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Author Topic: A potentially very stupid question....  (Read 1894 times)
Istaria
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March 19, 2015, 12:00:21 AM
 #21

Bitcoin is not deflationary, it's inflationary, currently at a rate of 3600 new coins every day, this value halves every 4 years or so, so eventually around 2140 there will be no more new coins.

Well, yes. OK, that point was cleared up. But my original question was why not increase the rewards over time instead of decreasing as long as the end limit remains the same.

It'd give late adopters a reason to opt in?

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March 19, 2015, 03:52:33 AM
 #22

Bitcoin is not deflationary, it's inflationary, currently at a rate of 3600 new coins every day, this value halves every 4 years or so, so eventually around 2140 there will be no more new coins.

Well, yes. OK, that point was cleared up. But my original question was why not increase the rewards over time instead of decreasing as long as the end limit remains the same.

It'd give late adopters a reason to opt in?

Right, but now you see that why that's not really good, yes?  You don't want to reward the later more than you reward the former because you can make a race to be the last in.  That would, of course, lead to an absurdity: no one wants to adopt bitcoin first because the later adopters are better rewarded so no one ever adopts it at all.  Obviously the better course is to make a race to be the first to  adopt and this is the sane thing which happened.  You understand this now, yes?

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March 19, 2015, 07:31:01 AM
 #23

First, mining reward keep reduced to prevent huge inflation & to reach 21 million BTC & something unlimited just become more worthless
Second, if everyone get a lot of bitcoin & sell it. Bitcoin don't have price anymore
Third, if you do have bigger mining power & get more bitcoin, too many bitcoin produced & sold at exchange site & potentially destroy bitcoin price.

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March 19, 2015, 09:57:32 AM
 #24

Bitcoin is not deflationary, it's inflationary, currently at a rate of 3600 new coins every day, this value halves every 4 years or so, so eventually around 2140 there will be no more new coins.

Well, yes. OK, that point was cleared up. But my original question was why not increase the rewards over time instead of decreasing as long as the end limit remains the same.

It'd give late adopters a reason to opt in?
If only 1 satoshi is generated from the start, today, only 2 satoshi would be in each block. The fees would be hard to calculate and there would be less people using it due to the scarcity of Bitcoins.
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March 19, 2015, 10:01:59 AM
 #25

I dint read others reply on this thread! My opinion:
Less Work= more coins in the beginning when coins were worth nothing!
Later on,
More Work = Less coins and coins have been a lot expensive than they used to be before Wink Hope this answer satisfies you! Smiley

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March 19, 2015, 12:11:36 PM
 #26

it's not deflationary. It only is in the sense that, once all bitcoins are mined, they can still be lost.

Right now supply is expanding. And i'm not sure if there will ever be a time when more btc are being lost than generated because people will become much better at backing up their data as everything moves to the cloud.

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March 19, 2015, 12:15:43 PM
 #27

Bitcoin is not deflationary, it's inflationary, currently at a rate of 3600 new coins every day, this value halves every 4 years or so, so eventually around 2140 there will be no more new coins.

Well, yes. OK, that point was cleared up. But my original question was why not increase the rewards over time instead of decreasing as long as the end limit remains the same.

It'd give late adopters a reason to opt in?

Right, but now you see that why that's not really good, yes?  You don't want to reward the later more than you reward the former because you can make a race to be the last in.  That would, of course, lead to an absurdity: no one wants to adopt bitcoin first because the later adopters are better rewarded so no one ever adopts it at all.  Obviously the better course is to make a race to be the first to  adopt and this is the sane thing which happened.  You understand this now, yes?

The rewards are increased over time. As long as bitcoin doesn't die, the price per reward in real value terms will always get bigger. A good question would be why the rise is not more gradual instead of block halving why does not the nominal btc amount per block decrease every so slightly every block? This is a good question because block halving is a bit dramatic in the sense that overnight the rewards get cut in half dramatically impacting the profitability of miner set ups.

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March 19, 2015, 01:55:34 PM
 #28

A good question would be why the rise is not more gradual instead of block halving why does not the nominal btc amount per block decrease every so slightly every block? This is a good question because block halving is a bit dramatic in the sense that overnight the rewards get cut in half dramatically impacting the profitability of miner set ups.

