Topic: [ANNOUNCE] EnCoin - An alternative with a completely different paradigm - page 7. (Read 12158 times)

Yes, you are reiterating one of the follies of BitCoin. The value of the total BitCoins is not 15Mx$320. That is what this whole fricken issue is about.

If we again use the same assumptions as my proposal (which are certainly incorrect, it is unlikely that there is a linear progression of bitcoin value--it is more likely than not bottom heavy, but this would require a detailed analysis of the difficulty levels and so on), the total cost to produce the current amount bitcoins is 7.3Mx$1.80, or about $13M. If we use a linear progression from $3.60 to $320 from 7.3 to 15M, we get $161.80x7.7M or 1.245B. A total of 1.258B (with the first half costing 1% of the price to produce, and the second half costing 99%). 26% of what you estimate the value to be.

I don't know how many coins are for sale right now within a reasonable market range, but let's just say it's 100k. That means 1.4% of the market total volume is for sale. With the incentive for hoarding in BitCoin, this should come as no surprise. At 15M, it is not a stretch to use that same 1.4% figure, as coins are much more difficult to acquire, so many more people will be selling, but they will be for much smaller amounts. We can essentially just double it as the number of coins has about doubled, so roughly 200k coins will be for sale at any given time. 25k@$1.80 plus 200k@$320 = $285 (simplistic). Every coin's theoretical value just lost $35. You can't use the price on an exchange to determine the value of the coins. So many are hoarded. If they all went on sale at once, assuming there was enough demand, they would roughly be worth $1.80. 1.258B/15M = $84 while costing $320 to produce NEW coins.

So BitCoin value relies on the fact that people will keep hoarding. At some point, greed is going to take over. People are not going to hoard forever. Or hell, maybe a big wallet gets hacked. Either way, someone is going to try to make money, and to do that lots of people are going to lose value. I believe it will eventually cause the collapse of the network.

It is an ingenious and neat system, but it is not a proper medium of exchange.

Why not promote a system that promotes spending and trade, which actually does create value. Read up on GDP.

At no profit margin, BTC are going for $320 each. 15M coins mined if the reward is 12.5.  That's a 4.8 billion dollar market.

24k coins is .16% of 15m

I don't think a 0.16% is going to make that much of a difference? Am I missing something?

1) There are different countries with different electricity costs.

2) A sell-off, should one happen (that is, should an early adopter with a substantial pile of coinage still exist at this point and choose, for some reason, to part with the entire stash instead of just the part he needs to hire some hookers and buy some wine or something), would of course drop the price, however, whether that would be permanent and how would market adjust is not subject to rational analysis at this point.

Value, as a concept, is mostly voodoo (gold value being prime example)

Predicting valuation behavior of large crowds is thus not verily likely.

However, I have nothing against your coin in principle, assuming that it can be implemented "in code", which is somewhat outside my ability to argue about (though it seems much more complex than bitcoin, which is a feat)

Funnily enough, I don't. It's not as if this has never happened before. BitCoins were worth $30 at one point, you know.


The price will likely rise, I wholeheartedly agree. It is the intention of the design of BitCoin that the price will rise. But you are wrong about the sell-off's devastation not being high. The price has absolutely nowhere to go but down in a sell-off. If you take my (not so extremely unlikely) example of 1 million people mining 12.5 BTC, you will see that an average person "earns" 0.054 BTC per month at a cost of $17.28 (200Wh x 24 x 30 x 0.12/kWh). This means the cost to produce 1 BTC is $320. Since 54k BTC are produced a month at this point, a 25k sell-off is the equivalent of 333 MILLION BTC-hours of effort. What took 1 million people two weeks to produce was conjured out of thin air by one person. Assuming no profit margin, 8 MILLION DOLLARS of demand was just eliminated from the economy. It is hard to say how the price will be affected, but it certainly won't be in a positive direction.

How many times will it take for people to get burned before they stop mining is the question. And once that happens, the security and value of BitCoin goes out the window.

I suspect that the effect of said sell-off will largely depend on market environment.

You seem to imply that price of coins shall not rise proportionally (at least) upon subsidy reduction for miners. Yes, that would be a catastrophic scenario (with or withou sell-off), but I find no rational argument can be made for or against it

Should the coin price actually rise, the sell-off's devastation potential shall not be that high (and it seems to me that a significant portion of first-adopters have already cashed out).

You seem to be running with some version of efficient market hypothesis in mind, right ?

:sigh: I really don't want to turn this into an early adopter debate.

