Topic: [If tx limit is removed] Disturbingly low future difficulty equilibrium - page 2. (Read 37667 times)

Exactly. And it works the other way around: "If the price of a bitcoin decreases, so does the incentive to attack the network."

Therefore, Bitcoin will never fail due to a "disturbingly low difficulty."

"Disturbingly low difficulty" would be a consecuence - not a cause - of an eventual Bitcoin failure.

If the price of a bitcoin increases, so does the incentive to attack the network (political parties and banks see it as more of a threat, more potential profit from double-spending and short-selling), hence the resources attackers are expected to muster, hence the hashrate required to secure the network. Because of this, BTC/block is a good measure for the level of security.

FYI, I added these two entries to the wiki, you're all invited to edit:

https://en.bitcoin.it/wiki/Tragedy_of_the_Commons
https://en.bitcoin.it/wiki/Proof_of_Stake

Proportional to the total ever minted doesn't sound right either; proportional to number actively circulating sounds more apropos maybe. Maybe plus dark pools, but maybe activity can help guess which are lost and which are merely dark pools that have not made any moves in the last few generations or years or centuries or whatever.

-MarkM-

EDIT: Remember, I am pointing at aux chains, increased reward can arise by increased number of high difficulty chains. Whereas you seem to be imagining your proposed chain is the be all and end all, hogging all the hashing power to itself, refusing to share the bountiful potential of merged mining...

Bitcoiners sound much like all the prervious entrenched monopolists sometimes. Oh gosh we cannot allow hashing power to be spread out, we have to let it go to waste to maintain our monopoly...

I thought breaking monetary monopolies was supposed to be a good thing, that bitcoin is here to help accomplish...

Thank you for the clarification.
As said for groupcoin, in proportion with the total monetary supply the block value gets relatively smaller with time.

https://github.com/knotwork/old-devcoind/blob/master/src/main.cpp Lines 649 through 658:

You presumably are pointing at static const int64 MAX_MONEY = 21000000000 * COIN;

However the code at no point ever adds up all the transactions of all the blocks. MAX_MONEY is merely the largest single amount it allows in individual calculations such as total of inputs of a transaction or total of outputs of a transaction or something like that.

-MarkM-

Demurrage fees aren't more tax than transaction fees. You're renting for the liquidity the network provides you.


I don't think bitcoin needs to be a winner lottery ticket nor a good long term investment to succeed.
Deflation by growth (if it's big enough) could maintain your purchasing power even with demurrage. Anyway, I want it as a medium of exchange rather than a store of value. Competent banks and a healthy financial market are supposed to be the answer for savers. Maybe p2p credit systems like ripple in the future.


Devcoin doesn't seem to have perpetual reward:
http://www.devtome.org/wiki/index.php?title=Devcoin#Generation_Rate

Groupcoin does
https://bitcointalksearch.org/topic/m.310656

But I want to clarify that if you want to have a constant proportional reward this doesn't serve. 50 coins will become less and less meaningful with time.
You either have a constant reward and demurrage (fixed supply) or an exponentially growing supply AND REWARD.
To keep inflation constant you need to add more units each year.
To have a proportionally constant reward is either freicoin or expocoin.

Merged-mined chains are out-of-band to some extent, though admittedly not totally out of band. The fact that merged mining is not totally unrelated to and independent of bitcoin (at least not yet, though RUCoin seems to have tried to separate I suspect it was simply being too lazy to put the full merged mining code in that led them there not a policy of trying to be the primary chain deliberately) might be a good thing.

We are projecting into some nebulous future, but a future in which bitcoins matter, so there are many possibilities. It seems a waste of hashing power NOT to merged-mine as many chains as you can come up with some clever plan for. Make your own blockchain currency kits could be marketed, encouraging youths everywhere to set one up for their local Junior Chamber of Commerce and use it in school to teach economics and mathematics and psychology and gosh knows what else while also being able to use it instead of "gold star on your report card" and so on - motivational stuff.

Miners could also start refusing to accept transactions of less than a bitNicKeL into the main blockchain, insisting that such puny amounts instead use the bitNicKels blockchain. There would be leverage here if hitherto bitNicKeLs had not had enough hashing securing them to be able to withstand a 51% attack by the miners who hitherto had not seen fit to add bitNicKeLs into their merged chains mix. Anticipation of each huge pool adding it to their mix might even cause the fiat value of bitNicKeLs to rise, but if bitNicKeLs might possibly be see-able as being a twenty per bitcoin kind of coin instead of being merely a coin valued about the same as an actually made of nickel old time nickel of the fiat world, then heck, do the math, if a bitcoin is twenty bitNicKeLs and bitNicKeLs are going up in value, shouldn't bitcoins also be going up in value? If a bunch of large heavily-invested corporations such as major pools and major exchanges indicate they certainly do not plan to buy any bitNicKeLs for any more than 1/20 of a bitcoin each, well, who are you going to believe? The naysayers who are determined to prove the megacorps cannot "fix" or "peg" the price of bitNicKeLs by pushing their price up above that "cap"?

