Topic: Early speculators' reward (Read 7744 times)

casascius: you are right on two really good points there ... the 21 million limit works really well as a 'hook'. I do not know if the number was intentional or not but it works.

The decimal point could have been put in any number of places, e.g. now it is proposed to moved so that 21 million number will no longer be strictly true. To the first glance a number like 210 billion would have been "forget about it" ... it is purely psychological but if the number is low enough a second look is warranted. The fact that it is a hard limit is more important than the actual value but the value of that limit is psychologically effective as a hook.

Second good point is that if nothing else, bitcoin will create a wide debate about what money is and how it is the bankers have screwed society over for so long by hiding behind the ignorance of the wider population. A widespread debate and people just re-evaluating what has value in their lives will be disruptive enough. After 15 years of trying to tell people why gold is important to their economic freedom, a wide debate on nature of money and why control is the hands of the powerful few would be mana from heaven.

A few months ago I lobbied for the exact same thing, which was derisively referred to (and still is) as "inflatacoin".

I was successfully persuaded that that's not a good idea, and for an unexpected reason.  Although "inflatacoin" may make sense from an economic perspective, one thing that is critical to the success of cryptocurrency including Bitcoin is getting the whole world to take a serious look at it.  And the 21 million limit and the "ponzi scheme" aspect help to give it a significant level of virulence - people are motivated to spread it and entice people to toy with it, who ordinarily wouldn't be geeky enough to ever consider such a thing.

What I feel I didn't realize while promoting "inflatacoin" is that the 21 million limit is an important part of that virulence.  I am persuaded that if you take that element out, it becomes much less enticing to the person hearing about it for the first time.

When people hear about Bitcoin, I believe they think, "that's stupid, how could that ever work?  if it's on a computer, no one can stop people making counterfeits any more than they can stop people from trading MP3's".  Then when they are told there is a hard limit to the number that can be created, and that it actually works it almost provokes them into arguing why they think they're right, which leads to them learning why they are wrong.  It is essentially a gimmick that helps overcome the hardest hurdle: learning the damn thing.

I have indeed bitched and moaned about the "ponzi" nature of Bitcoin.  But there is one huge bright side for the world.  If as a Ponzi scheme, it spreads to ubiquity, and if Bitcoin grows exponentially to the point that its "pyramid" collapses due to the inevitable end of potential participants, what this will mean is we'll have a world full of people who know about cryptocurrency and nobody who hasn't heard of it yet to sell it to.  In spite of some big winners and some big losers in the so-called "pyramid", in the end, we'll have a world familiar with Bitcoin with faith in cryptography, and a society empowered to create and willing to adopt a new cryptocurrency that is perhaps not so unfair (relatively speaking), but still is enough for the world to tell the Federal Reserves and other central banks of the world (not to mention PayPals, MasterCards, etc.) to jam it up their rear end and that they're not needed (or at least need to be far more competitive with the public)... a feat which as of today is impossible.

So... from an advocate of "inflatacoin"... I would suggest that for the good of the spread of the cryptocurrency concept, inflatacoin be shelved.  For the time being, with the first block halving a ways away, it won't even make any difference now.

Thank you, yes, I have read many of unk's posts, and I like him or her.  I favour conservatism when it comes to changing features.  For everyone who supports New Feature X, two may oppose it, and three may not care but would rather stick to what they know.  But I won't be surprised if there are a few compelling changes to be made, possibly even in the area of inflation policy.  In the end, miners and users determine what works, but coordination before a launch seems useful.

p.s., your use of the term jealousy suggests to me that you don't really understand the argument.  It is not jealousy that makes me ride a bike rather than drive.  It is a personal preference and a reasoned judgement of the relative merits of both.  Anyway, jealousy and ambition (or inspiration) could be two facets of a single phenomenon.

I am referring to that type of person who thinks the government should step in and "do something" about "obscene athlete wages".  You sound like you want to start a competitive league with lower ticket prices.  I commend you and wish you well.

I'll probably stick with watching the pros, though.

You should talk to unk. He proposed a chain with a block reward of 50 coins forever and said he would create it himself if no one else was interested. I think that would still create heavy deflation and wouldn't stop the whining about early adopters so I proposed a chain in which the reward grows with difficulty. I was just mocking unk evidently since that would produce hyperinflation but if you added diminishing returns to my method then I really think you could have a viable chain which solves both "problems" of deflation and late adopter jealousy.

I say try it.  But, I don't think I will switch.  What would be my incentive?  My incentive for promoting Bitcoin is obvious.  But, if I switch then my money looses value and Satoshi et al doesn't get "unearned" money.  BC2 may also divide the movement such that neither never takes off.

The solution is simple, make it worth my while to invest in your alternative (which will most likely fail) and I'll join.  Others will too.

Now, can we all just switch to Ido and leave Esperanto and it's orthography (ĉ, ĝ, ĥ, ĵ, ŝ, ŭ ) once and for all!

I, too, agree 100% with Steve's post.  (By the way, I stopped following pro sports around 1990.)  If you are referring to me (the OP) as one who prefers "forcible imposition" over free market competition, I suggest you read more carefully.  Nothing could be further from the truth.

If my squawks come across as complaints or whines, go away!  In fact, I am expressing demand for a new product in the hope of gauging such demand among the broader market and finding people capable of assisting in such product's creation.  If you can suggest a better (less intrusive, cheaper, or more effective) way for me to find interested parties, I will gladly listen.

