BIP: ?? Gradual Changing Block Rewards

[allten]

  BIP: ??
  Title: Gradual Changing Block Rewards
  Author: Slim Pickens
  Status: Draft
  Type: Standards Track
  Created: ??-??-2012
  Post-History: ??-??-2012

Abstract
This BIP proposes for block rewards to decrease more frequently.

Motivation
Every four years the block reward for bitcoin is cut in half. There is much uncertainty surrounding bitcoin prices and total network hashing power before and after these reward reductions. This author feels very confident that bitcoin will traverse its first block decrease with success; however, months before and after will be full of large price swings with a potentially modest decrease in global hash rate. Stability has yet to be one of Bitcoin’s virtues; yet, many hope (including the author) that this will change over time. The goal of this BIP is to avoid the frenzy in price fluctuations and global hash rate during these rare events by making them much more frequent with smaller decreases.

Specification
Block rewards will begin decreasing every two weeks starting at the end of the second year of the 25 BTC block reward (What’s the specific block number?). (Note: How frequent the changes are and when it goes into effect are open for debate). Unfortunately, this author is not into coding Bitcoin so the details of this BIPs implementation will rely on feedback from experienced Bitcoin programmers.

Variables:
•   Frequency of bitcoin decreases (Initial proposal is for every two weeks)
•   Date, more specifically the Block #, at which these smaller more frequent decreases take effect. (Initial proposal is for this BIP to take effect at the end of the second year of 25 BTC rewards)
•   The Percent of the decrease. Need to find a percentage that will in effect release the same amount of coins over the long term as the original block reward system.

Rationale
Two weeks were chosen for the frequency of decreases because it coincides with the difficulty adjustment. Seems like a good idea to do them together. However, this is not critical for the success of this BIP. Depending on the general consensus from the Bitcoin community and the simplicity of coding implementation, this may change.

The date for the change is proposed at the end of the second year of the 25 BTC block rewards. This gives the community 6 months to observe the market behavior of the initial block decrease and have a software implementation 18 months prior to the change going into effect. Again, depending on the general consensus from the Bitcoin community and the simplicity of coding implementation, this may change.

Based on Moore’s law and the history of computing innovation, it is commonly quoted as 18 months for computing power to double. 18 months should be enough time for miners to adjust their capital strategy before this BIP goes into effect. It will also give the community plenty of time to adopt the new code.

The implementation of this BIP would be a huge win for the bitcoin community. There are many articles written why Bitcoin is “fatally flawed”. They gloss over the fact that the brilliance and innovation of this new currency is in its decentralization and the fact that it is democratically governed. This system doesn’t have the flaws of other democratically governed bodies because there are no laws in effect that force anyone to use it. It is simply by free choice; therefore, no one would advocate changes to favor a few because it would self-destruct the currency. The implementation of this BIP would be a shining example that when problems arise the community will deal with it in way that will cause the currency to continue to excel. In other words, all supposed fatal issues are really non-issues. When the timing is right, mass consensus will be reached and they will be fixed.

Edit: 03/22/2012 ~~~~~~~~~~~~~~~~~ Comment added below ~~~~~~~~~~~~~~~~~~~
Appreciate everyone's comments even if they totally disagree. I would like to continue to push to get this published in the WIKI BIP. Doesn't mean it will be adopted. I just want to make it an official record of what is possible and not possible with Bitcoin.
Before doing so, I would like to kindly request that you humor me and this BIP "as if" it was going to be adopted and help me nail down all 3 variables and hold off from commenting on its feasibility.

Please comment on the following:
1)Frequency
2)Block # of implementation
3)Percent decrease.

Also, what if we rounded the block reward after each decrease to four significant digits? Any thoughts.

Other request for help:
       Graphs of Bitcoin curve over time compared to the original.
       Graphs of the injection rate over time compared to the original.
       Psuedo code for the implementation.

Thanks again.

Edit: 04/02/2012 ~~~~~~~~~~~~~~~~~ Comment added below ~~~~~~~~~~~~~~~~~~~

Alright. The key factors of this BIP have been improved and finalized.

The frequency of change is Every Block.
The Change will occur on block 315000 (Block count starting at 0)
The approximate percent decrease: 0.00031746 %

Over 100 years, the original will have approximately injected a few bitcents more than the proposed improvement.
However, these small details will be worked out during the implementation of the code. What's important is the amount injected
is approximately the same or a few satoshis less than the original.


Total Sum
     

Injection Rate

Again, all comments are appreciated and so far I've observed a lot emotional response.
That's ok. It's all part of reveling what it will take to get a well crafted IMPROVEMENT
adopted by the majority.

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[Vladimir]

Great Idea!!! But I know how to make it even better! Let's also have Bernanke to set amount of the block reward every month. This seems quite a logical improvement which should be done after your proposal is implemented.

[DeathAndTaxes]

I like it.  The adjustment would be roughly 0.6% decrease in reward per difficulty adjustment (2016 blocks) to correspond to a 50% drop every 210,000 blocks..  I say roughly because only looked at the % difference over 210,000 blocks.  The "stair step" effect means the actual decrease is smaller.  Halfway through next difficulty adjustment is is block #315,000 but that isn't a difficulty change block.  The 150th difficulty change is block #302,400 which might make a nice round number.

Still it is mostly academic.  It is nearly impossible to make protocol changes even modest ones.  Hopefully some alt-coin incorporates a continual decay function into the the block reward where reward is simply computed based on the height of the block.  Going from x coins to 0 coins in exponential decay over the timeframe desired.

[MaxSan]

Changing the fundamental protocal would be death to bitcoin. At the begining this would be suitable, not now. Not ever now.

