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Author Topic: The people should be in control of money supply  (Read 1362 times)
wingding
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June 21, 2014, 01:16:20 PM
 #1

Bitcoin's and other altcoins limited supply is what stops them from becoming a true free currency for the people around the world. We are loosing the opportunity, in spite that the solution is very simple:

One simply need to adjust how new coins are coming into being:

block-reward = C * difficulty    (meaning: money supply= hashing power)

The constant C is halved every 1.5 years - because that means you will always have the same amount of new coins given the same amount of energy. (see Koomey's law)

Even if the whole world started to use this coin, it would not give price explosions. Value would always be tied to energy in some more or less predictable way.
Cruptocurrency technology has two core features; proof-of-work and money supply. Why have they not been connected? This mechanism connects them, and does not need any man-made ideas for the money supply. This reward mechanism is the natural one for crypto, and is the same as we live after every day: The more you work, the more money you get paid.

This is not a new idea, and has been around for long time, in several posts, for example here: https://bitcointalk.org/index.php?topic=178140.0 and here https://bitcointalk.org/index.php?topic=64637.msg759250#msg759250
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June 21, 2014, 01:42:26 PM
 #2

It is better to have an appreciating currency that buys more and more as time goes by; Bitcoin can be divided as much as needed so there will always be enough bitcoins!

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June 21, 2014, 02:14:38 PM
 #3

Bitcoin's and other altcoins limited supply is what stops them from becoming a true free currency for the people around the world. We are loosing the opportunity, in spite that the solution is very simple:

One simply need to adjust how new coins are coming into being:

block-reward = C * difficulty   (meaning: money supply= hashing power)

The constant C is halved every 1.5 years - because that means you will always have the same amount of new coins given the same amount of energy. (see Koomey's law)

Even if the whole world started to use this coin, it would not give price explosions. Value would always be tied to energy in some more or less predictable way.
Cruptocurrency technology has two core features; proof-of-work and money supply. Why have they not been connected? This mechanism connects them, and does not need any man-made ideas for the money supply. This reward mechanism is the natural one for crypto, and is the same as we live after every day: The more you work, the more money you get paid.

This is not a new idea, and has been around for long time, in several posts, for example here: https://bitcointalk.org/index.php?topic=178140.0 and here https://bitcointalk.org/index.php?topic=64637.msg759250#msg759250

The supply of bitcoin and altcoins is not an issue at all. They are incredibly divisible. Price is relative.

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June 21, 2014, 04:31:29 PM
 #4

The people do control the money supply in a way.

All they need to do is stop borrowing from bank and pay back the debt. Money supply will shrink sharply unless the government go on spending spree.
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June 21, 2014, 04:42:49 PM
 #5

By the second law of thermodynamics Koomey's "law" will eventually end.  I would also point out that in the short history of Bitcoin the efficiency of miners have increased by many magnitudes more than Koomey's law.  Two years ago a GPU was about as good as it got and that had an efficiency of 300 J/GH.  Today we have miners capable of <1 J/GH.  Had Satoshi adopted that sort of money supply system, based on actual difficulty over that past two years the monetary inflation would have been >10,000% annually.
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June 21, 2014, 05:12:53 PM
Last edit: June 22, 2014, 04:23:22 PM by odolvlobo
 #6

One simply need to adjust how new coins are coming into being:

block-reward = C * difficulty   (meaning: money supply= hashing power)

The constant C is halved every 1.5 years - because that means you will always have the same amount of new coins given the same amount of energy. (see Koomey's law)

The difference between your system and the current system is the meaning of C. In your system, C is "constant", and in the current system, C is "cost".

It is interesting that the value of 1 bitcoin is determined by the choice of C under your system (I believe). It might be interesting to model it.

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Harley997
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June 21, 2014, 07:22:38 PM
 #7

This would cause the price of bitcoin to decrease over time as more miners are brought online.

The purpose of block rewards is to give miners an incentive to mine until there are enough TX fees to cover miners costs (plus some kind of a profit)

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June 21, 2014, 08:36:17 PM
 #8

There is no need to change Bitcoin's features.  Just create an altcoin that has the features you desire and change your currency.  Everyone has their own criteria when it comes to choosing which currency they prefer to use and best meets their needs.

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."   - Henry Ford
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June 21, 2014, 09:21:27 PM
 #9

There is no need to change Bitcoin's features.  Just create an altcoin that has the features you desire and change your currency.  Everyone has their own criteria when it comes to choosing which currency they prefer to use and best meets their needs.

I personally enjoy less than 1% of Bitcoin users owning 50% of the Bitcoins, which is completely better than 1% of people owning 99% of the worlds wealth. Financial Freedom!
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June 22, 2014, 03:41:58 PM
 #10

By the second law of thermodynamics Koomey's "law" will eventually end.
That's right. But it will not happen suddenly. It will come as a gradually increase in the doubling time for computing efficiency. This only means a sligt anti-inflationary bias for the coin. No problem.
I would also point out that in the short history of Bitcoin the efficiency of miners have increased by many magnitudes more than Koomey's law.
That happens because of jumping to different technologies - CPU-->GPU-->ASIC. We can be pretty sure that after arrival of ASICS, Koomey's law will rule.

