Gold collapsing. Bitcoin UP.

[Peter R]

@albin: Yes, I think it is possible that in the far future the market disconnects inflation from security and begins to also use inflation to help pay for other types of public goods (beyond Blockchain security). I could see this potentially being a good thing but I could also see this turning into a very bad thing that ultimately leads to the collapse of the currency--it really depends on how efficiently the market can express its true will (judging by the problem raising the block size limit I'm not encouraged.)

 

[AdrianX]

@Roger_Murdock & @albin
The idea of perpetual inflation is being tested in cryptocuracies as we chat, I'm more skeptical of it ever working having seen the results with fiat. There is no need to implement it in bitcoin, people can vote with their feet and go and but Quark, etc. now.
[doublepost=1465496738,1465495926][/doublepost]

@albin:

Let me preface this comment by saying that I think it is way too early to try to make decisions on what we'll do about blockchain security when the block reward runs out (we don't even know if it's a problem yet!).

With that out of the way, I believe the long-run inflation rate could be market driven using a BU-esque process. My grand-granddaughter's Bitcoin node might accept blocks so long as the value of the coinbase transaction was less than 1 BTC + fees (0.25% inflation per annum). Your grand-grandson might be more conservative and only permit 0.5 BTC + fees per block. If we apply this to all of our descendants, then probably a market-drive consensus would emerge on what the appropriate inflation rate is (which could very well be "0").

If a miner believes that the economic majority supports 0.25% inflation, then he can mine a block with a 1 BTC block reward. If he's correct, then his block will be accepted into the longest chain and he'll benefit by 1 BTC; if he is incorrect, then he'll also lose the transaction fees that he could have otherwise claimed. The safe thing to do would be to produce blocks with no inflation because the miner would be guaranteed to have them accepted. However, it might be worth the risk to produce blocks with a little bit of inflation if he's confident they'll be excepted. In other words, an equilibrium would emerge (and once again, that equilibrium could very well be "0 inflation").

that's a very viable future, one more real when you consider the huge wave of soft forks on the horizon. it would defiantly encourage more nodes, and one of the hesitations I'd have is what about an inflation sybil attack and the ignorant masses flowing their personal digital PR Google god who advises to adjust their inflation tolerance in there personal financial advice app.

This defiantly leads into some security issued bitcoin may have going forward - thinking about it we'll need nodes with some kind of proof of storage and service in the future.

 

[xhiggy]

@Peter R

This is a very interesting idea, please continue to expand upon it. Did you come up with this?

 

[Inca]

@albin:

Let me preface this comment by saying that I think it is way too early to try to make decisions on what we'll do about blockchain security when the block reward runs out (we don't even know if it's a problem yet!).

With that out of the way, I believe the long-run inflation rate could be market driven using a BU-esque process. My grand-granddaughter's Bitcoin node might accept blocks so long as the value of the coinbase transaction was less than 1 BTC + fees (0.25% inflation per annum). Your grand-grandson might be more conservative and only permit 0.5 BTC + fees per block. If we apply this to all of our descendants, then probably a market-drive consensus would emerge on what the appropriate inflation rate is (which could very well be "0").

If a miner believes that the economic majority supports 0.25% inflation, then he can mine a block with a 1 BTC block reward. If he's correct, then his block will be accepted into the longest chain and he'll benefit by 1 BTC; if he is incorrect, then he'll also lose the transaction fees that he could have otherwise claimed. The safe thing to do would be to produce blocks with no inflation because the miner would be guaranteed to have them accepted. However, it might be worth the risk to produce blocks with a little bit of inflation if he's confident they'll be excepted. In other words, an equilibrium would emerge (and once again, that equilibrium could very well be "0 inflation").

Whilst I agree with this sentiment, if this blocksize drama has shown us anything it is that the economic majority isn't always able to act so directly and miners don't always act in their immediate interest as theory alone would dictate. Why has the blocksize not been raised? Why is ethereum growing so rapidly? Also most in the bitcoin community would find changing the 21million coin limit to be anathema.

