Topic: 21 million supply?What prevents people from creating digital fractions of satosh (Read 1844 times)

A third-party could do that too. You deposit 100 satoshi on Divideyourcoins.com and they give you 100.000 millisatoshi.

is this what coloredcoin does

http://coloredcoins.org/

Correct.


Alt-coins are more complex. The difference between governmental currencies like the dollar, euro, yen, peso etc. is their usage is for the most part localized. People mostly shop locally (for food and gas). For this reason any currency specific to a geographical region typically dominates the market there. For example, the US, Canada, and Mexico are in close proximity so it's not unheard of to find citizens from each country with a bit of currency from another country. However, in each country the currency which reigns supreme will be the local one, because it can be exchanged the most places.

Cryptocurrency is different as it has no geographic boundaries or ties by default. This means each could theoretically be as good (meaning exchangeable) as the other. There is one thing which breaks the tie and that is size of marketplace. You can't eat money. You can't otherwise consume or enjoy money (besides maybe swimming in it). People hold money for one purpose: to exchange it for something they want more. That means the better their opportunities to exchange it the greater will be their desire to have it. The other side of that is people who offer goods and services for money. The type of money they accept will be the one giving them the biggest market. With cryptocurrencies technically each could access a large market because they are as ubiquitous as the Internet. That could mean merchants might accept many different ones.

Now we see a problem: if all places will accept all cryptocurrencies are they not all the same value then? The answer is no. The reason is because there will be slight differences in exchange value for each different coin. If I would sell a dozen eggs for .01 BTC which is $5 how many dogecoins would that be? I need to get the equivalent of $5, but if something affects the dogecoin exchange rate, like maybe a kittycatcoin launching which takes away some of dogecoin's marketcap then I really don't want to risk accepting and holding dogecoin since I might lose money. Each merchant is faced with deciding which coins would not lose them money. Since merchants are not typically day traders they will tend to stick with whatever they felt would remain stable. This is why many Bitcoin accepting merchants convert BTC to USD immediately, though some keep BTC. Similarly, merchants might accept a variety of crytocurrency, but they would always convert it into whatever they felt held value for them best. This means coins that have a head start, like Bitcoin, will typically keep an advantage, because coins that follow won't be good enough to claim better acceptance rates, unless they offer something significantly better. At the same time, not only do new coins have to dethrone the existing kings, but they compete with newer coins which challenge them as well. In other words it's the fact that alt-coins continue to be created which lets the market easily decide to (mostly) stick with only the top few. That's the situation we see today:

http://coinmarketcap.com/

At some point it will be clear that most of the world only favors maybe 2 or 3 main coins and the rest will be locked in a never ending battle to try escaping from obscurity, that is unless of course something substantially better actually comes out.

No.

If I have 1% of all the bitcoins that exist and the protocol is changed to allow 10 digits after the decimal instead of 8, I still have 1% of all the bitcoins that exist.  I'm no richer or poorer than before.

If I have 1% of all the bitcoins that exist and 21 million new coins are created, I now only have 0.5% of all the bitcoins, and am now only half as rich as before, since doubling the number of bitcoins makes each one worth less.

It's entirely different.

Perfect explanation, thanks

About the altcoins, I see your point. Like if Zimbabwe prints zillions of zimbabwan dollars it will not debase the Euro I guess. Although this is kind of confusing because the other argument by user Dr.Zaius seems to make sense too.

51% of the mining network has to use a client that supports more than 8 decimal places for it to be implemented.

I see where I made the confusion, subdividing coins doesn't alter your proportion of supply. thanks man.

No, altcoins don't accomplish it. Creating separate currencies doesn't debase each individual currency. The only way that would happen is if everyone treated alt-coins exactly as they do Bitcoin, meaning they were accepted everywhere bitcoin was and at a comensurate exchange rate so the affect would be people wouldn't care whether they had a bitcoin or a dogecoin, because each tended to be equal. That's clearly not the case.

People may choose to hold more than one type coin/currency, but what gives each currency its value is how many people choose the same currency. The reason Bitcoin reigns supreme is that although there are countless alt-coins, out of everyone that holds cryptocurrency (probably in the millions now) more people accept Bitcoin than anything else. That's because of the network effect which will continue into the future.

OP, I answered this topic at reddit recently. You may find my comment helpful:


Second part of the answer:

Altcoins already accomplish this.

You can't create a satoshi, or a fraction thereof. The closest thing you can do is issue a substitute--an IOU.


Adding a decimal place (a legitimate action that a consensus of miners may eventually agree to) will be analogous to the US Treasury launching a new metal coin that is worth one-tenth of a US cent. It doesn't debase the currency.

People can't just create their own tiny fractions of coins, but they can be implemented later if needed. I'm not sure they will though, at least not in our lifetime.

your confusing proportion of supply with number of coins.

Whatever BTC you buy now is on the 10e-8 ie the satoshi basis, any change of eg 10e -9 etc that that and you keep your current percentage of the whole 21 Million.

Nothing, especially if they do it off-chain. Doing it on-chain would mean a change to the protocol, at least in how bitcoin values are interpreted.

The difference is that the value of 1 BTC does not change when you sub-divide it, but it does change if you create more coins. Creating more coins is inflationary; it erodes the value of savings. Sub-dividing them isn't. A saver who owned 1,000 satoshi will end up owning 1,000,000 milli-satoshi and their wealth will be the same.

Hence creating more coins is controversial and will probably never happen to Bitcoin, but creating fractions isn't and probably will, if it ever becomes necessary.

If/when we get there, I think it will be all about the side chains..   

Don't forget about sidechains!

That is a solution but not a practical one for most people. Especially if the exchange rate between the 2 cryptos is non-constant. That's like keeping USD and JPY in your wallet in a world where there are no cents, and using the JPY for dealing with the fractional dollar amounts.

You can expand the monetary base ad infinitum.

How? Altcoins.

You can point a "miner" essentially into any altcoin, merge mine etc.

Since exchanging from BTC --> ALT is extremely easy, certain ALT's become fungible with bitcoin. This mechanism will also keep the value of bitcoin from ever reaching stratospheric levels. Look at a BTC/LTC chart since Spring 2013, it has much less volatility then BTC/USD.

As market demands for a BTC increase dramatically, substitutions begin gaining value as well. This is what occurred in Spring 2013. Bitcoin substitutes can be created out of thin air by simply copy and paste, and pointing existing miners to "strengthen the network" can be done in very short time frames.

People mine alts to trade back into btc, this increases the TOTAL crypto supply. Bitcoin currently is about 90% of mineable coins. So altcoins have already drained 10% of bitcoin's market cap, had it been solo. This is equivalent to $50 at present prices.

Bitcoiners think the world is running out of crypto, which is defacto impossible.

The protocol doesn't support it at the moment, but it could be made to do so. Such a change would require a consensus of miners at the time.


Not exactly, since you aren't creating more supply at the same value. The total market cap would remain the same. But it would alleviate many of the problems that people who complain of limited supply typically come up with. e.g. "but what will we do if 1 satoshi is worth $100 and poor people can't afford to even own any Bitcoin?"

There have been many many threads about this, so I suggest you read them.

I was thinking about the 21 million coins that will ever be "printed".

But what will prevent people from creating fractions of satoshis digitally? Like 0.1 satoshi, then 0.01 satoshi... then 0.00001 satoshi... then 0.0000000000001 satoshis

If people can create fractions of satoshis withou limits, it's the same as creating more than 21 million coins isn't it? In the end it's just the same as having unlimited supply