I'd also like to emphasize more clearly a few advantages this supply mechanism will have:
1. Price cannot swing to much - too high and everybody will start mining, too low and people stop mining, meaning supply gets limited, driving price up.
2. People can start using the coin without any exchange. The simply can mine it themselves without very advanced hardware. The electricity company works as your exchange. Provide A gigahashes to network, and you get paid A coins in reward.
3. Mining will always be profitable, for someone. No need for transaction fees.
4. When someone buy this coin from you, they know you also have paid for it. No-one could print it easy because they knew about it early. This fairness of acquirement is a prerequisite for any crypto to achieve broad adoption.  
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June 22, 2014, 04:14:44 PM
 #11

3. Mining will always be profitable, for someone. No need for transaction fees.

It is possible (and likely) that enough bitcoins will be mined to make mining for the block reward unprofitable. I believe that the result is that mining will stop completely if there are no transaction fees.

If any miners stop mining under the current system, then the remaining miners become more profitable. That feedback doesn't exist in your system.

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June 22, 2014, 10:49:42 PM
 #12

3. Mining will always be profitable, for someone. No need for transaction fees.

Asic manufacture is profitable. Mining, not so much.
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June 26, 2014, 03:35:06 AM
 #13

3. Mining will always be profitable, for someone. No need for transaction fees.

It is possible (and likely) that enough bitcoins will be mined to make mining for the block reward unprofitable. I believe that the result is that mining will stop completely if there are no transaction fees.

If any miners stop mining under the current system, then the remaining miners become more profitable. That feedback doesn't exist in your system.
The TX fees were put in place to supplement the block subsidies.

The block subsidies were put in place to reward miners for mining up until the time that TX fees would be sufficient to reward miners.

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June 26, 2014, 08:35:10 AM
 #14

Is the novelty of BTC not related to the fixed rate at which coins are released. If this is changed, we would just be fiat in a digital jacket.  Undecided

And investors like the fixed parameters. It's something unique, why change it?

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wingding
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June 26, 2014, 07:59:41 PM
 #15

Is the novelty of BTC not related to the fixed rate at which coins are released. If this is changed, we would just be fiat in a digital jacket.  Undecided
And investors like the fixed parameters. It's something unique, why change it?

It would not be like fiat at all. This coin can NOT be created from nothing. It would need a fixed amount of energy for each coin. For example, 1 coin = 1kWh.
Bitcoin's value is only governed by hopes, fears and greed, just like a stock hype. In 5 years of existence it has not yet become a means for exchange, and it never can, because it is not linked to any intrisic vale. People are interested in bitcoin bitcoin because they hope to become an early adopter, seen from a future perspective.
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June 26, 2014, 09:07:47 PM
 #16

3. Mining will always be profitable, for someone. No need for transaction fees.

It is possible (and likely) that enough bitcoins will be mined to make mining for the block reward unprofitable. I believe that the result is that mining will stop completely if there are no transaction fees.

If any miners stop mining under the current system, then the remaining miners become more profitable. That feedback doesn't exist in your system.

This in a deflationary system there is a positive feedback loop as the remaining miners become more profitable causing a stabilization of the hash.
That sort of feedback does not exist in the inflationary loop.

wingding
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June 26, 2014, 09:42:58 PM
 #17

3. Mining will always be profitable, for someone. No need for transaction fees.

It is possible (and likely) that enough bitcoins will be mined to make mining for the block reward unprofitable. I believe that the result is that mining will stop completely if there are no transaction fees.

If any miners stop mining under the current system, then the remaining miners become more profitable. That feedback doesn't exist in your system.

This in a deflationary system there is a positive feedback loop as the remaining miners become more profitable causing a stabilization of the hash.
That sort of feedback does not exist in the inflationary loop.

If you are mining gold, your result is proportional with the work you deliver. No matter what other miners around the world do. The same for my mechanism. It can be compared to mining gold. Bitcoin mining cannot.
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June 26, 2014, 11:56:31 PM
 #18

With the way that governments are evolving, people are losing control of everything (including money).   Short of purchasing items that could harm other people, I think adults should be able to do whatever it is they choose with their own money.

Putting everyone in control of the money supply though could be problematic
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June 27, 2014, 12:35:25 AM
 #19

3. Mining will always be profitable, for someone. No need for transaction fees.

It is possible (and likely) that enough bitcoins will be mined to make mining for the block reward unprofitable. I believe that the result is that mining will stop completely if there are no transaction fees.

If any miners stop mining under the current system, then the remaining miners become more profitable. That feedback doesn't exist in your system.

This in a deflationary system there is a positive feedback loop as the remaining miners become more profitable causing a stabilization of the hash.
That sort of feedback does not exist in the inflationary loop.

If you are mining gold, your result is proportional with the work you deliver. No matter what other miners around the world do. The same for my mechanism. It can be compared to mining gold. Bitcoin mining cannot.
There is a limit as to how much gold can be taken from any one gold mine. Eventually it will become more difficult to extract additional gold from a goldmine up until the point that no additional gold can be mined from that specific goldmine.

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June 28, 2014, 11:18:14 PM
 #20

3. Mining will always be profitable, for someone. No need for transaction fees.

It is possible (and likely) that enough bitcoins will be mined to make mining for the block reward unprofitable. I believe that the result is that mining will stop completely if there are no transaction fees.

If any miners stop mining under the current system, then the remaining miners become more profitable. That feedback doesn't exist in your system.

This in a deflationary system there is a positive feedback loop as the remaining miners become more profitable causing a stabilization of the hash.
That sort of feedback does not exist in the inflationary loop.

If you are mining gold, your result is proportional with the work you deliver. No matter what other miners around the world do. The same for my mechanism. It can be compared to mining gold. Bitcoin mining cannot.
There is a limit as to how much gold can be taken from any one gold mine. Eventually it will become more difficult to extract additional gold from a goldmine up until the point that no additional gold can be mined from that specific goldmine.
Kind of like how over time it (usually) gets more difficult to mine bitcoin and over time less and less bitcoin will be mined per block

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