$5000 per coin will never happen if PoW mining is allowed to continue - page 2.

AlexSm

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Quote from: kokojie on October 23, 2014, 11:25:47 AM

PoW mining currently transfers $500 million USD worth of wealth out of the Bitcoin eco-system, into the pockets of pools/miners/asic hardware vendor/electricity company.

This wealth transfer will go on, perpetually, as long as PoW mining exists. Because, as long as Bitcoin relies on PoW mining to secure the network, the expense will exist, and it can
not be cheap (otherwise attack on the network will be cheap and easy too).

In order for Bitcoin price to rise, there has to be at least more than $500 million of new money to enter the eco-system, every year, just to maintain the current price.

All Bitcoin holders are essentially charged a 10% tax per year, perpetually, by the PoW mining network. How can this be sustainable?

PoW mining will continue until someone comes up with a way to distribute wealth as fairly as PoW, so far PoS is not even a candidate.

inBitweTrust

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Quote from: LeChatNoir on October 24, 2014, 05:04:00 PM

No, it isn't flawed. Those who use and consume the road must to pay for the road maintenance.
In bitcoin those who store value in the protocol should pay for the security of the blockchain proportionally to the amount of time they hold their bitcoins.
Inflation is perfect for that purpose, as long as you hold your bitcoins your stake is constantly devalued to pay for security (miners).

It is very important for a POW currency to be stable, that the money someone has to spend to attack it, is strictly proportional to the market cap of the coin.
This condition can be achieved only with a stable and moderate inflation rate.
Bitcoin will never be able to work properly with 0% inflation and revenues from transaction fees only, i think 2% inflation is also too low, the 21 million coins cap will one day be broken or bitcoin will die.

Just like how linux, and any other open source distro has mandatory fees for their product to maintain development, right?

Hmmm, I wonder how Bitcoin is currently affording all the development right now that far surpasses any alt?

I wonder if anyone else has experimented in the past with non-mandatory fees to support development? I wonder if their are proven models that are more secure than software that requires payment?

inBitweTrust

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Quote from: TonyT on October 26, 2014, 01:12:06 AM

He has not done so since he is speculating with BTC, same as you, hoping for a pop in price. But he's quite right: as outlined in the academic study cited in Coindesk by an Austrian computer scientist, Google this, the transaction fees of BTC are set to rise, and will in 10 years time if not sooner become close to what is charged now by Western Union, PayPal, or your local bank for wires.

Bitcoin = Paypal. BTC is a short term buy but a long term sell.

Are you referring to this paper?
http://sdiwc.net/digital-library/near-zero-bitcoin-transaction-fees-cannot-last-forever.html

Did you even bother reading it? Otherwise, what paper specifically are you referring to that actually discusses the projected numbers and models hypothetical outcomes?

You aren't just following the headlines are you? Please tell me you are reading the research papers and references like I have before asserting such statements.

TonyT

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Quote from: inBitweTrust on October 24, 2014, 10:18:17 AM

Quote from: peeveepee on October 24, 2014, 10:15:42 AM

Time has proven centralization of currency issuing power is inevitable whether it is fiat or bitcoin, the only different is the players.

Might as well change the protocol and switch it to PoS system.

You can do this now. Please sell all your bitcoin and buy a PoS alt sir. Why haven't you already done this?

He has not done so since he is speculating with BTC, same as you, hoping for a pop in price. But he's quite right: as outlined in the academic study cited in Coindesk by an Austrian computer scientist, Google this, the transaction fees of BTC are set to rise, and will in 10 years time if not sooner become close to what is charged now by Western Union, PayPal, or your local bank for wires.

Bitcoin = Paypal. BTC is a short term buy but a long term sell.

LeChatNoir

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Quote from: DumbFruit on October 24, 2014, 02:31:48 PM

Quote from: LeChatNoir on October 24, 2014, 12:53:20 PM

The business model that imposes costs of network security to users who make transactions is completely flawed and will never work even with widespread adoption.

Toll roads impose the cost of their upkeep on everyone that uses them, is that completely flawed too?

Quote from: LeChatNoir on October 24, 2014, 12:53:20 PM

Network security of a proof of work coin MUST be paid by stakeholders via inflation.

This is a very strong claim. Why "MUST" it be so? There are all kinds of ways I can think of to pay for PoW, though they all have tradeoffs.

No, it isn't flawed. Those who use and consume the road must to pay for the road maintenance.
In bitcoin those who store value in the protocol should pay for the security of the blockchain proportionally to the amount of time they hold their bitcoins.
Inflation is perfect for that purpose, as long as you hold your bitcoins your stake is constantly devalued to pay for security (miners).

