I'm trying to clarify my understanding of how Bitcoin's inflation limit is enforced. Feel free to point me toward a wiki page if I've missed it.
I understand that bitcoins in circulation asymptotically approach 21 million by halving the mining reward at points in the future. When do the "pay cuts" go into effect? Is it based on block number?
I understand that bitcoins in circulation asymptotically approach 21 million by halving the mining reward at points in the future. When do the "pay cuts" go into effect? Is it based on block number?
Yes, the amount of coins newly generated by a block will be diminished every 210,000 blocks.
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If a sizable (non-majority) fraction of the network decides to continue awarding 50 BTC for blocks after the pay cut, does it matter? Or must a majority of miners disregard the pay cut to make their protest effective?
It is based upon what the rest of the network decides is the correct value for a generated block. Keep in mind that the transactions are enforced not just by miners, but by other nodes in the network passing around blocks. If somebody has a 25BTC block and tries to spend 30 BTC, that will be an invalidated transaction unless they have other blocks they are using as an input besides that mined block.
Yes, several computers could recognize the value of a block to be in theory any possible value, but at that point they wouldn't really be using Bitcion but some other parallel network. Any transactions that attempt to spend more than the number described by the network will be simply invalidated by that part of the network which still recognizes the gradual halving of Bitcoins. This is much more than merely 50% of the network, but simply anybody claiming to even be using Bitcoins at all. If you want to participate with Bitcoin, you will recognize that limit with regular halving of the value of new blocks over time, or simply go start your own currency instead as that would be much easier than convincing those on Bitcoin to change this system.
In theory this could change on the "official client" right now and would likely be accepted across the whole network, but there already is strong resistance to permitting a change of this nature even if you tried. The "majority" you'd have to convince to make a change of this nature would be the "overwhelming majority" of anybody who might even consider using Bitcoins, not just the small developer group or for that matter even a majority of the CPU processing power.
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I watched the IsStandard() discussions with interest. There seemed to be strong opposition from miners to a change which only theoretically decrease their revenue. What incentive do miners have to honor the pay cuts when it will halve their revenue in an instant?
Thank you for any guidance.
Thank you for any guidance.
When miners have to deal with blocks past # 210,000, I strongly suspect many of them are going to start to expect fees for transactions, at least if they are going to maintain their server farms that are currently being used to generate blocks. The miners are going to follow the rules because they want their blocks recognized by the rest of the network, not just other miners.
Keep in mind that while the issue of the IsStandard() function has been motivated by financial interests, there are other "political" issues involved too in terms of differing groups of people in several philosophical camps regarding if or how data other than financial transactions ought to be recognized by Bitcoin miners. Some of the people who regularly "win" blocks through mining activity are looking at non-financial data as a chance to earn some extra bitcoins, but it is the political issue that is the central theme over what should go into blocks.
