Kinda-sorta. I would argue inflation basically helps anyone who has money invested in things which do not consistently devalue (equity, precious metal) while destroying the wealth of those who do not. But there exists a host of problems for any deflationary currency that Bitcoin doesn't solve as well, and doesn't even attempt to solve.
Ultimately this all depends on how attractive you want to make the coin to investors and whether you want it to function better as a store of value or as a transaction currency. I would argue that the store of value mechanism is more important because if you have a good store of value people can easily create their own personal currencies on top of that.
The coins could in essence double as shares and those shares could be used as collateral to create new coins which are backed by the shares. To have a good transaction currency in my opinion you want to avoid both inflation and deflation so that the price is stable. Most people aren't going to want to store their life savings in a transaction currency though so if you want investment and long term users you need to create a good store of value.
Tx based proof of stake has similar issues to those for Peercoin, in my opinion, so I'm not overly hopeful. Even my proposed system has some issues, though, but I think it's an improvement.
I'm interested in seeing both of these solutions in action. If there is a way that we can agree upon to quantify the level of decentralization of the network we can use that as a metric to try and measure the success of things. What I do know is that Bitcoin isn't decentralized and if they stick with sha-256 there is no hope it will ever be.
The solution I would like to see and that I've been promoting is to have the hashing algorithm randomized so that no one group of people can optimize for it. If it changes at random intervals to a random hashing algorithm then you can't prepare in advance with a sha-256 asic farm or a scrypt mining farm. You simply will not know what the next hashing algorithm will be, how many days it will be in effect, and you would have to prepare for all the possible algorithms and have to purchase all machines or just pay really close attention to track it.
The other idea is the lottery effect where there is an occasional jackpot. The basic idea is if you put enough uncertainty into mining then no one can plan ahead and it becomes less about how much money you have to spend on chips or how many chips you have and more about how much you're paying attention and whether or not you're waiting for the opportunity to use whatever you do have when an algorithm and scheme favorable to your specifications kick in.
I understand this sort of randomized hashing would be a nightmare to code so it's only theoretical. I think the original whitepaper you had was to be something like that, so it's possible at least in theory.
That's the point, yeah. The problem with Bitcoin is that once you get to the fees level of inflation (inflation = 0), you run into the problem that no one wants to conduct on-chain txs because it's poorly incentivized. So, ultimately, for the system to continue functioning, you need to enact some inflation. I chose exponentially increasing inflation, like fiat, but at considerable slower rates of inflation per year than are standard. The reserve banking system (when/if it gets off the ground) is then intended to be a more dynamic system that is more responsive to world economic rates of inflation as determined by public oracle consensus.
I think there are ways around inflation but it's still experimental. I think you could simply just destroy the fees and the shares in the network would appreciate as the coins get destroyed. Of course miners would not have incentives at this time but once the mining network is fully built out I don't think miners will need that kind of incentive anymore. If you think of coins destroyed as a dividend, and then make everyone on the network a miner, why wouldn't that work?
The amount of hashing power available in 20-30 years if it's decentralized could be so ubiquitous and so cheap that you won't need to give any incentive directly to miners in the form of new fresh coins. You could destroy the coins at a 1-5% rate and disperse the incentive *which under the currently centralized Bitcoin network would go to a centralized cartel of miners as new coins* instead onto every participant in the network equally. As coins get destroyed with every transaction the fees would give a deflationary dividend to all who hold coins in the network. As a result of this dividend that would be continuously dispersed, their coins would become more scarce and thus more valuable so that the hashing power gets cheaper for them as their buying power increases.
And because technology is inherently deflationary, there is a synergy there. I admit this is theoretical so I only present it as an idea to consider rather than as a solution.
My gut feeling is that neither inflation nor deflation solve what is a considerable social and philosophical problem: that people will more money end up usually having the means to obtain more money, regardless of the financial system they are working under.
My argument is that because technology is deflationary (Moore's law), the currency backed by that technology should be deflationary. It's technological determinism. The focus in my opinion should not be on people and the pursuit of money, but on making technology more accessible and cheaper so that the cost of living decreases with deflation. If the rich are getting richer in numbers in some ledger but for everyone else the cost of living is going down then everyone wins. The rich feel richer and can invest in even more sophisticated technology, and poverty eventually ceases to exist because you can theoretically rely on automation, 3d printing, and decentralization.
Again this is highly theoretical, speculative, and philosophical so there is room for debate here. I just think human labor over time is being phased out in favor of automation and that technology will determine if poverty exists not monetary policy.
Having slow exponential inflation also insures investment into mining technologies in the future, as the hardware will continually be useful. However, with Bitcoin, eventually when inflation = 0, hardware investment will probably fall apart as far as I can tell.
I think it's the opposite. If buying power goes down over time you could end up with the opposite effect. I think if inflation is low enough you could be right in the short term, but over the long term I think Moore's law is deflationary and when that kicks in the hashing power will just become cheaper at a faster and faster rate. The only way to find out is to watch what happens with 1% inflation and always leave in the capability of putting things into deflationary mode at a later date.
Well, having something like this functional (useful PoW) is one of the the holy grails of cryptocurrencies, but doing it in a way that is decentralized seems unlikely at the current time. You can kind of hack it on (e.g. RippleLabs), but you need to rely on centralization of some kind to make this work.
I agree right now it is too centralized. I think we will be able to decentralize it eventually using a DAC though. So I'm actually very hopeful on this front.
SCIPs can give some kind of voodoo black moon magic approach to this where you can verify that you'd done some kind of very complex work very quickly and easily so long as you disseminate a massive (gigabytes or terabytes) consensus parameter set. These are a relatively new technology though, and I want to see how ZeroCash fares with them (they'll be the first currency to use them, for the sake of anonymizing cash flow). Very interesting. I think theoretically once we have infrastructure to have DACs and other tools available it wont be so hard to let the network itself or the artificial intelligence itself pay the human beings to do certain tasks on a list are are voted on. In that atmosphere it becomes possible to make Proof of Work beneficial and decentralized if human beings are used to verify the work or some process which uses human labor by paying human beings a bounty or fee is put in place.
I hope whatever Proof of Work you do decide to use is modular enough that you could switch it out for something better or improve upon it at a later time. As long as you have the flexibility to future proof it then it will be great.
Some additional information
http://www.bloomberg.com/video/how-technology-is-driving-deflation-everywhere-aOgVQHcASBqwtc9uFa1AGA.html