It is very important for a POW currency to be stable, that the money someone has to spend to attack it, is strictly proportional to the market cap of the coin.
This condition can be achieved only with a stable and moderate inflation rate.
Bitcoin will never be able to work properly with 0% inflation and revenues from transaction fees only, i think 2% inflation is also too low, the 21 million coins cap will one day be broken or bitcoin will die.

phillipsjk

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Let the chips fall where they may.

Quote from: devphp on October 24, 2014, 08:17:21 AM

Quote from: opossum on October 23, 2014, 10:18:24 PM

A PoS coin on the other hand costs nothing to attack, so anyone who wants to attack such a coin is able to do so without any cost/risk.

You're so clueless and a parrot of myths, it's embarrassing. Somebody please attack NXT and finish off its 11-month run, I am sure it will be no more difficult that taking a morning crap.

(Double face-palm snipped)

I would but:

Computer cracking is now considered more serious than actually killing someone
I have forgone about $60-$90 in revenue because I have been too busy/lazy to configure my Bitcoin miners over the past 3 months.

Essentially, the hardest part is finding a 0-day exploit (or series of exploits) that the majority of the "forgers" are vulnerable to. You then break into their machines and vote on whatever forks you want.

However, to prevent a simple roll-back, you may want to be even more ingenious. For example, you can randomly corrupt the block-chain such that no two nodes agree on the block-chain history. This is cheap since no proof-of-work is stored in the block-chain. This would be difficult for any PoS coin built "on top" of the Bitcoin bock-chain such as Mastercoin, however (such coins benefit from Bitcoin's PoW that you want to get rid of).

amaclin

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Quote

That's true, but again, it doesn't necessarily need to be paid for through inflation.

Yes. you can pay by buying coins from miners. Grin

DumbFruit

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Quote from: amaclin on October 24, 2014, 02:38:15 PM

Quote

This is a very strong claim. Why "MUST" it be so? There are all kinds of ways I can think of to pay for PoW, though they all have tradeoffs.

Because security is not free.
If you pay nothing - you receive nothing

That's true, but again, it doesn't necessarily need to be paid for through inflation.

amaclin

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Quote

This is a very strong claim. Why "MUST" it be so? There are all kinds of ways I can think of to pay for PoW, though they all have tradeoffs.

Because security is not free.
If you pay nothing - you receive nothing

DumbFruit

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Quote from: LeChatNoir on October 24, 2014, 12:53:20 PM

The business model that imposes costs of network security to users who make transactions is completely flawed and will never work even with widespread adoption.

Toll roads impose the cost of their upkeep on everyone that uses them, is that completely flawed too?

Quote from: LeChatNoir on October 24, 2014, 12:53:20 PM

Network security of a proof of work coin MUST be paid by stakeholders via inflation.

This is a very strong claim. Why "MUST" it be so? There are all kinds of ways I can think of to pay for PoW, though they all have tradeoffs.

LeChatNoir

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Quote from: johnyj on October 24, 2014, 01:05:27 PM

Fiat money does not have a production cost, but they are forced into circulation and take the chance that normal people don't understand how money works, once people realized a money without cost is just a scam, they will act

Decentralized currencies are not forced into circulation, thus people will voluntarily select the money which have a cost close to its face value, that is the spirit of fair trading. A cryptocurrency without production cost worth very little, since you can always duplicate and generate hundreds of copy of them, means endless supply

So, for $5000 coin, the coin's production cost must reach $5000, and currently it is far away from that

No, real world doesn't work like that.

johnyj

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Beyond Imagination

Fiat money does not have a production cost, but they are forced into circulation and take the chance that normal people don't understand how money works, once people realized a money without cost is just a scam, they will act

Decentralized currencies are not forced into circulation, thus people will voluntarily select the money which have a cost close to its face value, that is the spirit of fair trading. A cryptocurrency without production cost worth very little, since you can always duplicate and generate hundreds of copy of them, means endless supply

So, for $5000 coin, the coin's production cost must reach $5000, and currently it is far away from that

LeChatNoir

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Quote from: DumbFruit on October 24, 2014, 12:50:40 PM

Quote from: LeChatNoir on October 24, 2014, 12:41:20 PM

The only way to make a POW sustainable is to block yearly inflation at a certain level (3% ?? who knows) and never drop below that
Otherwise Bitcoin business model will slowly become flawed as the costs of security of the network will gradually switch from inflation to transactions fees in the future.

