Topic: How to guarantee that no more than 21 mil coins created? (Read 1481 times)

Despite the information disseminated by some rather vocal supporters Bitcoin was never designed for doing transactions that are so ridiculously low (you may have noticed that Satoshi Dice has copped a lot of flack for the way that they send back *dust* to let a player know that they *lost*).

For truly tiny transactions "off the block" methods are likely to be the only reasonable method (I don't think that most people running a "full client" want their hard drive to filled with 1 Satoshi dust transactions).

Of course if 1 BTC becomes worth much, much more then maybe even 1 Satoshi tx's may make sense but I don't see that is the case now.

I asked a similar question some time ago, here's the post:
https://bitcointalksearch.org/topic/is-the-21-million-bitcoin-limit-unchangeable-153330

As bitcoins go up in value the price of micro coins will increase so naturally pools would lower the fee required to accept your transaction, once again making micro transactions affordable. Microtransactions should stay expensive once the mining reward is gone anyway assuming the same value, it's no free ride you know?

ok, I will try to understand... but what will happen to micro transactions?

I know that 1 bitcoin can be divided down to 8 decimal places, with a smallest amount of 0.00000001 BTC

OK, one day, when the limit of 21 mil of coins are near, the block subsidy will decline and tx fees will be more important... but what appens to a micro transaction???

Even today, if I would make a quick micropayment of 0.00008 BTC, make no sense because there is a 0.01 or 0.001 BTC transaction fee.

But, what could happen when the fee will surclass the block subsidy?? There will be a 25 or 50 BTC fee for quick payments, because the block subsidy are near to zero BTC??? And what happen to micro transactions?

I can't understand this point. 

Not considering online banks, that has zero fee for a bank wire, today a transaction fee in a traditional bank (or in sys payment like paypal) are a small percentage of the amount, for example 4% ... so, in a micro transaction of 0.00008 BTC the miners will keep 0,00000032 BTC, while in a transaction of 625 BTC the miners will keep 25 BTC (assuming a 4% fee that compensates the low subsidy of block). Like a today block reward.

In this case the exchange value BTC/USD will be much smaller of that of today??? Because a micro transactions lose significance??

BUT if One Bitcoin is divisible down to eight decimal places, there will be 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible bitcoins.  So many bitcoin imply the adoption of milli-bitcoins (mBTC) or micro-bitcoins (μBTC), but if the transaction fees will growth in compensation of the minor subsidy block, milli and micro are nonsense.... boooo???

I can't understand this point. 

Bitcoin is a Bubble??? Ready to booom???

Thanks. Bitcoin is quite well designed.

The difficulty is completely independent of how many coins have been mined.  It is related *only* to the hashpower of the network.  It is impossible to say what it will be after the 21 mil coins have been mined -- since that will depend entirely on how much computing power is available to the network.

Yes, part of mining is verifying transactions.  Miners are supposed to reject invalid transactions, such as coins that have already been spent or transactions initiated by someone who doesn't hold the private key for the coins.  The mining process then seals these transactions into the blockchain, with each successive block making the previous transactions more and more irreversible.

Will difficulty continue to increase after 21 mill coins have been mined? Or will it stop increasing? Also is it correct to say that mining helps verify transactions?

... and there will therefore always be an incentive to mine!

Miners are compensated with block subsidy + transaction fees.  Over time the block subsidy will decline and tx fees will be more important.

Thanks all who educated me. So basically the mining can always continue, but with difficult increasing and reward (coins per block) decrease, at certain point it does not make sense to mine any more. It's basically like an infinite converging sequence. But if bitcoin price goes very high, the miners can always try to squeeze the last bits out of the mining process...

The subsidy started at 5,000,000,000 satoshis.  Every 210,000 blocks, that subsidy gets halved.  Note that the actual "halving" operation is "right shift without carry" on an integer register holding the exact satoshi value.  The total number of potential bitcoins is simply the sum of the sequence of subsidies.  B_tot=((210000*(5e9>>0))+(210000*(5e9>>1)+...(210000*(5e9>>x)))/100000000 as x goes to infinity.

We will never reach the maximum for two reasons.  One, there is no requirement that the subsidy claimed be equal to the maximum subsidy allowed, only that it not be greater.  Two, at least two generate transactions are identical, and thus have identical hashes, and thus at least one cannot be spent.

Reward decreases and eventually it can't decrease anymore...

A lot of wrong information.  Your right it is the protocol which prevents more than 21M coins however the mechanics are all wrong.

1) Mining will always continue.  The day mining stops is the day Bitcoin is dead.
2) Difficulty rises based on hashpower but that has nothing to do with the subsidy.
3) The block subsidy began at 50 BTC and is cut in half ever 210,000 blocks (regardless of hashpower or difficulty)
4) Difficulty can never get so high it is impossible to mine a block.  If difficulty is too high the time between blocks will increase and thus difficulty will go down.

TL/DR
The subsidy cut is what caps the number of BTC.
Difficulty is used to keep the average time between blocks constant.

It's built into the protocol, not the block-chain.  The protocol dictates the change in 'difficulty' based on how long it takes the hashing pool to find the next 2016 blocks; the protocol is designed around this taking 2 weeks.  If it takes less than two weeks the new 'difficulty' will be higher than if it had taken longer than two weeks.  In either case, the difficulty will continue to increase until it becomes mathematically impossible to mine new blocks.  By design, this will happen after the (I believe) 5,120,000th block in the chain has been found.

At that point the difficulty should be greater than the size of a block hash.  So it's the increasing difficulty that ultimately determines the number of coins in circulation, not anything inherent in the block-chain.

your client won't accept the block, nor will any other client.

Sorry newbie question here. If someone change the limit to say 100 mil, and compile the client, and if many people use the client for mining, would it accept the coins to more than 21 mil?

Does the blockchain has a "seal" that contain info that 21 mil is the max?