+1

I agree with you 100% Steve.  The problem is that the people making the argument on the other side often don't believe in free market competition, but they quite often believe in forcible imposition of what they think is a 'better', 'more fair' or 'more just' position which is derived neither from a higher power or some other externality but really from their own mind.  So appealling to the free market is futile because they don't recognize it as having any type of authority.

These arguments remind me of people that complain about how much money sports stars make.  Nobody is forcing anyone to buy sports tickets and merchandise and that is what is paying those athletes salaries.  Likewise, no one is forcing you or anyone else to use bitcoins.  Ultimately, it comes down to competition.  If you think the early adopters might become too rich, start a new currency that works how you want it to work and convince people of its merits and that they should start using it.  You'll need to do a lot of work to convince people that it's better than anything else out there and that they should put their money into it, but such is the nature of free market competition.

At the end of the day, if bitcoin is successful, then no matter how rich the early adopters become, the value that everyone else has derived from bitcoin will have been greater.  Only if people were forced through the threat of violence to use bitcoins could that not be the case.

If the "newbitcoin" had true anonymity (blind signing layer) and was supported by easy exchange with some well-known financial outlets in multiple large countries it might have a fighting chance ... otherwise every day is another day behind the exponential growth curve.

Good distinction.  But by choosing between buying BTC and starting up a competitor, we implicitly set a value on BTC's first mover position, which is the pioneers' reward.

Oh, well if your point was to ask if we would have voted for such a fix, I would say I would not have voted for the $100 billion solution nor would I have voted for the $10 million solution.  That is a completely different matter from what I surmised was the point of your question, which seemed to be that the fixer didn't deserve $100 billion simply because it's a really big number.

You analogy really isn't that relevant because we are not voting on how much to reward Bitcoin pioneers by valuing BTC.  By valuing BTC today, we are voting on the expected future value of bitcoin.  I don't think anybody is paying $9 for 1 btc today because they want to reward the pioneers.  Do you?

I maintain the analogy is relevant.  In the example, I did not ask whether you would pay the tax but whether you would have voted for it.  We are now voting on how much to reward Bitcoin pioneers by valuing BTC.

Apart from that, I agree with your comment.  If Bitcoin and the 2009 chain "offer the best return" for something, rational people will use it for that thing.  If something else offers better return, we will switch.

Granted.  But putting money into Bitcoin will not recover those dollars.  The interesting question, to me, is how much the market will value BTC versus a hypothetical, similar, fledgling competitor with lower seigniorage (higher minimum difficulty).  I am considering working on changes to the software that would support creating such a competing currency (or more than one).


Bearing in mind my caveat about TPTB, in a hypothetical, plutocrat-free world, even $100bn would have been outrageous.  If someone has been flogging me daily, would you berate me for not showing appreciation on the day he merely slaps me?

The example is not analogous to rewards earned through voluntary transactions. Taxation involves coercing those who disagree with a particular proposal into accepting it and contributing funds towards the project. In the case of bitcoin, or any other project/venture where participation is non-mandatory, those that invest see a benefit for themselves in doing so.

If during the credit crunch, an insightful fund manager offered investors a way to increase their returns in the midst of the market crashing, and investors moved their money to that fund, he/she would be expected to gain enormously. If the fund manager were able to produce returns of $2 trillion, they would see tens, or even hundreds of billions of dollars in profit. The investors wouldn't be discouraged from investing by the fact that the fund manager is profiting, because that fund offers them the best return on the market.

If bitcoin offers the best return in terms of greater convenience for someone going into cryptographically secured p2p currency, due to having a first mover advantage in creating a network, that is all that matters to someone who wants to use a digital currency.

This is a perfect example of why central planning by 'experts' doesn't work better than the market.

$100 Billion to fix the meltdown of 2008 would have been a screaming bargain which any number of countries would have been wise to take up.  The U.S. sunk a hundred billion into AIG alone.

And you would have turned down such an offer?  Why?

If someone starts a new block chain, what's going to keep some big miners from switching to it for a few days and taking a couple thousand coins for themselves?

I mean aside from the pointlessness of it all.

it's the current block chain itself that has very little 'moat' or, to say it in a less folksy way, very low barriers to entry. i wish those promoting bitcoins in that chain as speculative investments would have been more honest with speculators about that point.

i think other block chains could very easily catch on. call one 'credits' and draw up a nice graphic of the various advantages it offers to the current block chain, then make it public enough that a few people write blogs about it.

one advantage you get for free is, of course, lower seignoirage (in the form of payments to those of us who already have coins in the chain).

there are many ways to vary the technology slightly to offer other significant advantages. for example, you could (by removing two lines of code) keep the block-generation subsidy at 50 instead of gradually reducing it, thereby eliminating the chance of certain economic problems manifesting themselves in the future (see the various discussions about the projected mining equilibrium after the subsidy vanishes and the problems with most transaction-fee schemes). you'd also eliminate one way that bitcoin is dangerously marketed to the public (e.g., the marketing could be something like 'honesty: there's no get-rich-quick promise built in'), and you'd still solve pretty much all legitimate concerns about the sort of inflation we see with fiat currencies. besides, you'd also get around every (wrong but intuitive) concern about how a currency can't work if deflationary - and who knows, maybe one of the hundred people raising that concern has a point.

and there are other economic advantages available for alternative block chains for those with resources. the most significant would be a regulated, transparent group of trusted and/or competitive currency exchanges. the mining technology could be altered not to give gpus an advantage, thereby allowing people with only cpus to mine for a longer period of time (until custom hardware or an unexpected development changed the status quo).

others are much easier: a moderated forum very different to this one, a better user interface, protections against the denial-of-service attacks that are possible with the current version of the client, and so on.

Maybe I'm wrong, go for it.