Why Reduce the Block Reward?

[SapphireSpire]

The coin is secured by the blockchain.
The blockchain is secured by the miner.
The miner is secured by the block reward.

So why reduce the block reward when it's unnecessary and detrimental to the security of the system? The problem is that the coinbase has a hard supply limit and no mechanism for deflation. The solution is to keep the block reward constant until the very last coin is mined from the coinbase, and give all transactions expiration dates, a year for example, so that lost and abandoned coins can be returned to the coinbase. Expired transactions, and all previous transactions with no other dependencies, can then be pruned from the blockchain.

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[amaclin]

You are welcome to create your alt-coin with these rules.

[turvarya]

The coin is secured by the blockchain.
The blockchain is secured by the miner.
The miner is secured by the block reward.

So why reduce the block reward when it's unnecessary and detrimental to the security of the system? The problem is that the coinbase has a hard supply limit and no mechanism for deflation.

The block reward needs to remain constant until the very last coin is mined from the coinbase, and transactions need to expire after some time, a year for example, so that lost and abandoned coins can be returned to the coinbase. Expired transactions, and all previous transactions with no other dependencies, can then be pruned from the blockchain.

I read that often recently and it is just the worst idea, ever.
There are some many scenarios, where somebody wouldn't touch his coins for a year. Just look at my savings account, there is money lying around in case of an emergency and luckily emergencies don't come once a year.

[gmaxwell]

by the block reward.

By subsidy and transaction fees. You're missing part of it.

and transactions need to expire after some time, a year for example,

And then miners can simply confiscate anyone's money by ignoring their transactions until they expire and take it for themselves.

Expired transactions, and all previous transactions with no other dependencies, can then be pruned from the blockchain.

No expiration is needed to prune data. This is explained in the Bitcoin whitepaper (and implemented in an even more effective form in Bitcoin Core).

[piotr_n]

I think the reasoning of decreasing block reward is strictly economical and has nothing to do with Development & Technical Discussion

By design, after the initial inflationary period (during which the coins are being distributed into the circulation), Bitcoin is supposed to enter a deflationary state - that's why the reward decreases in time to eventually get down to zero at some point.

[amaclin]

And then miners can simply confiscate anyone's money by ignoring their transactions until they expire and take it for themselves.

https://en.wikipedia.org/wiki/Unexpected_hanging_paradox
OK, I am a miner and I see the transaction which spends the output which expires on the next block (let us call it "0-conf expire").
I have two possibilities:
a) include this transaction into my block, take the fees and give the owner his funds for another period of time
b) ignore this transaction and take expired funds

What is the strategy for miner who gets "n-conf expire" (n > 0) transaction?
I think that miners will include these transactions into their blocks in case they have less than 50% hash power.

[kolloh]

There is also a limited number of coins that can exist so to prolong the ability to give block rewards, it needs to be lowered as we get closer to that max limit I think.

[jl2012]

If Satoshi did not put a cap on the total amount of Bitcoin, it would very easy for someone else to create alt-coins with a cap. Such alt-coins will become more valuable than Bitcoin and replace Bitcoin eventually.

[najzenmajsen]

You are welcome to create your alt-coin with these rules.

like amcaclin is saying , if you dont like it ! create your own : >

[SapphireSpire]

You are welcome to create your alt-coin with these rules.

THAT shouldn't be TOO DIFFICULT...
https://bitcointalk.org/index.php?topic=225690.0

[justusranvier]

Oh, good - this debate again.

Maybe people will stop complaining after the third time.

[cr1776]

Oh, good - this debate again.

Maybe people will stop complaining after the third time.

Third? :-)

This seems off topic too.

[najzenmajsen]

Oh, good - this debate again.

Maybe people will stop complaining after the third time.

more like the millionth time.

[justusranvier]

By "third time" I mean 2020.

[AgentofCoin]

I think the reasoning of decreasing block reward is strictly economical and has nothing to do with Development & Technical Discussion

By design, after the initial inflationary period (during which the coins are being distributed into the circulation), Bitcoin is supposed to enter a deflationary state - that's why the reward decreases in time to eventually get down to zero at some point.

This, IMO, is the correct answer.

[cr1776]

By "third time" I mean 2020.

Ah, third halving vs third time bringing up the topic.

Time will tell, but I am sure someone will do it after too!

[Madness]

Well it have something with Economics . I guess when Satoshi made this he was thinking about Supply and demand and the price increasing .
Let's say that Miners are getting 25 BTC in Block reward , right ? with a decent amount of demand . then in 2017 (if all goes well) demand should increase (because bitcoin will get more known) and supply will get lower to 12.5 BTC per block reward. and that makes a huge Price increasing . It's really that simple , at least this is how I see it

~ Madness

[SapphireSpire]

I think the reasoning of decreasing block reward is strictly economical and has nothing to do with Development & Technical Discussion

By design, after the initial inflationary period (during which the coins are being distributed into the circulation), Bitcoin is supposed to enter a deflationary state - that's why the reward decreases in time to eventually get down to zero at some point.

To be a useful medium of exchange a currency cannot be too scarce or too plentiful. It must maintain a level of supply that maximizes it's value and velocity. That's why banks employ mechanisms to regulate the money supply according to economic activity. To simply inflate and then deflate is not useful.

Bitcoin's block reward is only a mechanism for inflation. Reducing it doesn't deflate the coin, it merely delays reaching the maximum supply. Bitcoin only deflates as people lose coins but it doesn't track lost coins in the blockchain so there's no means of returning them to the coinbase account which is what's needed to preserve the block reward.

[Mikestang]

Do mining efforts to scale back as well?  Did they when it halved last time (or was technology growing so fast at that point that it didn't)?  Since the reward drops, the costs to mine must drop as well to keep things profitable, which the system then adjusts to.

[nachoig]

The coin is secured by the blockchain.
The blockchain is secured by the miner.
The miner is secured by the block reward.

So why reduce the block reward when it's unnecessary and detrimental to the security of the system? The problem is that the coinbase has a hard supply limit and no mechanism for deflation. The solution is to keep the block reward constant until the very last coin is mined from the coinbase, and give all transactions expiration dates, a year for example, so that lost and abandoned coins can be returned to the coinbase. Expired transactions, and all previous transactions with no other dependencies, can then be pruned from the blockchain.

I think you're talking about demurrage. Well, this concept is already used in cryptocurrencies: http://freico.in/how/

But Bitcoin is not a demurrage currency.

I think the reasoning of decreasing block reward is strictly economical and has nothing to do with Development & Technical Discussion

By design, after the initial inflationary period (during which the coins are being distributed into the circulation), Bitcoin is supposed to enter a deflationary state - that's why the reward decreases in time to eventually get down to zero at some point.

To be a useful medium of exchange a currency cannot be too scarce or too plentiful. It must maintain a level of supply that maximizes it's value and velocity. That's why banks employ mechanisms to regulate the money supply according to economic activity. To simply inflate and then deflate is not useful.

Bitcoin's block reward is only a mechanism for inflation. Reducing it doesn't deflate the coin, it merely delays reaching the maximum supply. Bitcoin only deflates as people lose coins but it doesn't track lost coins in the blockchain so there's no means of returning them to the coinbase account which is what's needed to preserve the block reward.

The block reward doesn't need to be "preserved", even if 13,000,000 of bitcoins are suddenly lost tomorrow, it will continue to reward with the same 25 bitcoins, because these 25 bitcoins are issued as new coins, out of "thin air", like a fiat currency. One thing is the block reward, another thing is the transaction fees paid to the miners.

BTW, the regulation of money supply by banks doesn't work very well.