Topic: = Grand Unified Solution to Lost Coins, Hoarding, Deflation, Speculation = - page 5. (Read 11172 times)

I think the majority of the bitcoin community would reject the idea of decay over time.
Even if the community would accept such a revolution I think inflation would be easier to accept than decay.

Not a good idea for currency. See Freicoin...demurrage currency ( http://en.m.wikipedia.org/wiki/Demurrage_(currency) )

Another bad but similar idea: How about a coin that knows who owns it? This way, coins can redistribute themselves from rich people to poor people each week...and currency ownership taxes can be paid automatically every hour!

Do you like gift cards that have a monthly fee? I try to avoid  them.
Second, if someone wants to hoard, its their freedom to do so.

I'd be interested to post if you describe why these things are fundamentally bad.

This is probably the most evil thing I can imagine. But this one simple change would solve every single thing below:

- Solve the problem of lost coins / lost keys
- Prevent hoarding of coins / make it unprofitable in the long run to hoard them
- Encourage people to spend their coins as a currency
- Prevent over-speculation leading to volatility
- Create greater incentives for miners and give miners a reason to mine past 2140
- Eliminate transaction fees completely
- Solve the problem of deflation, while still preventing inflation at the same time (sound impossible? Not with this solution!)

If all those things are solved, mainstream economists would actually take Bitcoin seriously as an economic model, meanwhile the technological protocol and decentralization would be preserved. With this solution, we would still enjoy the benefits of the currency being decentralized, crpytographic, and pseudonymous, while mainstream economists would be more likely to endorse it as a practical currency rather than view it as the commodity / collectible that it currently is.

The grand unified solution is: Have the coins in circulation naturally "decay" over a very long period of time, like a radioactive isotope. Over the course of a year or so, each coin in existence would lose around 0.5%-1% of it's present value. That 1% or so would be re-issued as network fees and greater mining rewards, to the nodes that are actually responsible for sustaining the network. The exact decay rate could be variable based on an algorithm that takes into account the network hash rate and/or transaction volume, or it could be a fixed rate. The decay would have to be calculated at each block, but it should take at least a year to lose the 0.5%-1%.

A simple balance = balance * e^(-bt) where t is the number of seconds elapsed since the last block was created, and b is a very small number (0.00000001-ish) would do the trick.

This would make it so that the value of lost coins asymptotically approaches 0 over a very long period of time, eliminating the need to worry about lost coins causing deflation in the long run. Hoarders will have an incentive to invest rather than hoard. People would spend their currency as a currency rather than speculate and day trade. There would be no need to charge transaction fees since the nodes would be rewarded for moving transactions to blocks this way instead. This will further incentivize spending since users won't be dissuaded by transaction fees.

There would be no inflation, since the number is still capped at 21 million, but all the things that built-in inflation tries to solve in fiat systems, this would solve.

If Bitcoin is going to be adopted by the mainstream, we have to take action to solve every single one of those issues listed above. They are going to be solved anyway, whether it's by us or by them. The world is eventually going to move to a digital currency whether it's ours or theirs, this is beyond question. But if they get to it first and create something that eliminates those issues, it's going to be centralized, not anonymous, not cryptographically secured and will involve banks. If it's going to be us, we have to solve those issues some way soon, and there's not a whole lot of viable solutions for each, let alone singular solutions that fix every one.

Since this is possibly going to upset the "How dare you blaspheme the Sacred Cow by suggesting we change the rules for Bitcoin!" crowd, I humbly add this following. I think we need to let go of this idea that the current rules of Bitcoin are somehow sacred and holy, not to ever be touched because doing so would revile the spirit of the Almighty Satoshi. There is nothing wrong with recognizing a set of flaws in a system and taking action to fix those flaws. They need to be fixed somehow, and the sooner we do it, the easier it will be. If you have a better solution to all of the above, I encourage you to post it.