Topic: A proposed solution to adjust for lost Bitcoins: wallet 'heartbeats' - page 8. (Read 12205 times)

This will be an interesting experiment.

Shit.  I had a whole reply typed out, but the stupid forums limits the posting rate, and I managed to lose it while going back to try again.

The short version is that I now understand your point.

But I don't necessarily agree that instability is inevitable.  Holders of unusually large wallets from days past will have an incentive not to crash the system.  And as coins are actually lost, the increase in value of the remaining coins will give an incentive for people to recover coins that aren't actually lost, but merely hiding, keeping the ratio of "thought lost" to "actually lost" at a reasonably low level.

So, yes, over time, the loss of coins could cause uncertainty, which could cause instability.  But I don't think that those are inevitable.

If you keep repeating yourself over and over, the problem may not be with the listeners but with how you're stating your answers

Anyways, I read and re-read this and there's a lot of back and forth.

But I'll try this once again:

Your assumptions are:

• Eventually all bitcoins will be lost
• That the uncertainty in the amount of bitcoins that are available will effect the price.
• The reason it will effect the price is that there is a potential of an unknown wallet created back in the dawn of time that will be discovered that, after all this time, will be large enough to dramatically shift the market.
• And that trade will halt because of this potential uncertainty which will only increase with time.

am i closer?

No, that's not it. I will not keep repeating myself. Read my replies. Especially those that discuss ratios and uncertainty.

As the adoption of Bitcoin increases, and the prices rises, the incentive to protect them against loss or theft will increase proportionally. This is something that I don't see people taking into account when they say that loss and theft will be a huge problem.

See, I'm reading the thread and it sounds like this is part of the problem you're stating.

So to restate, there are coins that are lost and coins that are hoarded. Just focusing on lost coins,there shouldn't be an issue. Because the value of the remaining coins would climb and, if necessary, the coins can be bit shifted to increase the overall supply.

The purpose of this heartbeat then, is actually focused around hoarders, early adopters who have a large number of coins and for some reason want to keep them rather then entering them into the system. And to force them into the market, is that it?

Assume?

What about malicious attacks, viruses, natural disasters, power failure, & plain old stupidity.

We just had an exchange get hacked, where 7% of all bitcoins in existence were being manipulated by a single attacker.

Read the replies. Bitcoin divisibility has nothing to do with the matter at hand.

Clearly, you have not read my replies if that is your response.

How ironic.

I believe there is some theoretical merit to your argument. Bitcoins are different from gold in that they can actually easily be destroyed. But we will never know if they are.

This means that while we may now argue that bitcoins are more stable than gold because we don't know how much gold there is while we do know that there will never be more than 21 million bitcoins, the argument might be reversed in the far future: If only 1000 bitcoins were in circulation anymore, their value might be enormous. However, it might drop steeply on "rediscovery" of a 10,000 bitcoin wallet, just as today the price of gold would drop steeply were someone to discover a giant new goldmine.

Indeed, this might be seen as a theoretical problem in the concept of bitcoin. However, it is not likely to become a practical problem, because the more valuable bitcoins become (I hope we agree that this could only be a problem if bitcoins become hugely valuable), the more securely will they be guarded in general. This means that even the 1%/year loss ratio assumed by someone above is unrealistic. Indeed, the annual loss RATIO will probably tend towards zero fast enough so that the total number of bitcoins in circulation (or longtime storage) will fall ever more slowly towards a big percentage of the intended amount of 21 million. Which means that your problem will probably never become a problem. Interesting point though.

Assume 1% lost coins per year. Probably, it was a lot higher initially, but we're talking from now on.

That means it'd take 229 (log(0.1)/log(0.99)) years before we lose one decimal of precision.

Absolutely so. Coin loss, even delibrate coin loss, has always been part of Bitcoin.

Several times, Satoshi proposed deliberate coin burning as a way to use Bitcoin for escrow ("deliver the goods, or else I burn the coins that would otherwise be your payment") or document timestamping ("burn some coin to record a document's hash in the block chain").

