[Cryptography] Bitcoin blocksize limit can be removed

[John Levine]

[ not much to do with crypto, but what the heck ]

>> I wouldn't disagree with the second sentence, other than to nitpick
>> that it's arguably no worse than the gold standard was, ...

>Gold production is based upon price signals for gold, ...

Ahem, I didn't say it was the same as bitcoins, only that it was
arguably even worse than bitcoins.  

Historically, someone would discover a new source of gold, e.g.
Spanish conquest of South America, the Klondike, the Witwatersrand, a
whole lot of new gold would come on the market, there's be a boom and
inflation, then the source would be worked out, there'd be panics and
deflation, repeat ad infinitum and throw in the Cross of Gold speech.

These days gold mines tend to be marginal, using techniques like
washing old ore dumps with toxic solvents to leach out the last bit of
metal so it depends on a combination of the price and how much
environmental damage they can get away with.

> The best price signal for bitcoin is hashing rate, and it should be
>the hashing rate that decides the amount of Bitcoins produced, ...

Except that, as you know, the bitcoin algorithm adjusts to compensate
for increases in hashing power.  What if it didn't?

For the first year or so the difficulty factor was 1.  By 2011 it had
climbed to a million, now it's about 60 billion.  Hash rates were
about 1 Gh/s in 2010, now they're about 500 million Gh/s.  So with
constant difficulty, if we were getting a block every 10 minutes in
2010, now we'd be getting roughly a block per microsecond.  Every
Bitcoin pitch I've ever seen has a slide or two on Zimbabwean
hyperinflation so the result would presumably be familiar, give or
take the detail that at that rate all possible bitcoins would have
been mined in the first half minute.  I suppose that given that there
is some real world cost to hash generation, if we imagined that the
limit to the number of bitcoins were removed, we might get some sort
of equilibrium with bitcoins worth 9 or 10 orders of magnitude less
than they are now.

I'm not sure what the overall point here is other than to note that
while one can have opinions about Keynsian economics, one can't
have opinions about arithmetic.

R's,
John