The danger of an original coin sell off is greater as the cost to produce a single coin increases because that means it takes more effort to produce a single coin. As it takes more and more effort to produce a single coin, the effect of effortless coins flooding the market is greater. When those coins hit the market, who will want to produce new coins any more? If BitCoins are so popular that 1 million people are mining in the future for 12.5 BTC per block (0.0000125 BTC per person per block), the effect of 25k original coins hitting the market will be, in essence, as if 2 billion coins just hit the market. The market will crash, and 25k is a small percentage of the original amount of coins.

In EnCoin, the cost to produce coins will remain stable and the threat of this is non-existent.

Depends on the ROI  

Edit: I see where you're coming from.  but I think it's one of many possible scenarios, and an unlikely one at that.

Depends on what assumptions you make as to market behavior in face of this change.

Do bear in mind that it is incredibly trivial for a bitcoin merchant to have his prices respond to market fluctuations in near-realtime.

Yes, but to be frank, that small group of people that gradually got larger were getting in at the top of the "pyramid." The only possible loss was a few dollars of electricity here and there. Now that there are 60k people, 60k x a few dollars of electricity is a very large sum of money.


Some people will, for sure. But to expect the current 60k miners to keep on truckin when the BTC award halves is folly.

I believe that EnCoin can piggy-back on the popularity of BitCoin though to provide an actual medium of exchange rather than a speculative investment. BitCoin has exploded in popularity, but no businesses are buying in except (semi-)illicit ones, or ones that provide services to the BitCoin network only.

I am not against starting EnCoin with some specific award modifiers such as 2x, 1.5x, and so on for the first X blocks to garner additional interest. These extra coins will reward early adopters, but will not give them the catastrophic power to control the network that BitCoin has endowed its early adopters. The impact of those coins will be reduced across the network as a whole as it gets more popular, whereas the reverse is true for BitCoin.

Why would the danger of "original coin sell-off" be greater if price of a single coin increases ("people keep buying in") ?

Also, "first adopter problem" is people just being sore lol

Looks very interesting.

I the early adoptor thing is unfortunatly a potetial big problem for Bitcoin.
If people think it is a problem, it is a problem.

Hope someone will code this.

Wait, weren't people mining before bitcoin got big at a loss?

I think people will continue to mine -regardless- of the ROI due to some of the (currently) unique properties of Bitcoin.  And that's outside the speculative investment of mining. 

I don't understand what you mean. When the mining rewards drop off, the cost to produce new bitcoins increases. This means once it hits 25 BTC per block, you are going to have to convince people it is worth mining bitcoins at $7.20 a pop when they were just selling for $5 a month or two ago, and perhaps still. Every time the cost to produce new BTC increases, those with existing BTC benefit because exchanges make no distinction between a BTC mined for $0.00016 or a BTC mined for $7.20. People mining BTC for $7.20 are going to start looking pretty stupid unless people keep buying in to BTC. And if that happens, the danger of small, original coin sell-offs keeps increasing because they will have a larger impact as the ROI on those coins is even higher.

Actually, what would happen when subsidy drops to zero is a fascinating subject of discussion. Completely impervious to rational analysis it seems, too (since a lot will be defined by irrational actions by large groups of people)

Ahh, I see.  You're forgetting the mining rewards drop off.  So the ROI naturally curves itself.

Okay, this is officially weirder than "inflation/deflation" argument applied to infinitely divisible abstract programmatic constructs.

Can we get a TL;DR? I read up to point 3 but you didn't answer your own question so I'm unwilling to go through the rest of the proposal.

At what point do you think a ROI is sustainable? It wasn't at $30, a 1,560% ROI, it wasn't at $15, a 733% ROI; what makes you think it will be at 178% ROI?
If the amount of people mining today were to suddenly double, a bitcoin would cost $7.20 to produce. At a "reasonable" and immediate 33% ROI, coins would sell for about $9.50, or a 420% ROI for the "average" bitcoin's cost to produce. How many people do you think can be duped into this system? Typical businesses attain 5-10% ROIs, so I don't know how long you can get people to believe that this is possible.

We're going to see it in action as soon as the BTC award halves and half the mining network drops out (or the price suddenly doubles, which do you think is more likely), making the network half as secure. Instills a lot of confidence in the network, imo.

Wouldn't it go

High ROI -> More Miners -> Higher difficulty secures blockchain -> Bitcoin is 'safer' -> More people use it -> price goes up -> Rinse/repeat?

Did you miss the whole "cost to produce" section? I should have said that in the future they will "cost" not "be worth" $30 or $100 to produce.
If you go by my assumptions, the average bitcoin has cost $1.80 to produce. The average bitcoin is selling for $5. 178% ROI. Not. Sustainable. This gap is only set to widen due to the nature of bitcoin.

When bitcoins reach equilibrium and sell for about $2, do you think anyone will want to mine anymore when they cost $3.60 to sell for $2? Or are we going to continue to believe that the only price that matters is what it sells for, not how much it cost to make?