Here are some references:
http://forum.bitcoin.org/index.php?topic=750.0
http://forum.bitcoin.org/index.php?topic=645.msg7712#msg7712
http://forum.bitcoin.org/?topic=2162.msg28533#msg28533

The number of coins is totally arbitrary, as they can just be subdivided to the necessary level of precision. Bitcoin could function with any number of coins (even less than one, if the number of decimal places is increased).

Coin loss is nothing to worry about (provided that it's not your own coins being involuntarily lost, of course).

Refreshing coin can be 100% automatic, when you start Bitcoin client, it can check automatically if some coins weren't used for a year or two and refresh them with a simple automatic transaction (or ask user). How is that inconvenient?


I think ascent is right and just because Satoshi didn't think about that 2 years ago doesn't make it bad idea. I think there are many bad design decisions Satoshi made, for example the rate of Bitcoin generation that made the system look like a pyramid and made people who generated blocks with cheap CPU when nobody used this money the most wealthy ones (please don't tell me about investment risk of mining with CPU on your home PC).

But I agree that Bitcoins should stay like they are. If better cryptocurrency will be developed, Bitcoins will slowly lose value and disappear eventually, though some hobbyists will probably still generate blocks just to keep it alive.

Since Bitcoins are (nearly) infinitely divisible this is a moot topic. Even IF enough of them could be destroyed to change the market - you can always just form a new block chain, which is inevitable anyway.  
See https://en.bitcoin.it/wiki/Units
You keep coming in here telling all the pros to listen over and over again, but you never actually ready any of the replies.

Because when the ratio is near zero, the number of Bitcoins in circulation is small. It is so small, that some discovered dormant wallet can be huge by comparison, which can have a drastic effect on the wealth of all current users of Bitcoins. There is no way to know what might happen, but it is certain that it could happen. Because it is certain that there is extreme uncertainty when the ratio is near zero, there is little inclination to put faith in Bitcoins.

But conversely, when the ratio is much larger than one, as it is now and as it is in the beginning stages of any protocol that does not allow reclaiming of inactive wallets, then we operate with the knowledge that most coins are not lost, and thus can be put into circulation.

This is not difficult, but it is important to understand.

Why?  Why is it unusable?  You keep saying this, but you offer no reasons why it might be true.

So, please address the following two points:

1. Show that somehow, the ratio will not approach zero, as I claim it must eventually.
2. Assuming you cannot address point 1, show that the currency is usable when the ratio is near zero.

The stability of a system where 10 million coins are in circulation and no more than 1 million are unaccounted for is much greater than a system where 1000 are in circulation and 10 million are unaccounted for. By unaccounted for, what we mean is, are they lost or being saved? We cannot know.

If 1000 coins were in circulation right now, we know that about 6 million are saved, as opposed to lost. This is a reasonable assumption. This assumption must become murkier over time. We do know that coins will be lost, until every coin is lost. But we don't know the rate, nor will we ever have a more accurate estimate of it than we do now.

What we know for certain is that our estimate of the ratio of coins in circulation compared to the number of coins either saved or lost is guaranteed to become less accurate over time. In its extreme, that ratio approaches zero. And when that ratio is near zero, the currency is unusable.

I'd laugh, but this comes up a dozen times a day from people that aren't joking.

Personally, I blame high school science teachers.  If there was one concept that I wish that everyone I met understood, it is the concept of a dynamic equilibrium.  So many people are unable to understand that those 10,000 coins sitting out helped increase the value of the circulating coins, and they will have the inverse effect when (or if) they come back into circulation.  Yes, this causes an imbalance, but in a feedback system, such as an economy, this result is an adjustment, not an explosion.

You're missing the point. These aren't issues that will affect you or me. But as a model to endure the ages, it is guaranteed that over time, the ratio of coins known to be in circulation to the coins that are of unknown status will decrease from a number that is orders of magnitude greater than one to a number that, near the end, will be a number that is near zero.

That is the whole point. The dynamics of the system is guaranteed to change radically over a very long period. Why is that a desirable design characteristic? The short answer is, it is not.