Topic: The deflationary problem - page 14. (Read 32514 times)

Yeah, really.  At least the 2038 is a real problem.

Guys, I think I get it! Since the value of a bitcoin follows the difficulty, we should increase the current block reward to 50,000 BTC! We'll all be 1000 times richer!

In all seriousness, don't feed the troll. We won't have any meaningful data until the first drop in the block reward, but the current indications are that we'll be fine. This has been discussed to death in the past, so let's just suspend this discussion until we have that data.

Read that carefully, and remember - if bitcoin will somehow lose its popularity that means it's not necessary anymore  - so why secure it and produce quadrillions of bitcoins to miners?
Also this is calculation for current prices and production. If prices will go to $1000 /BTC then fees will go to 0.0001 or less, everything will be balanced anyway.

Yes, security will drop marginally. If the network is more powerful than the top 500 super computers in the world RIGHT NOW, then by the time this issue arrives, the network will be so insanely robust and secure, that a marginal drop in security will have a negligible if ANY effect on people's expectations that the network could survive an attack. As for the inflation argument, it has been discussed ad nauseum, and essentially, if you believe in your idea, go ahead and start inflatacoin and see if anyone wants to adopt it. Otherwise, please stop telling us we're doing it wrong. Funny how we have yet to see anyone put their time and energy where there mouth is.

The other issue is with the velocity of money.  A deflating currency decreases the velocity of money.  If money is worth more tomorrow, you're less likely to spend it.  If you know tomorrow your money is worth less, you're more likely to spend it. 

This issue has to be address with respect to miners.

If the velocity of money decreases (with a deflating currency), the processing nodes will experience less transactions which will decrease mining reward.

Everything about a deflating currency is BAD for miners.  If miners do not support the network with hash, the network will become vulnerable to attack.

A deflating currency creates a vulnerability inside the network to attack through the decrease in hash.

This is a fact.  The fact that people are hostile to consider this point of view is unfortunate.  If they're acting in their self interest then so be it.  But this is a very problematic possible outcome for the future of bitcoins.

That's obvious.  Hash will be tested at the first reward point in a year or so.  If hash falls significantly, we can say the bitcoin experiment will end in failure.  If hash continues to rise, then it's possible that mining can continue.

The issue with your presentation, and everyone else that has explained this, is that "transaction fees will support mining."  

1) There's no proof of this.
2) It really does not matter.

I'll explain why it doesn't matter, and it should be obvious by now - unless you have not read anything or don't think.  It doesn't matter because even if transaction fees support hash (which there is no proof), you still deduct a revenue source (block reward) from miners.  Which means, miners make less money than they would if there was block reward.  It's very simple.  Shouldn't be hard to explain.

Since miners make less money than they would with transactions fees and block reward, we assume that hash will decrease once block reward decreases.

(Mining profit = block reward + fees)
 
(Mining profit = (block reward)/2 + fees) in 1 year

(Mining profit = (block reward)/4 + fees) in 5 years

(Mining profit = (block reward)/8 + fees) in 9 years

It should be obvious that if you remove a source of mining income, miners will profit less.  This will decrease hash, hash secures the block chain, and it will devalue bitcoins.

INFLATION IS NOT THE ENEMY

I don't know why people believe INFLATION(BITCOIN) = INFLATION(FIAT).  It's NOT TRUE.  Inflating bitcoins costs computational power, A LOT of it.  Inflating paper currency costs almost nothing.  

Inflating bitcoins also secures the NETWORK.  Because it gives miners profit.  When mines profit, hash increases.  When hash increases bitcoins become more valuable because they're more secure and less prone to attack.

So please, enough with the "fees will support the network."  There's no proof of it, and even if there is, it's irrelevant because inflation + fees are more beneficial.

1. This problem wouldn't be a '2040' problem, it would be a problem every time mining rewards were lowered every 4ish years. Not to mention, your title shows a lack of research, as BTC will still be created way after 2040.