Etc... Its a Drama. Tune in next BTC block-reward-drop for the next exciting episode...

-MarkM-

EDIT: oops, I forgot to even mention things like hey we are megapools lets incorporate and each have a blockchain for our shares so people can trade them too...

EDIT 2: GRouPcoin and DeVCoin both have fixed block-rewards. Any others?

I think it's possible that a fixed block reward scheme will work better than Bitcoin ... we'll have to wait and see.
I don't like any demurrage proposals that simply tax Bitcoins that haven't moved in a while ... those are useless IMO.

At the current stage, it's very easy to explain to newbies that "If you buy 1000 Bitcoins for $5000, and the world happens to switch to Bitcoin in thirty years, then you'll own 1000/21,000,000 of the world". If the block reward didn't halve every four years, the explanation why investing his time and money into BTC now is worthless, would be a bit more difficult. Not impossible ... because there are still incentives even with an ever constant block reward ... but less straightforward.

The thing about changing the block reward halving scheme is that nobody knows whether that is the correct solution to the incentive problem. This is a parameter in the Bitcoin protocol that is hard to optimize before we have a good few years of market data, and pass at least a couple of block reward reductions ... so we might as well go with the current parameter (50% block reward every 4 years) until conclusive evidence shows some tweaks in this scheme are required.

Wow, only 50 million USD a year? That's really cheap for a widely used global payment system and I don't mean this as a joke! Visa has a net income of 3 billion USD - that's 60 times that!
With even only one million users, each one would pay less than she does now for bank/credit card fees. I would say a million users is plausible in the longer run, even if Bitcoin stays a niche solution.

Miners have a high incentive for the longer term survival of Bitcoin (because they need to recoup their investments), so they won't allow the hashrate to drop to dangerously low levels. Also they will be using specialized hardware (ASICs) which is useless for anything else so they will just keep mining and set their transaction inclusion policy to stay profitable.

Funnily enough, I remember well when I had to argue in the boom-days about why the hashrate will not go through the roof causing environmental disaster in the long run only because Bitcoin is deflationary

What do you think about perpetual reward + fixed (even more than bitcoin) monetary base?

Note that I don't consider lost coins as an important bitcoin flaw because the protocol can be easily modified to divide satoshis. I'm only saying that the monetary base is more stable with demurrage and a perpetual reward. For concerns about "elastic supplies".

I don't believe in merged mining as the answer.

Yes, merged mining lowers the security pressure for all chains.
Some proposed chains have perpetual "subsidy", like freicoin.
With 5% demurrage, the annual reward would be 5% of the total monetary base (which by the way converges better than bitcoin's because lost coins are recycled).
You seem better than me in these security requirements calculations. Say we end up with 100 M freis, will 5 M of them a year be enough to secure the network, or it will be co-dependent on other chains like bitcoin?
How many chains like this one are needed to reach the necessary security through merged mining?

The argument that difficulty will tend toward zero in the absence of a block reward is something I've brought up in the past.

One thing that I had not considered at the time was the effect of merged mining, since I was spouting off this line before merged mining ever existed.

I think that to understand this issue, it's significant to consider that if Bitcoin really does end up in a situation where its difficulty tends to zero due to a lack of economic incentive to mine, something somewhere else is likely to not have that problem (inflatacoin? litecoin?).  Someone's always going to be mining something.  Bitcoin can be secured with merged mining the same way Namecoin benefits from Bitcoin mining.

Of course, it would be a huge OUCH to Bitcoin (specifically, the legitimacy of the main chain as we know it) for it to have to take a back seat to some other alt chain just to survive.  But at least it would remain secure.

I don't think it's a reasonable assumption either.  But some assumption has to be made to even start putting numbers into the analysis, and using the current state is at least a feasible one (since it's currently at this state).   And in the end, it doesn't change the fact that the network may need $100k/day to maintain healthy miner participation.  I'm looking for an order-of-magnitude more than anything:  getting $100k/day of contributions may be tough, and fitting them in with NACs will be painful for the blockchain.  It might be better to focus solely on transactions fees, the way they were intended.

IMO this is not a reasonable assumption ...

