Topic: Demurrage, transaction fees, storage fees & comparison to commodity money. - page 3. (Read 16732 times)

Actually, this made something click for me.

Isn't it he recipient, not the sender, the one to gain the most from the protection of the block chain? Past six confirmations (or however many before the recipient provides the good or service), the sender couldn't care whether or not the transaction is reversed.

Is there some way to take this into account without breaking Bitcoin?

This is not correct.  The cost is nothing more than what would need to be kept anyway even with culling. Please see: Merkle hash trees


The person who owns the old coins needs to maintain a archive of the blocks that contain those coins... Again moving to a 'user-pay' system.  When the owner of the old coins wants to spend the coins that owner must provide a copy of the full old block.

The owner makes a transaction and provides the old block for download.  (if the miners who offer this service don't already choose to keep the old blocks)


There is no global cost, (aka a user-pays system), then there is no 'unintended consequence' - the few miners who wants to secure old blocks (by downloading old blocks or keeping a archive), can charge a premium for the service.  This is why it is a 'transaction fee' for 'processing the transaction.'  If it requites more work to process old transaction, then those transactions will attract higher fees.  (again a user-pays system).


Again, yes there is, See: Merkle hash trees: negligible cost for verifying old blocks without long-term storage.  (other than the owner of the coins providing the block for upload)


This, again, is incorrect.  Nobody is compelling any miner to process old transaction... The miners can choose to reject old transactions for whatever reason they want.  Including their age.

Ultimately you are paying for the security of the present transaction.

Even if a million BTC were to sleep in an account for a hundred years, it is only when they are spent that the security is important (and paid for).

If I keep 10 BTC for 10 years, but one day before I spend them the blockchain is tempered with (in a way as to render the network worthless), I don't see why I should have paid the miners all this time.

I repeat: the security is only useful when you use your BTC. I would even add that the current transaction need the transaction history to validate itself.
Everything in-between transactions is irrelevant. 

Please don't destroy a key characteristic of Bitcoin (and ANY money); for now it is durable - as durable as the network. Doing so would undermine the entire project.

I suppose that would work, if we were starting over or starting a new fork of code, but this problem doesn't justify a breaking change.

The creation of bitcoins to pay the miners would be as simple as the creation of the current reward and equal to:

flat_demurrage_fee * number of old transactions

All nodes would have to know that it is allowed to "create" bitcoins this way accept those blocks.

The later destruction of the already payed fees could be implemented through a third field (apart from payment and transaction fee) for registering the amount "destroyed" in the transaction. That field isn't even necessary since the content of that field can be calculated like this:

 ((previous_tx_block_num + expiration_time) - current_tx_block_num) * flat_demurrage_fee

All nodes would have to know that the "old" accounts contain less money than they say to reject transactions from accounts with not enough funds.
The lost wallets are just ignored like empty accounts when they've spent all they content in demurrage fees.


The "creation" is constant and not related to the number of old transactions

For the "destruction":

 (previous_tx_block_num - current_tx_block_num) * demurrage_rate * amount_in_account

Is there a single word that means "money holder"/hoarder without negative connotations (that I don't need) and other than "saver"?


With demurrage some savings would move from "money holding" to lending, storage of goods or direct investment
Some savings could also move from lending to direct investment. Before direct investment becomes "too risky", savers would prefer storing to lend.
Some of the investments are not done not because they're not economically feasible due to a lack of real resources, but because the saver can demand the liquidity premium or just hold their money at zero cost for them.
This forces all investments to be at least as profitable as the liquidity premium.
The risk premium is an "insurance" from the lender to the borrower, that's why it gets smaller with collateral.
If the capital was only the investments, nothing would prevent the yields of capital to tend to zero as the different investments compete between them for profits. But while the capital is investments plus money, there's an artificial (yes, money being time resistant is an agreement between the money users) low limit for the capital yields. When investments yields are below the liquidity premium (instead of when they're below zero), the capital price of the investments is recalculated and investment "stops" until the cost of production of the real capital at least match (through comparison with the yield of money on liquidity premium) the rent that can be earned in the market with that real capital.
While lenders and other capital owners take the extra profit from the liquidity premium, the more saving is made by holding instead of lending, the more investments won't be done to "compete with the rest of the capital for profits".
The money holders don't benefit from all this, nor they are the ones to blame for anything. We should not blame no one for this. It's just the result of the agreement of letting money be time resistant. The players just follow the rules of the game. But as we can create new moneys we can change those rules. If people find more interesting that money is not everlasting, they can agree with each other in trading with that money. Actually there's people doing it right now.
I think is not a semantic issue, but an economic one.
Since I'm pretty sure no one is going to agree on the financial gains of demurrage, I think we should move to another thread. For example this one:

http://forum.bitcoin.org/index.php?topic=6549.0

I would like to know any flaws on my reasoning, but I don't want to keep on discussing it here because it goes beyond the topic of the thread.

I'm still waiting for any of the developers to chime in and tell me how demurrage could be done, or if it's even possible, beyond the early idea of an alternate minimum fee upon eventual transfer.  I still can't grasp how lost coins could even  be 'rotted'.

I think that it's totally reasonable for users to refresh once a year.

I'd like this demurrage on very stale coins, as in lost coins. If you don't move coins for 8 years, they start disappearing slowly.

It is totally reasonable for BTC holders to refresh once in 8 years. This gives a small fee to miners, and with what I learned about nodes not accepting blocks that split the block chain too far back... with little change to the protocol, we might not need many miners to keep things going.

I find the idea of having exactly 21M coins much nicer than the risk of "suddenly, surprise market crash caused by ancient million bitcoin deposit". Also, you can pretty much rely on coins getting lost somewhere, so this will always secure a minimum amount of mining.

Nice part: nobody complains, since everybody can prevent demurrage by just doing a single transfer to himself every 8 years. The client could remind people, too.

How do you propose to do this?  My understanding of the system doesn't allow for discounting of transactions (or accounts, if you prefer) without significant changes to the technical aspects.


This would likely introduce other perverse incentives than what I was trying to prevent, and I would have to oppose that on principle and on economic grounds.  Any demurrage system must scale relative to the real costs to the network scale, and that means per transaction and not per transaction value setting.


This is neither economicly sound, nor relevant to Bitcoin.  It's not remotely relevant to the problem I'm trying to avoid.


I don't even think that this is possible.


No.  Absolutely not.  I would much prefer to leave the potential problem unaddressed than proceed in this manner.

Ok, so we agree that hoarding and saving are exactly the same thing? Then why use the word hoarding, which has a distinctly negative connotation?

This is specifically the part of your post with which I take issue:


You imply that hoarders are a subset of savers, and that it is less detrimental to punish them compared to the savers. I don't understand this view at all.


I'm merely taking issue with your biased terminology, which seems to be at the core of your argument for the use of demurrage in the first place.

"Hoarding" is just shorter than "holding money". I still don't know what you don't like about my definition of hoarding: is a way to save. But it doesn't mean that I should always use save instead of hoard, because sometimes I mean save in a more general way, not necessarily hoarding, without specifying the way to save.