Topic: cryptocurrencies and monetary supply (growth rates) (Read 5090 times)

I think the constant % growth over coin base (starting from a premined base) is the best model.

My reasons are that (a) it is still completely predictable and (b) it reduces uncertainty.

If you start out with 0% or 1% inflation and it works, then you will expect it to continue working in future years. You never need to alter the mix between fees and block reward. The future plan is to operate the currency just like it is currently operating. No uncertainty. No debates like these.

If you start out with 100% inflation and then go to 50% .... and then to 0%, you are repeatedly moving to a new and untested monetary model. At some point, you may worry that the model will cease to function. This introduces a lot of uncertainty. At the same time, for the social reasons D&T points out, even if the system fails it may be likely be impossible to fix. This makes the uncertainty issue more severe.

Despite my concerns with Satoshi's system, there is a good theoretical justification for Satoshi's model. If you want to build up a network, it is optimal to subsidize early adoption and then raise fees once people are "locked-in." Thus, you would want to have 0 txn fees and high inflation initially to subsidize adoption of bitcoin payments. Once people depend on the network, you would want to gradually raise fees.

Satoshi's probably did not expect anyone to pay attention to Bitcoin. Given this belief, the use of an extremely aggressive strategy to promote adoption would be optimal. Ex-post, the aggressive strategy becomes unfortunate.

There is an example in history we can pull from if a fork happens and there is support for both but not enough for one side to win out.   Read about "Bimetallism".   This happened with Gold and Silver and people hoarded gold while the used silver in daily transactions or to trade for gold.

What do you guys think it will be the best model for coin creation?

Inflation model cannot be changed or market will lose confidence in the currency. It doesn't matter that a majority agree with the change or not. Market often disagrees with majority opinion.

Even just smoothing the sudden drop would be a dangerous exercise as that opens a precedence that inflation model is changeable.

Coins scammed or hacked aren't lost.  Criminal buy and sell them.  They remain part of the money supply.

You will NEVER be able to change the minting rate.  Even 99% of miners can't do that. It would require a complete consensus of all users, all nodes, all merchants, all exchanges, and all miners.  Doing it with less will cause a permanent fork in the network and the new fork probably not supported enough to survive.  Say you make BTC generation 12.5 but MtGox accepts coins from the original fork 6.25 BTC rate.  You now have a situation where two entities are calling themselves Bitcoin but they are completely incompatible.  

Given non-miners gain nothing from a higher generation rate why would they update their clients just to make miners richer?  If they don't upgrade their clients well they won't even be able to see the new blocks as valid.  The miners who continue to mine the "old fork" will see tx rise and difficulty fall and become massively profitable.

Best case scenario is they most nodes simply ignore the "hard fork miners" and the fork just goes away.  Worst case scenario is you end up in a situation where both forks have significant support and it likely will very damaging to Bitcoin.  Can you imagine the noob confusion if they send Bitcoin to a merchant's address but the merchant does see them because the merchant is using the "other" Bitcoin?

Note:
The topic is interesting for creation of new alt-coins.  However Bitcoin is probably never going to change.  Not something as fundamental as the minting rate.  Changing it after the fact would be essentially a bait and switch and would lead to a loss of confidence.  If miners can change the rate once they can change it again.  What is to say someday miners won't act like the Fed and determine the appropriate mining rate in order to control economic expansion?   

Yep, I agree with all that. There must be more to it than this. I have a lot of ideas but I wanted to leave this post to the particular problem of supply.

This was suggested a long while back and was termed "ease-in, ease-out." Whatever Satoshi's intent with the distribution curve, it is what it is and bitcoin has momentum. I don't think that any alt coin that only changes this property has any chance of competing at this point. In the great grand scheme of things, it is probably not all that usefully different.

Honestly I don't think these ideas should be applied to bitcoin itself, but rather to a new alt-coin.

Another option I had been thinking of is a "sigmoid" kind of supply function: start with a small block to allow people some time to join, generate a bigger coin base during a big block period (say, 6 months later and going on for a few years), then start reducing the block reward again until some low rate is achieved, or allow a fixed final block reward forever.

The subject of this thread is important but we have just killed the discussion with some irrelevant details. Maybe we should start a new thread and ask pool operators personally for a statement.

Point taken, but since you are doing the same thing (sans insult) I have to remind you that orderly subtraction is not a particularly demanding or complex concept. We're talking about the simplest of mathematical operations that is run once per block. Compared to the thousands of point multiplications or billions of hash operations per second.

Actually, after insulting me for saying His Holiness the Divine Bitcoin Creator made a mistake, he only mentioned floating points (and several times) as the alternative. Then went on again to expound on upon the properties of bitshifting and how accurate it is. Vehemently supporting the design decision while ignoring other possible decisions and only giving a terrible decision as the alternative is patently dishonest posting in my book. It's a false dilemma.

That was uncalled for IMO. D&T never claimed such thing, he just said that the bit shift was a justified decision as could have been some other option.

I was rude because D&T is a non-stop sycophant that can't imagine that there is something that bitcoin maybe didn't get right. It's not as if this has been our first exchange. "No bitshift? Must mean floating points!" Asinine. And he calls into question my ability to think like a programmer. His posts are almost always dishonest when it comes to bitcoin's shortcomings, so I often have to set him straight for the non-initiated that may be reading.