Topic: Altcoins with permament inflation destined to fail? (Read 1522 times)

No, of course, it have to be addresses in the past, say, between bloc 100 000 and block 400 000, when people didn't know about it.  One only needs a "random owner generator" with secret keys attached to it.  Bitcoin and several altcoins are great such generators.  It is the main thing they brought to us: private keys distributed over people.  That's what needed for an initial coin distribution.  It doesn't have to be fair.  That notion doesn't exist.  It has to be decentralized.

2500 metric tonnes of gold get mined every year. Yet Gold has held it's value for thousands of years.

http://www.numbersleuth.org/worlds-gold/

This is not going to work. Anyone can generate millions of bitcoin addresses. Even if there is a random amount allocated per address, the one with more addresses gets more coins. They can consolidate all the coins later. So there would be a real mess in the IPO.

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I am not sure I solved this entirely, but the general idea is to have to have sufficient "stake signature".  The difficulty is this: ideally, you'd want to have, say, 10% or 20% of all stake to sign off your wallet, but that is not realistic.  So I'm thinking of someone being able to delegate its stake signature to other wallets in a kind of pseudo random way.

My idea is that one should be able to prevent a Sybil attack, but that one makes the hypothesis that randomly selected stake wallets are most of the time sufficiently honest to do the job correctly.  Thus I'm not starting with "trustlessness", but rather with "most randomly selected users are to be trusted, but some can be evil".  This is like a randomly selected jury on a trial. 

Thanks for telling us more about your idea. It's interesting idea to limit the consensus about transactions to the essential.

How are you preventing that an adversary uses multiple wallets to fake co-signatures?

Ah, I see. There are multiple definitions of inflation and you are referring to a different concept than I am.

This is not correct. We are talking about currencies here. The only way to measure the market cap is based on economic value. Unless you have a different purpose for your cryptocurrency than as a currency.

I agree that currencies without inflation are destined to fail, which is one of the nice features of monero.

The supply of mined gold increases at a rate of over 1% a year. This has nothing to do with USD. I posted the link above. In the example one starts with 165,000 tons and adds an additional 2,500 tons per year from mining that is an annual inflation rate of 2500/165000 or 1.52%.

Edit: The mined gold is what is relevant economically.

Can you clarify how gold has an inflation rate of around 1%? If you look at historical prices of gold in USD, it has a real return. Inflation is the increase in prices. So in an economy priced in USD, USD become less valuable as prices increase. But it is the opposite with gold. Gold has to be denominated in another currency. Even if you imagine a single world economy, the value of gold has increased. '

Now a separate issue is that more gold is being discovered, but are you suggesting that even if the supply of gold was fixed, there would be inflation?

Well, I also started on designing a system.  But it is far from even conceptually ready, so I have no clear answers yet to many questions, but I think that the main issue is indeed that one shouldn't gain from keeping the system running in any "proportional" way, as you say.

In fact, my idea is that the only reason to keep the system running, is that if you don't keep the system running, you lose everything you have in it.  Honestly, if nobody in the system cares about its holdings, then I don't mind the system failing.  


I'm not looking for altruism (a notion I think doesn't really exist).   It is more like: "if you don't care about your holdings, don't be surprised they are gone."


Very rough sketch:

My idea is that there are no transaction fees, nor "block rewards".  There is an initial amount of coins, and that's it (derived, for instance, from a fork of different existing coins, like bitcoin, ethereum, and a few others).  For each address you have on these chains, you are entitled to one coin.  Not even proportional.  Just a RANDOM initial coin distribution.

Next, there are no rewards for anything.  But each user is responsible for his own wallet, and co-signs off other people's wallet updates, and must make sure he gets a recent validation before he can make a valid transaction.   You get validations from those nodes that have kept a sufficiently long history of transactions that they can "update" your validation.  The longer you wait to get a validation, the larger is the risk that your wallet will never be validated again, and you've lost everything.  So you better validate regularly.  At that moment, you can also validate other wallets.

There is a kind of block-chainish distributed file, but it only contains validation information.

In fact, the idea is inspired from the masternode concept of DASH, where masternodes "validate" transactions on the mem pool.  But if, as a wallet owner, you keep those validated transactions, that's in fact good enough.  No need for writing them ultimately on a block chain.  And everyone with a minimum of stake can be a "masternode".


