Topic: Why I think the 21Million hard limit will never be reached - deflationary spiral - page 3. (Read 5915 times)
May 08, 2012, 03:47:43 PM
The main point I made this thread as at first glance it seemed to me and many others have had a similar view that as the block reward gets very small that it equals no new bitcoins therefore hyper-inflationary spiral. The other point being as long as bitcoins value keeps increasing (maybe like gold circa up to 1918AD [start of then end of the gold standard]) then a valuable amount of new bitcoins will keep entering the market. Therefore killing of the idea of hyper-inflationary spiral once the block reward is very small.
May 08, 2012, 03:35:13 PM
If Satoshi had wanted it to be an even number the starting block reward should have been a multiple of 2. For example is the first block reward had been 2^32 satoshis (~42.94 BTC) then we would have had 32 perfect halvings of the reward. 2^32 down to 2^0. A bit of trivia. The "21M" appears nowhere in the code. The entire subsidy calculation is just a handful of lines.
Absolutely right.
The 21M comes from summing the geometric series I mentioned above. http://en.wikipedia.org/wiki/Geometric_series
1/2 + 1/4 + 1/8 + 1/16 + ... + 1/2^i + ... = 1 = S
Each term in this series maps to one block reward period. i.e. 210000 blocks. Now that first term 1/2 maps to the 50 coin reward, so we want to multiply by 100 as well.
Therefore we get S*210000*100 = 21M.
Being that S is the sum of an infinite series, we will never quite reach 21M as we will never have an infinite number of terms.
Yes I see after infinite amount of time it will only get closer and closer to 21million. The main point of the OP is the block reward never ending even after a block reward of only 1 satoshi and bitcoin value ever increasing. Therefore no hyper-deflation.
Edit: As a valuable amount of new bitcoins/satoshis always entering the market.
May 08, 2012, 03:30:28 PM
If Satoshi had wanted it to be an even number the starting block reward should have been a multiple of 2. For example is the first block reward had been 2^32 satoshis (~42.94 BTC) then we would have had 32 perfect halvings of the reward. 2^32 down to 2^0. A bit of trivia. The "21M" appears nowhere in the code. The entire subsidy calculation is just a handful of lines.
Absolutely right.
The 21M comes from summing the geometric series I mentioned above. http://en.wikipedia.org/wiki/Geometric_series
1/2 + 1/4 + 1/8 + 1/16 + ... + 1/2^i + ... = 1 = S
Each term in this series maps to one block reward period. i.e. 210000 blocks. Now that first term 1/2 maps to the 50 coin reward, so we want to multiply by 100 as well.
Therefore we get S*210000*100 = 21M.
Being that S is the sum of an infinite series, we will never quite reach 21M as we will never have an infinite number of terms.
May 08, 2012, 03:27:19 PM
Well no none of that is true.
I don't think deflation will be a problem but your reasons don't make sense. Adding decimal places isn't increasing the money supply. Deflation WILL occur I just don't think the deflationary death spiral idea has ever been proven.
I don't think deflation will be a problem but your reasons don't make sense. Adding decimal places isn't increasing the money supply. Deflation WILL occur I just don't think the deflationary death spiral idea has ever been proven.
The only reason I mention adding more decimal places is for when the block reward is less then 1 satoshi (edit: and as bitcoin becomes more valuable) and yes its the deflationary spiral I'm on about not general deflation.
May 08, 2012, 03:25:26 PM
Well no none of that is true.
I don't think deflation will be a problem but your reasons don't make sense. Adding decimal places isn't increasing the money supply. Deflation WILL occur I just don't think the deflationary death spiral idea has ever been proven.
Also I don't think there will ever be a time when 1 satoshi will be equal to 1 BTC now.
That would put 1 satoshi = $5 and the Bitcoin money supply at ~ 10 quadrillion dollars (or ~100x the size of entire global money supply).
I don't think deflation will be a problem but your reasons don't make sense. Adding decimal places isn't increasing the money supply. Deflation WILL occur I just don't think the deflationary death spiral idea has ever been proven.
Also I don't think there will ever be a time when 1 satoshi will be equal to 1 BTC now.
That would put 1 satoshi = $5 and the Bitcoin money supply at ~ 10 quadrillion dollars (or ~100x the size of entire global money supply).
May 08, 2012, 03:21:37 PM
In the future if 1 satoshis is as valuable as 1 bitcoin now then the block reward will still be valuable when the block reward is only 50 satoshis. The point of the OP was as long a bitcoin keeps increasing in value and more decimals keeping getting added then deflation will never be a problem.
May 08, 2012, 02:42:59 PM
MoonShadow is correct.
The method used for determining the reward is to do a right shift on 50,000,000 satoshis every 210K blocks. That truncates any fractional satoshis.
There are some truncation along the way. For example starting in block 6,090,000 the reward is 9 satoshis. In block 6,300,000 it becomes 4 satoshis so the block reward declines by more than 50%. Block 6,930,000 will drop the reward to 0 satoshis however only 2,099,999,997,690,000 so it looks like we will be eternally 2,310,000 satoshis (0.0231 BTC) short of the magical 21M.
If Satoshi had wanted it to be an even number the starting block reward should have been a multiple of 2. For example is the first block reward had been 2^32 satoshis (~42.94 BTC) then we would have had 32 perfect halvings of the reward. 2^32 down to 2^0. A bit of trivia, the "21M" appears nowhere in the code. The entire subsidy calculation is just a handful of lines.
Even IF decimal places are added (a move of dubious value) we will hit 0 block reward again before hitting 21M total minted. I doubt decimal places will be added. If the entire global money supply was in Bitcoins and no fiat anywhere on the planet existed 1 satoshi would be worth about 5 cents which isn't a limit on commerce. In any scenario short of single global currency 1 satoshi ends up being worth various fractions of a single cent.
