Topic: The current Bitcoin economic model doesn't work - page 21. (Read 96539 times)

Your proposed changes to bitcoin WILL NOT WORK with the current implementation of Bitcoin. Absolutely everything about the program would have to be completely and fundamentally redesigned from the ground up in order to implement your suggestions. That is why I don't take your suggestions very seriously. Although I think that such a currency is probably possible, your current suggestions on how to implement it WILL NOT WORK.

I already explained why is this different than purchasing food and why banks and loaning aren't realistic when it comes to Bitcoin. Please refer to the previous posts under this thread and comment on them if you find them unreasonable.

I rethought about my model and found that if we adjusted the constant difficulty so that we need a month (or more) to generate a block, not many folks will be generating, so the network wouldn't be overcrowded for propagation purposes; people would prefer to buy from professional generators instead (who'll make a small profit margin). But then again we then have a problem that the proof-of-work wouldn't be as strong, although that's surely better than the current situation.

I hope Satoshi or Sirius would take these suggestions seriously and provide some feedback on them, but I think they've totally 'programmed' themselves that the current model works best to the extent that they don't welcome different recommendations very much.

People need to buy food and goods right? And more savings leads to lower interest rates, which incentivise people to borrow more and move toward interest rate equilibrium

We would all be way richer and more developed in the present, had the inflationary meddling taken place in the last century. You see, high savings rates decrease real interest rates, which makes high order capital industry investments profitable, which otherwise wouldnt be due to their low return. These high order capital industries in turn make lower order industry and consumer goods cheaper, and lead to increased productivity.

There will be monetary inflation and, monetary inflation causes interest rates to be below their market level, thus creating speculative bubbles and malinvestments as the resulting capital industri invesments arent supported by actual time preferences.MONETARY INFLATION = BUSINESS CYCLES

Bad idea mate, monetary inflation causes business cycles.


Overall, a lotta ya'll would do good to brush up on some real economics, that is Austrian Economics. Rothbard's MES is a and thorough good start.

http://mises.org/rothbard/mespm.PDF

I'm actually not in a hurry to implement Democracy Dollars. I might look into it further at the end of this year or the beginning of next year. Perhaps I can come up with an even more fantastic name before then.

That's what I'm talking about. If we have something like "spare blocks" designed to be occupied by double-entries as in programming lines (they go 10, 20, 30 not 1,2,3 to make room for later changes), and if we have timestamps which say when was each block exactly generated down to the 100th second, maybe we can solve that problem altogether.

If worst comes to worst, and the number exceeds the proposed 86,400 before we achieve enough technological progress to significantly reduce the latency time, then some blocks will inevitably be lost until this progress is achieved. So, say, if 100,000 nodes are simultaneously generating coins, maybe 10% of the new blocks will be lost which should be an incentive for some of them to leave the network (or, ironically enough, perpetually raise the price they charge to accommodate for their losses!).

This scenario, however, is extremely unlikely. If each node is connected to 10 exclusive others, it should take only 5 "hops" to reach the whole 100,000 connected network. How much time would it take for each hop at most?

But what do you do when there are hundreds of thousands of nodes generating coins? You would have many people generating blocks every second which breaks the current implementation.

At 1 block/month on average, with only 30 computers in the network it would take about 1 day to create a new block. 1/2 a day with 60 computers etc.

I admit that we need to correctly estimate the minimum amount of time to broadcast a new block across the network though. And is it possible to use timestamps for blocks so even if the difference was 0.1 second they could be re-organized on our machines? How about something like programming lines with 10-figure differences reserved in case of double-block-creation before broadcasting is complete, is it possible?

The problem is that blocks are also the equivalent of checks clearing. They are how financial transactions are verified and propagated. If you set the difficulty very high from the beginning, it would take days or weeks to send money until it became more popular.

My model should be fairly simple to implement. We'd just freeze the amount of effort needed to find a new solution so the odds of finding it would need, on average, a month of continuous work for a modern 2.0 Ghz core-2-duo for example.

Satoshi and other pioneers: I understand your reluctance to change the current system: you guys don't want to sacrifice all the effort you've put into the project and start from scratch with no coins. But all we need to do for Bitcoin 0.3 is remove a couple of zero's for an average month's production to equal 3 new coins for instance. Perhaps every 4,000 Bitcoins can equal 1 NBC (new bitcoin) or something like that?

Yes, I want the rate to average out at 144 blocks per day forever. I like that rate because I understand and trust satoshi's judgment on that aspect of how Bitcoin works. The Democracy Dollar client requires only a few minor changes to the Bitcoin code. Your currency would have to work very differently from a technical perspective. I'm certain that a P2P digital crypto-currency with the economic model you envision is possible, but it would require a competent programmer to redesign how it works. Electric Bitcoins is a good name.