Well, the first idea is that you have to update the validation of your own wallet regularly.  And yes, if you don't "invest" in a running PC, you diminish the security of the system.  But there's not much security to be had.   Block chains do much too much, because they allow you to have an "immutable record".  But that's not what is needed for monetary assets.  What's needed for monetary assets is *unforgettable* transactions.  The real order in which non-double spent transactions are given is not really important if they don't succeed one another (and they can't).  Adding stuff doesn't matter.  Once a balance is updated with the most recent transactions concerning him, and having sufficient "validation signatures", we don't really care about the past.  There's no winding back, there's no inventing transactions that didn't exist (impossible imitation of signatures).  The ONLY thing that matters in monetary affairs, is that one doesn't FORGET a decreasing transaction.  But once it is included in your balance (in order to obtain a recent validation), there's nothing else that's needed.

If my only recent stamp I have indicates that I have 20 dollars in my account, that's all that's needed to prove that I have a right to spend 20 dollars.  If I spend 5 dollars, then the receiver will want to have a validation of his INCREASE in his account by 5 dollars.  The only way for him to get that validation, is by having a simultaneous recent validation of MY account by 5 dollars.  So I have now an "older" validation that says I have a 20 dollar account, and a more recent one that says that I have a 15 dollar account, which, at the same time, sets my counter party's account to 5 extra dollars.
Nodes know about this transaction which is broadcasted.  So if I want to have an 'update' of my validation, I ask nodes to sign off my account status, and they will only sign if this corresponds to the last transaction since my previous validation.
When nodes "forget" about this transaction, they cannot validate my account any more.   If I wait for too long a period, I will not find sufficient nodes that are able to have the list of transactions since my former validation stamp ; so I might lose all I have in my wallet (an old validation is worth nothing).  I better continuously ask for validation updates.  If my wallet didn't transact anything in the mean time, nodes will give me a validation update.  
In order to send a transaction, I have to have a recent validation, no conflicting double spends since this validation and my counter party has to have a recent validation too.  We then get a common "updated validation".


This is why this system needs to be entirely obfuscated so that nobody knows anything about it.  You only update potential wallets with potential transactions.  

Actually no. The constant inflation economic model for gold is far more accurate than the fixed supply economic model.
http://www.westcoastplacer.com/how-much-gold-is-left-on-earth/  This furthermore does not take for example into account the mining of asteroids for gold or production of gold in nuclear reactors.

Edit: We are dealing with practical economic models here, such as the inflation rate lasting longer than the history of humans on earth.

Gold itself has inflation. http://www.numbersleuth.org/worlds-gold/ So the money supply of Monero in terms of gold would actually fall annually once Monero reached tail emission if the current inflation rate of gold ~1.5% were to continue.

The gold reserve on earth (even in the whole universe) is limited due to physical constraints, so the inflation cannot last forever.

I meant permament inflation in fact. But maybe the notion of market capitalization is inprecise and I should have written "market capitalization in purchasing power parity". So, yes, if the exchange currency (used to measure the market cap, e.g. USD) is subject to a higher inflation than the cryptocurrency itself, the market capitalization of the coin can theoretically grow forever, as long as there are enough atoms in the universe to express the numbers.

However, if the market cap of the currency is expressed in ounces of gold or man hours for a certain kind of work, it is obvious that the market capitalization cannot increase forever as commidities and man power are a scarce (physical) resource.

Let's measure the market cap of a cryptocurrency against the amount of hash power (or number of ASICs) you can buy with it. At some point in future, the market cap must stabilize due to the scarcity of the resource. As the coin supply will still grow according to the protocol, the price of the currency or the purchasing power with regard to ASICs will eventually decrease and so will the block rewards.

I think an ongoing "tail emission" of coins is almost essential for a crypto to survive. Alternative is transaction fees that are high enough to incentivize miners.

Provided the inflation rate is low enough I think its fine. Low enough is probably 3% per year or so or less.

