to look at that, but if one is restricting oneself to the mass weight of each in an "above ground" (i.e. already mined) and elemental (i.e. refined to an elemental metal) and in a quantifiable form (mostly means it's in bullion or coined form) then there is much more gold in our modern world than silver.  The reason for this is that there are many industrial and commercial uses for silver beyond it's use as a store of value.  Such as, up until the relatively recent takeover of digital photography, silver was a necessary component of photo development chemicals, some trivial amount of which always ended up permanently in the photographs themselves.  Silver also has excellent electrical properties, and is therefore the ideal conductor for mission critical devices that weight is a severe limitation; such as spacecraft, satellites and high-altitude military aircraft.  Silver also has well documented antibacterial properties in it's elemental form, and for this reason is the traditional material that the food implements used by the wealthy.  In today's world, that use isn't as significant, but many surgical materials still contain silver in non-trivial amounts.

All of these uses, and others less significant, tend to 'consume' elemental silver; unlike it's use in jewelry or as a store of value.  On the other hand, gold has relatively few industrial uses that cannot be met by other means.  For example, gold does not corrode, so a gold plated steel hulled ship would be largely immune from saltwater corrosion; but zinc corrodes in a manner that actually protects steel (it's an electro-chemical thing that I don't understand, but I know that zinc used in this fashion is called a "sacrificial anode").  The zinc needs to be replaced periodicly, but over the expected lifetime of such a ship, zinc is by far the better deal.

So, the result of over a century of the industrial age, almost all of the gold ever mined is still known to exist, more or less.  Whereas much of the silver mined, although it's 16 times more abundant in the Earth's crust than gold, no longer exists in any economicly recoverable fashion.

Thank you for the explanation!
So if all the national currencies were to disappear, other currencies (like bitcoins, gold and silver) would be more monetized, silver has the potential to become more valuable than gold due to its scarcity. In that case, gold would be good to trade "small quantities" while silver would be used for bigger trades. Due to its potentially infinite divisibility, bitcoin could be used for both big and small trades.
The demonetization of just one big currency (like the dolar or the euro) could be enough to bring such a scenario.
If the "intrinsic value" of the currency was important to its monetization, silver (for having more industrial uses) also has an advantage over gold (and both metals over bitcoin). Like Gesell and unlike Nielsio, I don't think any "intrinsic value" is necessary for money.
On the other hand, the monetization of currency over other is highly psychological and hardly predictable: gold could also become the only currency.
Maybe I should move this comment to the "Bitcoin vs Gold" thread.

[jtimon]

Quote from: amincd on Today at 07:35:16 am
A gold bitcoin will have no such differences in its quality as a currency from a silver or copper bitcoin, because any amount is easily transferred (e.g. 0.1 gold bitcoins versus 1,000,000 copper bitcoins is equally easy to transfer).

I agree.
And if other chain has to be created, it should be int hte way satoshi and mike describe (which I'm not sure I understand). That way, the new currency would enjoy the current security from the beginning (much more than if a new completely parallel chain were started) while not competing for CPU power with bitcoin.
If another currency have to be started, it has to be for a better reason that a smaller denomination. That's not needed at all since bitcoins can be easily divided.

I'm not familiar with the method Satoshi and mike describe, but if it's more secure, then I would agree it's better and I agree that a new currency would need a quality other than a different number of denominations to be useful.

http://bitcointalk.org/index.php?topic=7219.0

If another bitcoin-like currency is created, I think most of its users (probably all) would also accept bitcoin. If there's people that accept some newcoin and not bitcoin, they would need a very good reason. In this case maybe we should support newcoin instead of bitcoin. I don't think, for example, that anyone accepting timecoin or freicoin would reject bitcoin.

I think it would just cause confusion for new users, and make people uncertain about investing into it as they wouldn't know which
currency would end up being the more widely adopted one. This is what happens when standards are competing. People sit-out until they know which standard will come out as the winner, like the way they did with Blu-Ray vs HD-DVD.

That being said, experimentation can be beneficial, so it might end up doing good, but I am leaning towards it being to the bitcoin community's advantage to focus on only one variation for now rather than creating a few variations and convincing people to adopt them.

I think newcoin could save a lot of explanations by linking to bitcoin. In the description could be some text like "if you don't know bitcoin, go to...". For newcoin, the success of bitcoin would be highly desirable I think, just like the success of gold is good for silver because they share most qualities. Instead of looking at it as a market of competing currencies, look at it as a market for competing qualities for money: the currency with the best "basket of qualities" will "win".
Newcoin would take advantage of free developments done for bitcoin, but mostly later. For the newbie it would be always better to start with bitcoin since it has more applications and services.
Only the people who see a flaw in bitcoin and wouldn't use it, would use newcoin.
For example, some "interest haters" could give a chance to freicoin while they're not interested in bitcoin.
I should mail Bernard lietaer.

[AntiVigilante]

twits .. the supply is increasing ...   so until all the bitcoins are mined it is an inflationary system .. of which we look at it as static because we know the total ...

so look at gold as the total .. duh..

think people.

Stop. You'll go crazy. Just let's create diskcoin, cyclecoin, bandcoin, and servcoin before these idiots poison the reference currency.

What part of "We don't large round bricks with holes" don't people get?

We want rectangular bricks that everyone can build upon not just the self-proclaimed priest class. The real cause of poverty is a bunch of inflated egos telling the minimally able that they need an intellectual permit to help themselves.

Haven't you idiots ever played with Legos?

[MacFall]

if I had a bitcoin for everytime someone proposed to "fix" bitcoin by adding inflation...

They just don't get it.

Why don't they just create an inflationary counterpart to bitcoin and let the two compete? (It may be uncharitable of me, but I think it's because the pro-inflation people are mainly also the sort of people who believe in monetary monopolies. "Properly governed", of course.)

[ShadowOfHarbringer]

if I had a bitcoin for everytime someone proposed to "fix" bitcoin by adding inflation...

They just don't get it.

Why don't they just create an inflationary counterpart to bitcoin and let the two compete? (It may be uncharitable of me, but I think it's because the pro-inflation people are mainly also the sort of people who believe in monetary monopolies. "Properly governed", of course.)

As i have said many times: Market will decide which solution is better.
If somebody wants moar inflation so much, they should start their own currency and compete with Bitcoin. The code is free & open - so just do it.

I somebody wants to add more inflation into bitcoin then they essentially want to steal from me. I will not tolerate such a common thievery, so i will always be against adding **ANY** more inflation than satoshi envisioned. EVER.

[MacFall]

This uncertainty is a major problem for the market.

Great. Markets are all about managing uncertainty. It's what they do.

It means that we traded the unpredictability of central bank policies for an unpredictability of the size of the actual money supply.

Not analogous. Central banks are political organizations. They are secretive, coercive, and inherently fraudulent. A non-inflationary competitive currency, for all its flaws you can name, is transparent, voluntary, and while not completely fraud-proof is at least not conducive to it. Furthermore, central bank currencies are monopolistic; centrally-controlled and effectively outside the market. Market currencies, by definition, are not.

What you are proposing is to apply a central planning solution to a problem which markets are perfectly suited to address: a top-down guess at a solution which will inhibit or prohibit the millions of possible other solutions coming from millions of different approaches. Whatever benefit may come from that solution cannot possibly be as good as the solution that will occur naturally, through competition, in its absence.

It really seems to me that you're completely missing the point of bitcoin. In closing, go start your own inflatacoin or whatever. Some of us are choosing bitcoin for precisely the thing that you would do away with.