A proposed solution to adjust for lost Bitcoins: wallet 'heartbeats'

[cunicula]

I would put this in much stronger terms. The theory unambiguously indicates that changing from block reward to txn fees will fail under the current design unless mining becomes monopolized.

We will return to this topic in 30 years, when it will be possible to verify these claims.

For now, stick to the matter at hand. And the matter is, we don't need any fix for a problem that neither does exist yet or it is certain it will ever exist.

My guess is that a single entity will acquire 51% sometime during the next block reward cycle. (that is during the period when the block reward is equal to 25, starting in December of 2012). If the individual is malicious (admittedly unlikely), the developers will likely be taken by surprise and won't have time to save the blockchain. This idea of waiting for bitcoin to die before taking precautionary measures is foolhardy.

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[ShadowOfHarbringer]

I would put this in much stronger terms. The theory unambiguously indicates that changing from block reward to txn fees will fail under the current design unless mining becomes monopolized.

We will return to this topic in 30 years, when it will be possible to verify these claims.

For now, stick to the matter at hand. And the matter is, we don't need any fix for a problem that neither does exist yet or it is certain it will ever exist.

My guess is that a single entity will acquire 51% sometime during the next block reward cycle. (that is during the period when the block reward is equal to 25, starting in December of 2012). If the individual is malicious (admittedly unlikely), the developers will likely be taken by surprise and won't have time to save the blockchain.

51% attack won't destroy the blockchain...
Also 51% is actually not enough to perform massive scale attack. You should have few percent more, which is highly unlikely (for example, if deepbit became the adversary, large percent of users would stop using it instantenously).

And we already have a contermeasure against 51% attacks - decentralized mining pools. If only people used them more often.

So increasing inflation by any means is not necessary. What kind of solution is that ? This is common thievery, nothing else.

[ShadowOfHarbringer]

What I want is a solution to the problem discussed in this thread. I'm not sure how what you're suggesting would accomplish that.

But there is _NO_ problem. And there is _NO_ hard evidence that it will become a problem.

[Foxpup]

My guess is that a single entity will acquire 51% sometime during the next block reward cycle. (that is during the period when the block reward is equal to 25, starting in December of 2012). If the individual is malicious (admittedly unlikely), the developers will likely be taken by surprise and won't have time to save the blockchain. This idea of waiting for bitcoin to die before taking precautionary measures is foolhardy.

It won't take anyone by surprise, and the blockchain won't need saving. There's nothing to save it from. There's just not a whole lot of damage you can actually do with 51% of the hashpower. Block other people's transactions? The transactions will get through the instant you lose your 51%. Double-spend your coins? You'd need to double-spend a lot of coins at once to make it worth the amount of money a 51% attack would cost, because it only works once: as soon as your coins are first double-spent, everyone will realise that the network is compromised and will refuse to trust any future large transactions until it's clear the attack is over, at which point it's business as usual again. No precautionary measures are needed because the network is already designed to handle this threat.

[cunicula]

 There's just not a whole lot of damage you can actually do with 51% of the hashpower. Block other people's transactions? The transactions will get through the instant you lose your 51%.

Why would the attacker stop the 51% attack? Say you are Paypal or VISA or a government agency. Destroying the network is like squashing a bug. You built up 51% to destroy the network. It is a pretty fucking trivial investment from your perspective. Maintenance cost of the attack is trivial. There is just the upfront capital cost. In addition, by selling on the way up or postponing the attack date, the investment partially pays for itself.  Why would the attacker allow someone else to recapture 51%?  Why would anyone invest the resources necessary to recapture the network from a determined attacker? It is not likely to work since the attacker can invest resources too. Even if the martyr is successful, then he will still have wasted a large amount of money. I am skeptical that anyone will fuck themselves royally to save the currency.

The network's days are numbered.

[ShadowOfHarbringer]

 There's just not a whole lot of damage you can actually do with 51% of the hashpower. Block other people's transactions? The transactions will get through the instant you lose your 51%.

Why would the attacker stop the 51% attack? Say you are Paypal or VISA or a government agency. Destroying the network is like squashing a bug. You built up 51% to destroy the network. It is a pretty fucking trivial investment from your perspective. Maintenance cost of the attack is trivial. There is just the upfront capital cost. In addition, by selling on the way up or postponing the attack date, the investment partially pays for itself.  Why would the attacker allow someone else to recapture 51%?  Why would anyone invest the resources necessary to recapture the network from a determined attacker? It is not likely to work since the attacker can invest resources too. Even if the martyr is successful, then he will still have wasted a large amount of money. I am skeptical that anyone will fuck themselves royally to save the currency.

The network's days are numbered.

1. You completely ignore sociological & geopolitical aspects of such an event. Such a large operation would be a direct proof that Bitcoin is a danger for current establishment, which could cause MASSIVE surge in publicity for Bitcoin, which would bring a lot of new people into mining business.

Every action has a reaction, you simply CANNOT ignore that.