 

[Peter R]

@Peter R

This is a very interesting idea, please continue to expand upon it. Did you come up with this?

I got the idea from two places.

The first was from a conversation with @chriswilmer where he hypothesized that perhaps 1 - 2% inflation was a sort of "human constant"--that perhaps it's the most we'll put up without seriously considering abandoning the currency system. For example, currencies with inflations significantly higher than a few percent tend to collapse quickly (on the order of one generation), while currencies with consistent inflation of only a few percent can persist for hundreds of years (e.g., the British Pound or the US dollar).

The second was from Michael Kumhof's paper "The Chicago Plan Revisited." The idea that perhaps in the future the market would decide to pay for certain public goods with inflation (beyond Blockchain security) is an extension of Irving Fisher's idea (see Kumhof's paper)--except instead of the "inflation" being decided by a centralized governance entity (i.e., the Fed), it would be decided by a decentralized governance entity (i.e., the market).

However, I'm not sure how this could be coordinated without serious risk of corruption and collapse of the currency.

 

[cypherdoc]

I agree, because inflation changes the current rules and who gets to set the rate over what time? As well, refusing to remove what was always meant to be a temporary 1MB limit is a change to the rules.

@Roger_Murdock

I'm extremely skeptical of the feasibility of building perpetual inflation into a cryptocurrency for this purpose, because no matter how you design it, this is just a roundabout way of price-fixing the amount of security applied to the chain.

[doublepost=1465503727,1465502904][/doublepost]As I said above, it's clear to me that @Jihan has probably been in negotiations for months with the buyout group. While he may have felt strongly about doing more than just muttering his displeasure about the lack of blocksize increase, it is very clear he could not actually DO anything about it for fear of disrupting the ecosystem to the point of jeopardizing the deal. The fact that he's sold his company and that KNC has gone BK as well as others means that change is afoot. These are all fallout strategies in anticipation of the halving. And we can expect more changes all of which should push the mining ecosystem to accept larger blocks out of necessity.

Whilst I agree with this sentiment, if this blocksize drama has shown us anything it is that the economic majority isn't always able to act so directly and miners don't always act in their immediate interest as theory alone would dictate. Why has the blocksize not been raised? Why is ethereum growing so rapidly? Also most in the bitcoin community would find changing the 21million coin limit to be anathema.

 

[chriswilmer]

Wait, @cypherdoc ... @Jihan 's company got bought out? I thought he tweeted about Avalon getting bought out (not Bitmain). Am I misunderstanding?

 

[AdrianX]

And we can expect more changes all of which should push the mining ecosystem to accept larger blocks out of necessity.

What makes you so sure? Mining companies could be consolidating among those who have an alternate plan for the "Hard Money" bitcoin. I've even heard Blockstream are acquiring a notable amount of mining equipment.

 

[cypherdoc]

@AdrianX

those buying out Bitmain as a publicly traded company and even Blockstream, if it's indeed getting into mining, can't possibly be wanting to continue to cripple onchain scaling otherwise where do future revenues come from? doubling as centralized LN hubs? massive fee mkt fees? i don't think so, based on all the reasons we've stated here. i think growth of mining fee revenues are highly contingent on increasing the blocksize to facilitate global adoption. that's my opinion.
[doublepost=1465509947][/doublepost]

Wait, @cypherdoc ... @Jihan 's company got bought out? I thought he tweeted about Avalon getting bought out (not Bitmain). Am I misunderstanding?

i'm getting some confusing info behind the scenes. i'm trying to clarify.

 

[Zangelbert Bingledack]

@Zangelbert BingledackI don't see how an exchange could make good on promises to deliver "ClassicBTC", even if there was a definitive "winner" after a while. The exchange has no power to force miners to mine Classic blocks or network nodes to adopt Classic block size rules after some time X. It can only hope that the rest of the ecosystem notices its market and transforms itself accordingly (Butterfly effect?).

I think you're talking about two cases.

1) If Core wins, the exchange probably has no way to deliver ClassicBTC, but it should be good enough that they deliver them if it is possible. If Classic chain exists on September 1st, the exchange delivers the ClassicBTC; if it doesn't exist, the obligation is recognized as fulfilled by default (as stipulated in prior policy).