Yes. Without a permanent block reward that does not diminish over time POW coins are destined to fail. This includes Bitcoin, Dash, Litecoin, Ethereum Classic, etc. So the topic should actually be Altcoins without permanent inflation destined to fail. Another here would be to replace inflation with demurrage. There are altcoins however that do not have this issue. Starting with Ethereum, (although in this case the tail emission has not being finalized), Monero, Dogecoin etc. Freicoin was the original demurrage crypto currency and demurrage may actually have a place in sidechains.

There are two very common misconceptions: The first is that gold does not have inflation. In fact the inflation rate of gold is around 1% and gold has been around for millennia as the "gold standard" for hard money and preservation of wealth. This has worked to a large degree because of the growth in economic activity. Monero for example has a tail emission of 0.6 XMR per block which is jut under 1%, the historical inflation rate of gold. As rough comparison this would be equivalent to a minimum tail emission in Bitcoin of 3 XBT per block. The second misconception is that this issue is "far into the future" This is simply not the case. Bitcoin going under 3 XBT per block is not far into the future but rather under 12 years away.

The market cap of a currency can grow forever, but at nothing close to the rate at which it currently does unless the supply falls dramatically - it can only keep growing until it represents nearly the entire world's currency requirements, and after that it can only grow along with the country's economy.

If you were being hyperbolic about it, you could even link the growth of altcoins to a kind of decentralised Ponzi scheme - the value only rises for previous investors because of the investments of later investors.

This is false. Market capitalization of a currency can grow forever. Basic economics. You titled the topic altcoins with "permanent inflation", which describes this kind of currency. Or do you mean currencies with permanent deflation are destined to fail?

I agree for most existing cryptocurrencies which fail to stay decentralized. But I think the problem lies in the fact that the power is proportional to stake/resources and gets reenforced by the rewards. As you already know, I'm trying to design a system that decouples power from stake to encourage real decentralization.


Well, if you particpate to keep the value of your investment, you do this out of a financial motivation, which is not true altruism. There's actually a big design space between altruism-prime and direct monetary rewards. I started a thread about it a while ago but didn't receive any feedback. I think that this a rather underexplored area of research.

One of my latest ideas is to set a fixed-percentage transaction fee on default and give the miner the priviledge to make transactions without any fees up to the total amount of the transactions that he included in his block. Such an incentive mechanism would benefit to miners with high transaction volumes. As an alternative, one could even imagine setting a lower limit for transaction amounts and exlude the miner from this rule. You would then mine to make microtransactions!


That's an interesting approach to the NaS issue, but unfortunately your suggestion is not incentive-compatible and could result in another type of Tragedy of the Commons. Your participation in block mining as an individual stakeholder doesn't add much to security. It's the whole group of miners that matter. And as mining is costly even in PoS currencies (you have to keep running your PC the whole time), why would you mine if everybody else does? But, then, others might think the same and stop mining, so that the system eventually collapses down to a minority of real altruist miners.


This is a problem that I have been discussing with iamnotback a while ago.
Not every kind of attack will necessarily lead to a devaluation of your coins. If you just censor certain transactions that most people deem questionable (i.e. drug payments), you could probably participate in censorship without the risk of losing anything. As there's no mining incentive whatsoever, censoring such transactions and discarding blocks that contain them wouldn't make you lose money. The bribe amount to make you participate would thus be very low.

If there's money to be made, then of course you attract strategies to make it, you inspire scammy strategies, and you end up with an oligarchy of greedy bastards that are then responsible for the system.   If you are just a participant in the system, and there's nothing to be gained apart from having the system keep running, system in which you invested, then chances are bigger that you will volunteer to do so, without any nasty incentive.  Proof-of-stake without gain will not fall for "nothing at stake", because also "nothing to be won if you bet on both horses".  If you can get a distributed consensus of stake holders, they have only one incentive: not crash the system in which they hold value.  There are no fee strategies, no block reward wars, no crazy wasting electricity.  Of course, you need to trust that there is no conspiracy amongst other stake holders against you.  But if the "stake signature" is sufficiently diverse and involved, this can be mitigated.  ZCASH is based on the supposed honestly of ONLY SIX PERSONS with the trusted setup.  A continuous "trusted setup of hundreds or thousands of stake holders that have no other incentive but to keep the thing running should be good enough.