Let's consider a scenario. Let's assume that FBI/CIA/Other US govt agencies start a new supercomputer, and gain 60% in one day.
But there is no action without reaction. China & other countries who don't like USA immediately assume, that Bitcoin is probably a danger to US dollar and because China really wants to get rid of dollar, they put one of their newly built supercomputers into mining Bitcoins, so dollar will fall even more quickly.
Also, other "wild" miners join the game - some (ideological) to protect Bitcoin, but most because USA admitting that Bitcoin is dangerous confirms that is it valuable. So not only the attacker's network share drops below 40 or even 30%, but Bitcoin value skyrockets.

2. Increasing inflation by sunsetting old coins is in no way solution to this.
So your entire reply is decidely not on topic (as is mine, unfortunately).

[cunicula]

Let's consider a scenario. Let's assume that FBI/CIA/Other US govt agencies start a new supercomputer, and gain 60% in one day.
But there is no action without reaction. China & other countries who don't like USA immediately assume, that Bitcoin is probably a danger to US dollar and because China really wants to get rid of dollar, they put one of their newly built supercomputers into mining Bitcoins, so dollar will fall even more quickly.
Also, other "wild" miners join the game - some (ideological) to protect Bitcoin, but most because USA admitting that Bitcoin is dangerous confirms that is it valuable. So not only the attacker's network share drops below 40 or even 30%, but Bitcoin value skyrockets.

Now that I read your cogent argument, I'm convinced that China will step in to save the network. The network is not in danger at all and never will be. Hats off.

[ShadowOfHarbringer]

Let's consider a scenario. Let's assume that FBI/CIA/Other US govt agencies start a new supercomputer, and gain 60% in one day.
But there is no action without reaction. China & other countries who don't like USA immediately assume, that Bitcoin is probably a danger to US dollar and because China really wants to get rid of dollar, they put one of their newly built supercomputers into mining Bitcoins, so dollar will fall even more quickly.
Also, other "wild" miners join the game - some (ideological) to protect Bitcoin, but most because USA admitting that Bitcoin is dangerous confirms that is it valuable. So not only the attacker's network share drops below 40 or even 30%, but Bitcoin value skyrockets.

Now that I read your cogent argument, I'm convinced that China will step in to save the network. The network is not in danger at all and never will be. Hats off.

(Well i guess I'm not used to people giving up so quickly in long discussions, but that's OK too)

[aqrulesms]

Sorry for reviving a 2 month old thread but upon insight then lost bitcoins really wouldn't affect the bitcoin economy.

The lost bitcoins would be so negligible, even now it is definitely negligible.

Since bitcoins go up to 21000000 in integers, that's quite good. It also goes in the decimal places as well.

If .00000001 BTC became worth $1 in the future if it were globally adopted by many people, then you could easily revise the client to handle that in integers instead, and "move" the decimal place out.

Realistically, we can represent 2,100,000,000,000,000 units.

The amount of lost coins is probably very small, and you could just possibly add more decimal places in the future to bitcoin to accomodate rising deflation, which would make bitcoin theoretically infinite despite the "finite" 21,000,000 coins.

This is also a reason why introducing endless inflation would be such a bad idea.  

[interlagos]

Sorry for reviving a 2 month old thread but upon insight then lost bitcoins really wouldn't affect the bitcoin economy.

The lost bitcoins would be so negligible, even now it is definitely negligible.

Since bitcoins go up to 21000000 in integers, that's quite good. It also goes in the decimal places as well.

If .00000001 BTC became worth $1 in the future if it were globally adopted by many people, then you could easily revise the client to handle that in integers instead, and "move" the decimal place out.

Realistically, we can represent 2,100,000,000,000,000 units.

The amount of lost coins is probably very small, and you could just possibly add more decimal places in the future to bitcoin to accomodate rising deflation, which would make bitcoin theoretically infinite despite the "finite" 21,000,000 coins.

This is also a reason why introducing endless inflation would be such a bad idea.  

I wouldn't say the amount of lost coins is going to be negligible or small over time.
Just imagine 1 million Satoshi's coins (which AFAIK haven't moved yet) would be considered lost at some point. That's 5% of the whole Bitcoin economy no matter how much further you divide the units. Another half a million belongs to a dozen of other guys who jumped in early.

So this problem will have to be solved in the future, but we should also take into account how and when the original Bitcoin idea was introduced into our society. Having a limited amount of coins is very easy to explain to people tired of endless and unsustainable inflation carried out by their governments. People wanted a return to the Gold Standard and having a limited amount of coins is an easy sell. So I guess it was more important to get people attracted to a whole concept of P2P currency where they essentially control the rules of money generation and then later people themselves will decide what inflation rate and policy is best for them.

PS: Regarding Satoshi coins and another half-a-mil, I really believe that people who invented Bitcoin to save us from the current system will spend their millions of bitcoins for the betterment of humanity and peace on Earth

PPS: I do not support original idea of wallet heartbeats. I'd love to live in a remote village for 10 years and be sure that my coins are safe when I return back to civilization.