In 5, 10 or X years, when the block reward drops, Bitcoin value either rises considerablly, or drops to zero. Its value today hinges on the speculation that it becomes a major world currency "sometime in the future". If people see that this is not the case, they will exit the market. 

I am finding it difficult to believe in the concept that some rich people will essentially fund then network.  I'm just doing a back-of-the-envelope calculation here.  Unfortunately, this is all dependent on BTC price:  if price jumps to $100/BTC because all of online betting/gambling and MMORPG trading adopts Bitcoin, then miners would still have incentive even if generation dropped to 2.5 BTC/block right now.  I know it's not that simple, but the point is that looking at raw BTC/block generated makes for a somewhat arbitrary measure of how much miner support there will be.

But let's assume the BTC price stays constant at $5 and mining reward drops to 12.5 BTC/block in 5 years.  Then the NAC as described by Mike Hearn would have to support about 30 BTC/block of miner incentive, to guarantee that miners still find it profitable to continue mining (because at $5/BTC and 50 BTC/block, miners are incentivized, but making less than 100% profit).   That means that there needs to be buy-in for $150 per block to keep the network going.  That's $900 per hour, or about $20k per day.  That seems doable in a sense of a one-time crowdfunding effort -- but this is every day til the end of time.   If you look at how the variables change, an increase in price will require a lower BTC reward to be profitable, so I see $20k/day as a decent right-order-of-magnitude number that is needed to keep the network going at the current generation rate.  And it will get larger, though only slightly as the generation continues halving.

Although, ideally we'd have at least 3x the hashing power we do now, as I believe that governments and botnets are in range using existing resources to attack the network (but I dont' want to get distracted on that part).  The point is, I believe that for a good equilibrium to be reached, we're looking at about $50k-$100k per day to be added to fees or NACs to keep a healthy network running.

If there are 50k users who all pledge $1/day, or $30/mo, that's obviously ideal.  I'm sure some people would step up to contribute more and make it less expensive for others.  But it's still a tremendous amount of money.  And still an unsolved problem.  Mike has talked about using NACs to incentivize miners, but using OP_CHECKMULTISIG for even 1000 public keys is a lot of blockchain bloat.  And no matter how you do it, those 1000 public keys will end up in the blockchain trying to get money into an address that can fund the NAC to begin with.

Put all this together, and I feel like we would need some rich folks to fund it (which is stupid expensive for anyone), or we should be focusing on transactions fees carrying the incentive, since they are already part of the network (or somehow create out-of-band non-BTC incentives...)

Thanks for covering this D&T. I wanted to write something similar to this, but didn't want to distract the focus from the profitability of monopoly in the other thread.

I have.  It is just unproven that it will work or on the scale that is necessary.

In 2011 terms the network annually costs ~$1 mil per TH/s.  The first thing to keep in mind is that Moore's law doesn't improve security.   Moore's law raises the nominal number but the same faster hardware available to good guys is available to bad guys too. How much security do we need?  Today likely not even half (which is why this first subsidy cut is likely that big of a deal) but someday if Bitcoin is processing billions of dollars a year we likely need much more, maybe 30 or even 50 TH/s (circa 2011 hashes) so the cost to secure the network is in the $50M range annually range.  Now depending on when that is the nominal number will likely be higher but the network isn't any more secure.  Say in 10 years the cost per TH is 1/20th the current cost well 200 TH/s in 2021 isn't any more secure than 10TH/s today.    $50M is a large annual sum to expect a small number of rich people to put up.  Even if it logically should be done the 51% attack is a "black swan" many rich people will convince themselves the network is secure enough.  They won't really understand the risk they are taking until the event occurs and then it is too low.

While I think Mike's solution is a novel one and likely useful to boost network security, if the protocol enforced a minimum fee then the amount it would need to "boost" would be less and maybe more probable.   Fees would still trend towards the minimum it would be a more meaningful amount.  Say 1/10th of a bitcent vs 1 satoshi being the lower bound on fees.*

Note free transactions would still be possible only fees between 1 satoshi and the min fee would be invalid.  Free transactions would allow micro transaction to be handled using alternate financing.  Say I run a site that needs to process large numbers of micro transaction where even 1/10th of a bitcent would be unprofitable.  I could make arrangements with a pool(s) to finance free transaction to an address(s).  I may pay a fixed monthly fee and the pool(s) includes these free transactions when space is available (think junk mail rates by postal service).  More likely some service could act as a middle man negotiating between multiple pools and multiple micro transaction enterprises.

*There are issues with a fixed fee also.  Someday 1/10th of bitcent might be $20.  Setting the minimum fee as a % of inputs is an option.