2. This is an issue with marginal security of the network, and a very small marginal change at that. If Bitcoin makes it to the last BTC creation date, the change in marginal security of the network due to removal of this reward will be VERY small. It would be insane to think it would cause a detrimental effect to the network.

3. There is a balance that must be created between features that incentivize users and incentivize miners. What's the 'sweet spot' reward amount that most most maximally incentivies miners while also encourages people to adopt the currency? Under your premises, 60 BTC per block would also make the network more secure, so where do you propose we fix the reward at and why? Network security is not the end-all-be-all of bitcoin. Most people that use BTC right now would not use a currency that inflated in perpetuity, this is a design feature and would incompatible with your proposal.

i think the world will end next year so why dont u just give me your bitcoins ?
thanks

Yes.

I don't understand the problem reported in the OP. Am I tested for trolling resistance?

Did this guy read the first two paragraphs of the bitcoin thesis and then started screaming that he invented the table salt? Why aren't moderators suspending his ass until he learns to voice his questions in a civilized manner? Doesn't he check at least one block on blockexplorer.com to see how big the transaction fees are for just 30% of the total bitcoin mass?

There are already transaction fees in upwards of 2-3 BTC per block.

By 2040... if bitcoins are still around then... I expect each bitcoin to be worth about a few million USD in today's equivalent.

Sure you will be mining fewer "bitcoins", but you will be receiving greater "value" for each one you do receive until the end of time.

ban this troll please ; - ) waste of KBs on server space. He don't even read what we write.

Sweft, I think you haven't factored in as much as you need to the replacement of the block bounty with the increase in tx fees. Granted it remains to be seen how that will play out.

Also the security of the network is just one aspect that i believe feeds into the value of BTC. When the block bounty decreases we may see a decrease in hash rate thus making the network theoretical less secure but network security is not the only factor that determines the value. If the total net-hash halves (which I don't predict will happen, will decrease but not by half) when the block bounty decreases from 50 to 25BTC, I don't expect the value of BTC in $ to half - which I think is what you are trying to imply. I believe that when the block bounty halves that even if the network hash halves it will still be prohibitively difficult for an attacker to destroy the system.

It's not the rest of us having trouble understanding.

Please.  Enough circle jerking.  That doesn't help this problem. 

Sure, the program is elegant but the creator obvious he isn't an economist.  Without inflation the network will become insecure.  I'm not worried about the ramifications of a deflationary currency with respect to anything besides hash.  Hash secures the network.

This is pretty much a fact at this point.  There's no way around it.  At some time bitcoins will begin to devalue after hitting a peak.  People will wonder why.  It's because miners were punished by removing inflation.  This is an inescapable conclusion.

I'm sorry people are having trouble understanding this.

Who says Bitcoin is/was his/her/their first try?

I don't agree that Bitcoin could not have been invented by a single person. In another thread, someone pointed out that the critical breakthroughs that make Bitcoin possible (Merkle trees, asymmetric cryptography, and the like) had been around for at least 5 years before Bitcoin was created. If Satoshi is a single person, he is undoubtedly very intelligent, but Bitcoin is more the product of clever composition of concepts than of expert knowledge of all subjects involved.

2040 is the new 2012?

seriously though, bitcoins really are not THAT hard to comprehend!

it /is/ a complex system but with very basic checks and balances wrapped around some rather brilliant math.

even my 80 year old grandmother understands it and is actually kinda fascinated.

Everything leads us to 2 thoughts:

1) everything is hard to understand in bitcoin or

2) part of society became so stupid that those people don't know how to search and read before writing such stuff?

Where did he got that 2040? From picture on wiki?


Btw. maybe lets create an easy to understand big FAQ on any often used websites such weusebitcoins or so? There is a lot of information to be explained in easy steps to prevent such misunderstanding.


my 0.02 btcs : )

You know, when I clicked on this thread, I was expecting something on the order of Bitcoin becoming self-aware and placing a monolith on the moon.

And what I got instead was "oh noes deflation!"