Inflation is not the only way to fix this problem. Transaction fees can also take over if the block-size is limited. The question then becomes "how fast should the block-size increase?"
Gavin speculates 50%/yr increase is about right to keep up with technology. However, we don't want capacity to precisely fit demand, otherwise there are no funds going toward mining. Therefore, whatever the increase in block-size, it must be less than ideal.

If Gavin is correct, then we only know that the increase should be less than 50%/yr.

There is no perfect answer under the current system because any answer requires foreknowledge that cannot be known.

The business model that imposes costs of network security to users who make transactions is completely flawed and will never work even with widespread adoption.
Network security of a proof of work coin MUST be paid by stakeholders via inflation.

DumbFruit

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Quote from: LeChatNoir on October 24, 2014, 12:41:20 PM

The only way to make a POW sustainable is to block yearly inflation at a certain level (3% ?? who knows) and never drop below that
Otherwise Bitcoin business model will slowly become flawed as the costs of security of the network will gradually switch from inflation to transactions fees in the future.

Inflation is not the only way to fix this problem. Transaction fees can also take over if the block-size is limited. The question then becomes "how fast should the block-size increase?"
Gavin speculates 50%/yr increase is about right to keep up with technology. However, we don't want capacity to precisely fit demand, otherwise there are no funds going toward mining. Therefore, whatever the increase in block-size, it must be less than ideal.

If Gavin is correct, then we only know that the increase should be less than 50%/yr.

There is no perfect answer under the current system because any answer requires foreknowledge that cannot be known.

LeChatNoir

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Totally agree with OP but POW expenses are not only proportional to market cap (Available supply * BTCUSD), they are also proportional to inflation.

POW expenses = AvailableSupply * BTCUSD * InflationRate * K1

$ to spend for 51% attack = POW expenses * K2

Security of the network = $ to spend for 51% attack / MarketCap = (AvailableSupply * BTCUSD * InflationRate * K1 * K2) / (Available supply * BTCUSD) = InflationRate * K1 * K2

K1 and K2 change with market conditions and other factors not important for this analysis.

Bitcoin and POW coins' security is proportional to the inflation rate and it goes down with time as block reward keeps halving and halving

There will never ever be a Bitcoin with inflation < 1%, POW model can't work with low inflation because it becomes vulnerable to speculative attacks.
Bitcoin can't exist with a 1 Trillion $ market cap if it costs 100 millions $ only to 51% attack it.

The only way to make a POW sustainable is to fix yearly inflation at a certain level (3% ?? who knows) and never drop below that.
Otherwise Bitcoin business model will slowly become flawed as the costs of security of the network will gradually switch from inflation to transactions fees in the future.

POS doesn't have this problem since the amount of $ someone has to spend to bring it down is and will always be proportional to the market cap of the coin.
And that is how it should be.

Jamie_Boulder

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Very interesting topic, unfortunately I don't have the time to read all the responses.

Favorited.

inBitweTrust

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Quote from: schnib12 on October 24, 2014, 10:18:05 AM

because they use different steps , e.g. 1,000,000-1,000,000,000 instead of 10,000,000-~~1,000,000,000~~100,000,000

Correct, sir, good eye. This would mean my original statement of 7-15 owning most Nxt is true.

DumbFruit

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Quote from: peeveepee on October 24, 2014, 10:15:42 AM

Time has proven centralization of currency issuing power is inevitable whether it is fiat or bitcoin, the only different is the players.

Might as well change the protocol and switch it to PoS system.

No thanks. It's important for competing miners to be able to enter to the market even (especially) in the event that it is highly centralized. Basing competition on how big of a pile of money you have can not physically be overcome by a new entrant.

In other words; Those in power can remain in power at their leisure.

inBitweTrust

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Quote from: peeveepee on October 24, 2014, 10:15:42 AM

Time has proven centralization of currency issuing power is inevitable whether it is fiat or bitcoin, the only different is the players.

Might as well change the protocol and switch it to PoS system.

You can do this now. Please sell all your bitcoin and buy a PoS alt sir. Why haven't you already done this?

schnib12

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Quote from: inBitweTrust on October 24, 2014, 10:03:27 AM

Why does this

https://nxtblocks.info/#section/blockexplorer_distribution

not match this :

http://charts.nxt.org/cDistribution.aspx

This is a huge discrepancy!

Additionally, can you at least admit that this comment was hysterically fallacious:

because they use different steps , e.g. 1,000,000-1,000,000,000 instead of 10,000,000-1,000,000,000

Topic: $5000 per coin will never happen if PoW mining is allowed to continue - page 2. (Read 10107 times)