Everyone knew what they were getting into and will stick by the block loss year on year. all is good here.

[Revalin]

We still are at the beginning.  I agree with your objection to many large changes to the protocol - undermining the trust that the currency can be trusted long-term would be very damaging - but in this case I don't see much harm.  It results in the same amount of currency in the end, just with a smoother distribution.

I like the way this proposal is written: let's see how big the disruptions are after the first reward drop and plan to switch to a better function if it looks worthwhile.

[wogaut]

Changing the fundamental protocal would be death to bitcoin. At the begining this would be suitable, not now. Not ever now.
Everyone knew what they were getting into and will stick by the block loss year on year. all is good here.

I really don't think so.

I generally like the proposal, that was actually one of the things I wondered when looking at the rewards curve for the first time: Why are there steps in it, when computational power these days can easily afford a gradual, more 'natural' increase'?

Overall I don't see why it could hurt Bitcoin as long as the overall shape/trend of the curve is sufficiently maintained.

[DeathAndTaxes]

Look this may (and likely will ) go nowhere but the doom & gloomers need to lighten up.

For any change to happen it must be supported by 51% of the community.  If the reward curve is roughly the same, total # of coins is roughly same, and annual inflation is roughly the same AND it is supported by 51% say of community that will KILL Bitcoin?

Fuck Bitcoin is pretty easy to kill.  Forget massive hashing farms, secret NSA ASIC designs, and 51% attacks just make a proposal that is wildly popular, get overwhelming majority to support it and then the protocol dies.  I never knew Bitcoin had this fatal popularity flaw.

[ThiagoCMC]

Hi!

 I think that ANY change in the protocol, that needs >51% support, SHOULD be done AFTER the P2Pool like pools being 80%.

 Until then, I disagree with any change. Including BIP16/17/18/P2SH/WHATEVER...

 And the community must have a clean comparison between the BIPs to be able to choose what they want...

 Today we just trust the developers we like and follow him... This is more or less like my fucking country (Brazil), which is a fucking representative democracy... The diff is that I trust a zillion times more on any nerd than on a politic. I mean, I don not trust in any politic.

Cheers!
Thiago

[Littleshop]

Changing the fundamental protocal would be death to bitcoin. At the begining this would be suitable, not now. Not ever now.

Everyone knew what they were getting into and will stick by the block loss year on year. all is good here.

+1 

[rjk]

Just to provide a little technical insight in case it wasn't known to some previously, both the difficulty adjustment and the reward drop are based on a number of blocks passing, and not on a specific timeframe. The difficulty adjustment causes that time frame to remain somewhat steady, but it won't ever be exact.

[hazek]

The reward decreases get exponentially smaller anyway, why change it only after the first and largest one?

[splatster]

The reward decreases get exponentially smaller anyway, why change it only after the first and largest one?

I think that's the fundamental problem with this. The change will become less as time goes on. It's too late to implement something like this.

[hazek]

People don't realize this, but a lot of what looks like a huge bug in Bitcoin is actually an ingenious design.

[Boussac]

Changing the fundamental protocal would be death to bitcoin. At the begining this would be suitable, not now. Not ever now.

Everyone knew what they were getting into and will stick by the block loss year on year. all is good here.

+1  

+1
Bitcoin is still in its infancy and there is absolutely no necessity for the proposed change.
Volatility is due to irrational speculative behavior and has nothing to do with the protocol.
Speculation will happen no matter how the protocol is running.
Volatility will lessen only when the share of speculative trading becomes smaller in comparison to real trading (exchanges of goods and services for bitcoins).

[julz]

... and miss out on all the 4 yearly Block parties??        https://bitcointalk.org/index.php?topic=68316.0

I suspect these 4 year Bitcoin "eras" were probably put in deliberately for their psychological effect.. presumably not just for ease of software implementation, but to assist people in understanding and reasoning about the system and their potential involvement in mining.  The discrete jumps are easier to explain to newcomers. (no need to look up current reward)

.. or maybe Satoshi just had the end-of-era Block parties in mind

[Revalin]

The reward decreases get exponentially smaller anyway, why change it only after the first and largest one?

The reward drops are always cutting it in half.  It may cause sudden drops in block rate or changes in value.  This doesn't just apply to the first drop.

People don't realize this, but a lot of what looks like a huge bug in Bitcoin is actually an ingenious design.

Please explain.  Why are 4-year drops so beneficial?

Keep in mind: this proposal does not eliminate the generation drops.  It just changes them so they are much more frequent, much smaller drops, but the end result will be the same.

[Vladimir]

People don't realize this, but a lot of what looks like a huge bug in Bitcoin is actually an ingenious design.

Unfortunately to realize that one would need to perform some higher order nervous activity, like having a brain, for example. Not going to happen. 

[N12]

Vladimir, both of you have made no arguments against the change or for the current design.

My only issue with this is the "slippery slope" problem. I don’t see why it should be better to do it every 4 years than regularly. Consider the psychological impact and impression of scarcity it would have if miners were getting slightly smaller payouts on the same difficulty on a regular basis.

[FreeMoney]

The reward drops are always cutting it in half.  It may cause sudden drops in block rate or changes in value.  This doesn't just apply to the first drop.

If fees remain the same or increase then level the impact of the fixed subsidy halving will actually be less each time.

[theymos]

It wouldn't be right to change any aspect of the subsidy rules in Bitcoin. These rules are a "contract" that all Bitcoin users have agreed to.

The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime.

It's technically very difficult, anyway. You don't need just 51% of miners: you'd need essentially 99% of all users.