[Cryptography] Another Bitcoin issue (maybe) (was: BitCoin bug reported)

[Sampo Syreeni]

On 2014-02-13, Peter Todd wrote:

> Frankly I think the reward schedule going to zero was a really stupid 
> idea. It makes for nice marketing - deflationary currency is an idea 
> with legs - but ignores the fact that all people owning Bitcoins 
> benefit and require the security that mining provides.

I disagree. The idea was, from the start, that transaction fees would 
supplant mining fees in the end. Both are subject to the normal 
competition over nominal cost, and if you take a look at the monetary 
equation of exchange, both mechanisms work out pretty much the same on 
the same side of the equation. Profits from mining equal a percentage of 
M, profits from fees equal a percentage of V, and then in long term 
equilibrium both just work out to a fixed money supply combined with a 
market rate for transaction processing. So, it's good marketing for 
early adopters, combined with a steady state that is fully set by the 
market. What more can you ask for in a de novo non-state backed 
cryptocurrency?

> A much better mechanism would have been to target a specific inflation 
> rate of, say, %1 on the basis that doing so in effect means that you 
> are taking the entire value of the currency and devoting some % of 
> that value to security ever year.

Then you'd be taking the position that steady inflation is a good thing. 
Satoshi took the opposite, gold bug position where a fixed (or highly 
inelastic) money supply and its attendant deflation in times of growth 
was seen as a good thing. Now we live with that: nobody says you should 
invest in bitcoin if you don't like its lack of macroeconomic 
stabilisation possibilities or somesuch thing. In fact, you could always 
fork the codebase and the blockchain and make yours better.

But if you can't make it fly and drive Bitcoin out of the market, isn't 
that just testament to the fact that the idea of mining really *was* 
just the thing you need in order to get this kind of a virtual currency 
going?
-- 
Sampo Syreeni, aka decoy - decoy at iki.fi, http://decoy.iki.fi/front
+358-40-3255353, 025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2