Lastly adding decimial places wouldn't change the rate of price deflation by any material amount. Even if you added decimal 4 places that would allow you to pay out ~ 2.1 million satoshis over the next 3 decades. 99.9999999% will still be issued by the time the block reward originally would have hits 0. Spreading the remaining 0.00000001% over a couple decades means the money supply growth rate is something like 1 billionth of 1% per year.
0% vs 0.00000000037% = totally meaningless a token change at best.
Essentially 0% (which is what it will be when block reward is 0).
The method used for determining the reward is to do a right shift on 50,000,000 satoshis every 210K blocks. That truncates any fractional satoshis.
There are some truncation along the way. For example starting in block 6,090,000 the reward is 9 satoshis. In block 6,300,000 it becomes 4 satoshis so the block reward declines by more than 50%. Block 6,930,000 will drop the reward to 0 satoshis however only 2,099,999,997,690,000 so it looks like we will be eternally 2,310,000 satoshis (0.0231 BTC) short of the magical 21M.
If Satoshi had wanted it to be an even number the starting block reward should have been a multiple of 2. For example is the first block reward had been 2^32 satoshis (~42.94 BTC) then we would have had 32 perfect halvings of the reward. 2^32 down to 2^0. A bit of trivia, the "21M" appears nowhere in the code. The entire subsidy calculation is just a handful of lines.
Even IF decimal places are added (a move of dubious value) we will hit 0 block reward again before hitting 21M total minted. I doubt decimal places will be added. If the entire global money supply was in Bitcoins and no fiat anywhere on the planet existed 1 satoshi would be worth about 5 cents which isn't a limit on commerce. In any scenario short of single global currency 1 satoshi ends up being worth various fractions of a single cent.
Lastly adding decimial places wouldn't change the rate of price deflation by any material amount. Even if you added decimal 4 places that would allow you to pay out ~ 2.1 million satoshis over the next 3 decades. 99.9999999% will still be issued by the time the block reward originally would have hits 0. Spreading the remaining 0.00000001% over a couple decades means the money supply growth rate is something like 1 billionth of 1% per year.
0% vs 0.00000000037% = totally meaningless a token change at best.
Essentially 0% (which is what it will be when block reward is 0).
May 08, 2012, 02:39:36 PM
This argument is a matter of semantics. The 21 million btc limit is a limit in the calculus sense. technically the limit will never be hit no matter how many decimals are added to the current protocol, but for any practical reasoning it matters little.
May 08, 2012, 02:36:11 PM
If more deciamal places keep getting added in an infinite amount of time an infinite amount of bitcoins would be created. What my main point is there is no need to worry about the 21million bitcoin limit being reached. No bitcoin will just resemble the gold or a very earth mineral market. So no need to worry about bitcoins stopping being created and a hyper-deflationary spiral.
Not necessarily; 1/2 + 1/4 + 1/8 + 1/16 + ... is famously 1, not infinity. (If it's not obvious, bitcoin is simply a large constant times this series, so it too reaches a finite total, even if it had infinite precision)
Also; let's think practically. When the block reward is 0.000000001, then it will take five billion blocks to make the same number of coins as 1 block does now. That's 95 thousand years. For all intents and purposes, when the current BTC resolution is used up (i.e. 8 decimal places) there are effectively no more bitcoins being generated.
May 08, 2012, 02:26:10 PM
what?
You said some things that don't have any thing to do with the protocol. I fail to see the importance of decimal places.
Is easy. reward is 50BTC, 25BTC, 12.5BTC, 6.25BTC...., not exactly 21 million total but very close.
The only way this will not happen is if bitcoin dies or community decides to change the rules (not gonna happen with this rule because it can lead to abandon of this currency)
You said some things that don't have any thing to do with the protocol. I fail to see the importance of decimal places.
Is easy. reward is 50BTC, 25BTC, 12.5BTC, 6.25BTC...., not exactly 21 million total but very close.
The only way this will not happen is if bitcoin dies or community decides to change the rules (not gonna happen with this rule because it can lead to abandon of this currency)
If more deciamal places keep getting added in an infinite amount of time an infinite (edit): closer amount of bitcoins to 21 million would be created. What my main point is there is no need to worry about the 21million bitcoin limit being reached. No bitcoin will just resemble the gold or a very rare earth mineral market. So no need to worry about bitcoins stopping being created and a hyper-deflationary spiral.
May 08, 2012, 02:15:44 PM
what?
You said some things that don't have any thing to do with the protocol. I fail to see the importance of decimal places.
Is easy. reward is 50BTC, 25BTC, 12.5BTC, 6.25BTC...., not exactly 21 million total but very close.
The only way this will not happen is if bitcoin dies or community decides to change the rules (not gonna happen with this rule because it can lead to abandon of this currency)
You said some things that don't have any thing to do with the protocol. I fail to see the importance of decimal places.
Is easy. reward is 50BTC, 25BTC, 12.5BTC, 6.25BTC...., not exactly 21 million total but very close.
The only way this will not happen is if bitcoin dies or community decides to change the rules (not gonna happen with this rule because it can lead to abandon of this currency)
May 08, 2012, 02:08:22 PM
I don't think there is anything in the bitcoin protocol that states on exactly 21Million bitcoin will ever be made. No just that the block reward will keep half'ing. So if bitcoins value goes up and more decimal places are and keep getting added as the value of bitcoin goes up then the block reward can keep getting paid. Even if the block reward gets really small as long as the value of bitcoin keeps rising and more decimal places are added then a valuable block reward can keep being paid. At some point in the future the amount of newly created bitcoins entering the market will be similar to the amount of gold entering the gold market. As where we are at now with such a high block reward is like a gold-rush.
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