[Cryptography] What has Bitcoin achieved?

[Lodewijk andré de la porte]

2014-06-20 16:31 GMT+02:00 ianG <iang at iang.org>:

> Take a block.  Calculate the amount of money spent on the mining of that
> block, which you can use 25BTC as a proxy for.  Divide that by the
> number of transactions in the block.
>

I do not, at all, think that's fair.

It is some sort of indication of:
    * how unprofitable mining would suddenly become if the blockreward
would dissapear
    * how expensive transactions would be if miners would still demand
payment (read: how Bitcoin would suddenly die if that happened)
    * how Bitcoin is "fractional reserve" in a way, only if people put in
what we call "market cap" would others be able to get it out. It's more or
less like fractional reserves in that not everyone can get "his money" out.
    * how disproportionate the current mining efforts are to the value of a
transaction

And that last one is just as intended and a good feature. In a way you can
say that your fee buys you security, by buring your transaction under a
certain amount of hashes. Now there is money out of nowhere paying for a
whole load (maybe around 60x) more security than you paid for. That's a
good thing because Bitcoin is (used to be?) kind of small and thus
hackable, and is now (maybe around 60x) less hackable.

The question of who pays for that is peculiar as it seems in many ways as
if money comes out of nowhere. The complexity of supply and demand does not
nessarily change the value (although supply might correlate with amount in
existence) of the coins as they increase in quantity. I would say that
"newcomers" that push the price compensate for the pulling of the price
caused by selloffs through mining. The truth is miners are purchasing new
coins from nobody, not affecting supply/demand directly and securing the
network through it. It's a very good choice for Bitcoin. So good that you'd
almost like to make a coin stable versus hashing power.

And what's worse: this does not depend upon any one transaction at all.
And what's better: this means that by your account the Bitcoin transaction
price is expected to regularly drop *dramatically*!

I think you should add the cost of developing software for Bitcoin, if you
take initial coin distribution into account. And to think that the price
ends up being similar to a bank transfer!
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