So you want the rate to be constant @ 144 blocks/day forever? Why not increase it to, say, 1/minute (1440/day) so the system could accommodate more nodes without much delay? With 10,000 nodes at the current difficulty, you need to wait an average of 70 days for a coin to appear. If your dollar became an international currency, you might have to wait for a whole year or more for a coin to appear!

I imagine that my idea will make downloading the existing blocks very difficult after a couple years or so though because of their size (1M blocks?!), isn't there a way to compress them or something?

I could just name mine Electric Bitcoins (EBC's, yummy!), because they're directly proportional to how much electricity you've put into them regardless of how many people are in the network.

I didn't forget. I was only pointing out the differences. Democracy Dollar blocks would be generated at the same rate as Bitcoin blocks, on average once every ten minutes. You could call yours DC Dollars, short for Direct Current Dollars since you are trying to tie yours more closely with to the price of electricity and computers use DC electricity.

I think you're mixing the terms "inflation" with "deflation". We currently have a sharp deflation (i.e the currency's value is increasing). I predict it will continue to occur.

Yes. If he's willing to pay less, less people will produce BTCs causing their production to be easier until price equates with cost. If he's willing to pay more, more people will produce BTCs causing their production cost to increase until it equates with cost. If you don't understand this very basic economic principle then you should've read the previous posts. And under my model, a similar equation is in effect but is not changed as more people join the network and isn't doubled every 4 years.

No. And I'm tired of having to explain why a deflating currency is a bad idea. Please refer to previous posts.

It does. Because as long as energy costs don't increase by, say, a constant 10% annually, coins won't.

Oh God...
Did you forget that 99.99% of goods purchasable via coins are also purchasable via cash? You're not making any sense.

Refer to my previous posts, please. I thoroughly explained why this won't happen.

Because it greatly reduces the wish to spend now.

Many will leave the system via computer failures, many will leave the system via sabotage attempts, and there would be noway to bring them back.

That's exactly what a "monetary deflation" is.

I'm mysteriously resisting the urge to give a really mean response here.

Same here. The current model doesn't grant that.

They go hand-in-hand. With constant deflation there would very little market trade if any.

If he earns $ via exchanging them, he wouldn't have a reason to stop generating even more. Nominal prices now does indicate that more people are producing, whether botnets or otherwise.



You forgot the most important question: How many DMD's do you suggest being produced per day on average? You do want it to be a fixed amount, no?
I did a quick and dirty research and it seems that the lowest electricity cost worldwide is about 1/4 of the US average. In an attempt to shoot for ฿1 = $1 to make calculations easier, I think making my block worth about ฿3 (for a month of work) should be close enough.

More like a currency cousin.

http://newlibertystandard.wetpaint.com/page/Exchange+Rate

BTW New liberty, what is the site you do your exchanges at...
I would like to look.....

A competing currency?

Democracy Dollars is now the name for my theoretical currency which is based on Bitcoin but with a few modifications. $1.00 DMD would be awarded per generated block instead of ฿50.00 BTC. The amount of dollars awarded for generating a block would not decrease every 4 years like with Bitcoin. Two decimal places would still be displayed because dollars usually have two decimal places. Ideally users would have the option to display and use hidden decimal places. The client would be called Citizen Bank.

My exchange rate will not always rise without ever falling. The only reason why it is rising steadily right now is because I calculate it using a large average to reduce volatility. If I used a smaller average, you would regularly see much higher highs and very frequent lows.

Neither the current model nor my model will continue to deflate forever. Once generating bitcoins becomes exceedingly difficult, most people will not try to generate bitcoins.

I know that my model is similar to the current model. What I don't like about the current model is that people generating bitcoins at any given time can generate twice as many as others after four years. That is what I want fixed.

It's Suggester's model that strives for price stability from the beginning.

As I think I understand you, if the goal is to have price stability I'm not sure I see the advantage.

Even if bitcoins were to increase at a set amount, and therefore increase at a decreasing rate, the pricing system would react the same way as it does now with a final cap: price deflation.  The only difference really is the degree, except that in your system we would still be propagating new blocks (though future computing power probably minimizes this added cost). 

Milton Friedman proposed a similar system to maintain price stability by trying to have the rate of dollar inflation mechanically approximate population growth.  The problem with his proposal though, was that no government (constitutional amendment or otherwise) would limit itself to population growth once it had sanction to increase the money supply.  Besides, they've already given themselves permission now even though the US Constitution forbids it.

As long as we can effectively divide bitcoins (as Satoshi mentioned down to 8+ decimal places), prices will be able to adjust to deflation and increasing purchasing power.  So, Keynesian deflationary spiral crisis ideas aside, absolute price stability is really not necessary.

XC