This good question indeed has been discussed in this topic a few days ago.
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March 19, 2015, 02:34:40 PM
 #29

Bitcoin is not deflationary, it's inflationary, currently at a rate of 3600 new coins every day, this value halves every 4 years or so, so eventually around 2140 there will be no more new coins.

Well, yes. OK, that point was cleared up. But my original question was why not increase the rewards over time instead of decreasing as long as the end limit remains the same.

It'd give late adopters a reason to opt in?
The point is, Bitcoin in the original idea was supposed to emulate gold. And with gold back in the ancient times you have gold mines that had very good quality of ore (many ounces per unit of cost) that were first explored and emptied. New mines that were opened later had much less gold and thus the cost of production per one ounce increased. Same with Bitcoin - low difficulty and huge reward for the early (individual) miners, afterwards little reward, complex mining machinery and huge mining costs for these coming at the end, when there is very little of available resources.

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March 19, 2015, 06:31:11 PM
 #30

The interesting side question of why rewards aren't reduced in a different scheme is in another thread and this OPs question was about why block rewards don't go up over time rather than down.

I hope everyone (including the OP) can see that this leads to an absurdity where no one wants to be the early adopters because they get paid a lot less than late adopters, which leads to a case where everyone else is waiting for someone else to start.

This is like a funny game you might have played as a kid, the backwards race where the last to the finish line wins.  Everyone who has tried this realizes that it doesn't work.  No one has any incentive to move at all.

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March 19, 2015, 11:23:56 PM
 #31

Hello all,

I'm fairly new to Bitcoin and very new to these boards. I've begun trying to learn as much as I can about the currency, and the more I read, the more questions I have! Honestly, this is the funnest learning experience I've had since I figured out that you could throw jelly and it'd stick to the wall Tongue

The part I am having the most difficulty with is the whole "Is Bitcoin deflationary etc" thing - trying to get that figured out in my head, coming from a background of absolutely no economics knowledge whatsoever.

So, my (probably daft) question is this:

Why is Bitcoin structured so that the amount of coins mined reduces? Would it not make more sense that the number would be low in the beginning and then rises with the difficulty? A sort of more work = more reward thing?

I'm pretty sure that I am missing a BLATANTLY obvious point here, but I'd much appreciate enlightenment.

Thanks Smiley

Ist.
Hey there.  No such thing as a stupid question.  The short answer which has pretty much already been answered in earlier posts is to incentive-ize 'early adopters' to mine the coin in the first place.

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March 20, 2015, 04:51:44 AM
 #32

Your reasoning, more work = more reward, is true for a 'currency', however Bitcoin is more of a commodity than a currency at this point which means that it works because it's rare. More people mining it means more people want it. More coins being created through mining would dilute the value.
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March 20, 2015, 04:55:26 AM
 #33

It'd be very interesting to see how things would have turned out if you got a smaller amount of coins per block in the beginning.
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March 20, 2015, 06:08:50 AM
 #34

It'd be very interesting to see how things would have turned out if you got a smaller amount of coins per block in the beginning.
It would not change our general perspective I think. It would only made mining bitcoins slower and we would have less bitcoins available today in circulation today. But remember that at the beginning bitcoin was considered just an experiment. No one knew if it will be successful or not.

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March 20, 2015, 09:58:21 AM
 #35

Thank you all very much! I have to say that this forum is amazing for someone who is learning about this stuff!

Cheers Smiley

Ist.

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March 20, 2015, 06:20:04 PM
 #36

It'd be very interesting to see how things would have turned out if you got a smaller amount of coins per block in the beginning.
It would not change our general perspective I think. It would only made mining bitcoins slower and we would have less bitcoins available today in circulation today. But remember that at the beginning bitcoin was considered just an experiment. No one knew if it will be successful or not.

I can see that, perhaps it may have even taken longer to get off the ground if the "reward" was lower initially (despite the fact that Bitcoin did not receive any substantial "value" from trading until 2010 or so).
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March 23, 2015, 04:52:17 PM
 #37

Your reasoning, more work = more reward, is true for a 'currency', however Bitcoin is more of a commodity than a currency at this point which means that it works because it's rare. More people mining it means more people want it. More coins being created through mining would dilute the value.
exactly and very similar as it happens to gold. Many mine it, but do to low quality of ore, the output in terms of pure gold is tiny in comparison to the efforts spent.
See my earlier post.

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