As many of you know, the wealth distribution within Bitcoin is tremendously unequal. In the real world, 1% of the population owns half the world's wealth. In Bitcoin, half of all Bitcoins belong to around 927 individuals. The Winklevoss brothers own around 120,000 Bitcoins. If Bitcoin were the world's only form of wealth, they would be the world's first trillionaires.
To make matters worse, Bitcoins have a habit of ending up in the hands of a small group of hackers. There have been numerous incidents where hackers made off with tens of thousands of Bitcoins. Bitcoin is not able to serve as a credible currency for the future as a consequence. Would you want to live in a dystopian society where a small cabal of early adapters and anonymous hackers rule the world and control the world's currency supply? I would consider this a nightmare to live in.
Starting over
Imagine if we could start over. According to the latest estimate I've seen there are around 4.5 million addresses with a balance above 0.001 BTC. Imagine if every address with a balance above this threshold received 1 bitcoin. We would be left with 4.5 million bitcoins. If this currency took off, it might reach the current market capitalization of Bitcoin. If such a thing were to happen, every address would have a balance equivalent to 44,444 dollar. This would not be a bad deal for the majority of Bitcoin holders, who now hold bitcoins worth far less than that. If our new currency struggled to reach more than 1% of Bitcoin's current market capitalization, it would still have the effect of handing out 444 dollar to every user.
There are a number of different arguments you can raise against this suggestion. A few of the most common are:
a. The early adopters deserve their wealth
b. The unequal distribution of wealth would rapidly return
c. People simply won't step over
d. This distribution is still unequal
I don't feel like writing a very in depth essay in regards to all my motivations for this project. If you don't agree, don't participate, it's as simple as that. To summarize things however, the concept of deserving wealth by investing correctly seems somewhat bizarre to me. In addition, the simple conclusion that follows is that if we can set up an alternative currency that is more equally distributed and replaces yours, it would follow that apparently you didn't deserve your wealth after all.
It's true that the unequal distribution of wealth would rapidly return to our version of Bitcoin. This doesn't matter. The solution would be very simple: Start a new coin. Currencies are not meant as a store of wealth, but as a means of exchange. To use numbers in a digital ledger as a method to store wealth seems absurd to me. There's no reason whatsoever to anticipate it will maintain its value, it could easily be displaced by a better alternative, or people could start to disregard the ledger.
I believe that people have every incentive to step over. Unequal wealth distributions don't deliver added value to Bitcoin, they detract from it. They're a product of everyone pursuing his own individual self-interest, at the cost of society as a whole. They create a degree of uncertainty and a feeling that people are signing up for their own enslavement. If you genuinely believe Bitcoin is the future of money, how can you feel comfortable buying a fraction of a bitcoin? If given a credible alternative, people will readily jump over.
The way to create interest in a cryptocurrency has traditionally been the early adapter advantage. You buy because you expect others to step in at a later point too. This ends up hurting the currency's appeal in the long term however. The solution is to draw interest by creating a broad distribution instead. If four million people discover tomorrow that they have two hundred dollar sitting in a digital ledger somewhere, they will listen to you.
Finally, there's the issue that the distribution of our currency is still unequal. That's a fair argument, but there are two different arguments I have to raise to this. I'm fine with wealth being distributed in the hands of responsible people, who use it in the best interest of society as a whole. Do you think the developer of a ransomware virus has your best interest in mind? I don't think so. In addition, the method of distribution I propose is simply the best option available to me, despite not being perfect.
The other elephant in the room
A lot has been written about the dramatic electricity usage of Bitcoin. It now uses 20,000 times more energy per transaction than a VISA card transaction. Whatever you might think of cryptocurrency as a whole, the argument that Proof of Stake leaves you with "nothing at stake" seems somewhat irrelevant in the light of this looming environmental catastrophe. There is no solution to Bitcoin's energy use, except for a hard fork. The electricity used to mine Bitcoin will eventually become equal to the financial value of the block reward and the miner fees.
Bitcoin has a legitimate problem that harms decentralization that's never talked about by people who criticize proof of stake. A 51% attack is easy to achieve and a legitimate threat, as it has occurred in the past that a pool gathered a majority of the hashrate. In addition to this, Bitcoin almost fell apart whenever miners chose to jump over to Bitcoin Cash. Worse, most of the miners are now located in China, thus in practice giving control over Bitcoin to the Chinese government. Besides the 51% attack, proof of work currencies suffer from a 25% attack risk. In addition, pools with less than 51% of the hashrate can often still succeed in reversing a block, but with a less than 51% chance of success.
So, my suggestion would be that our experimental currency has to move towards a Proof of Stake mechanism. In regards to the nothing at stake problem, no example of the issue having practical consequences has ever been witnessed as far as I'm aware. Cryptocurrencies don't operate in a vacuum. Someone who stakes on multiple chains does so because of his own individual incentive, but to do so casts doubt on the currency's value, thereby creating an incentive not to do such a thing. In addition, there are various mechanisms that can be used to genuinely put something at stake for the person staking on multiple chains.
The plan as it currently stands
At an as of yet to be determined block height, we will make a snapshot of the Bitcoin blockchain. We will use this snapshot and filter it down to all unspent outputs with a balance of at least 0.001 BTC. Every unspent output will be credited with one coin in a genesis block for our new alternative currency. Our alternative currency may use the exact same address format as Bitcoin, to make it easy for people to transition to our alternative currency. Alternatively, we may use the sidechain protocol, so that Bitcoin users will have to "claim" their coins on our chain.
Our currency will make use of a proof of stake mechanism, that allows it to avoid most of the common problems that proof of work currencies tend to suffer. We may or may not use a mechanism to avoid the "nothing at stake" problem, which may or may not be a genuine problem.
Bitcoin currently appears to suffer from a problem, in the form of transaction spam having zero cost to the spammer, provided he mines his own spam transactions. The spam transactions are effective however, at forcing regular users to increase their transaction fee. This seems to be the true "nothing at stake" problem. If you mine your own spam transactions, what reason do you have not to spam the network? However, I am not fully convinced this is a true problem yet. If it is a genuine problem, a simple solution would be to destroy a portion of every coin once it's sent.
We will avoid making use of any sort of "founder's reward" or pre-mine option, not because we're selfless altruists, but because this forever undermines the reputation of a currency. The fundamentals of our currency lie in the simple fact that it's fairly distributed among the interested demographic and environmentally friendly.
What added value do we deliver?
There already exist coins with wide distributions and proof of stake mechanisms. Clams come to mind, although the Clam project no longer has an active development team. I hope to attract a broad development team, that will allow this vision to be carried forward, even if at some point I can't or don't want to contribute any longer.
Subreddit
Please join us over at our subreddit, /r/bitcoinreset
Recruiting developers
We're interested in having new developers join our team. You can join us by sending me a PM.