2) If Classic wins, yes, the exchange has no power to force miners to mine Classic, but miners will want to mine where the money is. It's especially clear when there is a definitive winner and the loser is essentially worthless.

As mentioned, if a major mining farm employee knew during the futures trading that his company was planning to mine on Core no matter what even though Core was getting clobbered in the trading, he would have great incentive to buy up those cheap CoreBTC futures. Easy money for all insiders (or just astute observers) to milk for as long as there is any discrepancy between the prediction market rate and the actual rate of market/infrastructure/mining support.

This should ensure - as long as the time gap between end of futures trading and the fork flag day is not too long to allow circumstances to change much in the meantime - that the miners and ecosystem are eager to support the winner.

If you're wondering, "Can prediction markets really do that? Sounds too good to be true," I highly recommend reading up on how prediction markets work (futures trading being one example). The six numbered mini-papers on Paul Sztorc's github are quite good and succinct:

https://github.com/psztorc/Truthcoin/tree/master/docs

 

[cypherdoc]

Dow futures starting to play games. note the gap down. you don't usually see that:

 

[cypherdoc]

Deflation:

 

[solex]

Coincidence, Co-ordination, or Control of 50% of the hash-power:
Which "C" do you see?

 

[bluemoon]

@solex

Antpool and F2Pool co-ordinate and control:


Or maybe there is some higher power?
[doublepost=1465547037][/doublepost]Given up digging their heels in anyway.

 

[jonny1000]

Now hopefully we're done quoting bible verses, and can get back to acknowledging that this boils down to nomenclature. What is considered an "attacking" chain vs an "honest" chain, and who makes that decision? The whitepaper clearly uses the word "attack" in the context of some entity trying to damage Bitcoin. In this current blocksize debate, I do not consider either side to be a conscious attacker. I consider a small-block world potentially quite damaging, but I don't think the motive is malicious (I'm not one for conspiracy theories), just misguided and narrow-minded. So that leaves the mathematical nature of the system where the "longest chain" of >50% PoW reigns as "Bitcoin".

No it does not come down to if the motive is malicious or not. That is a subjective judgement. It comes down to if there is a hardfork in the rules or not:

1. Not a hardfork - e.g double spend attack or lowering the block size limit - 51% of the mines (aka nakamoto consensus) is sufficient

2. Hardfork - e.g. stealing coins or increasing the block size limit - nakamoto consensus is not sufficient, just like the whitepaper explains with examples

What you may think about the above:
1. The logic is wrong and biased. You may think I am making this logic up now in order to use as an excuse for keeping 1MB blocks. - If you trust I am not malicous, I promise you this is not true, I had had this opinion for years, well before the this blocksize dispute.

2. You think the logic may be an idea, but its just a bad ideolgy, you think the mathermaitical trusth is 51% rules. - 51% does not rule when it come to removing consensus rules, this is not an ideaology, but a fact based on mathertical logic. There are several factors at play here, including the asymetric nature of a HF.

It may be helpful to try to thino of some examples:
1. 51% of malicous miners softfork to 100KB - A group of malicous attackers wants to harm Bitcoin. The attacker controls 51% of the hashrate and decides to lower the blocksize limit to 100KB, delibrately to damage Bitcoin. Since this is a softfork, the attacker can do this, the attacker just creases blocks less than 100KB and refuses to build on blocks greater than 100KB. Sicne they have 51% of the hashrate, they have the longest chain. All the nodes on the network regard the 100KB chain as the longest valid chain and the attacker wins.
2. 51% friendly of miners hardfork to 2MB - A friendly nice group of miners want to help Bitcoin. The goup controls 51% of the hashrate and decides to increase the blocksize limit to 2,000KB, delibrately to help Bitcoin. This is a hardfork, if the friednly group produces blocks, they will be rejected by the nodes. Even though the group control 51% of the hashrate, since they regard blocks outside of their group as valid, they will mine on top of those and therefore the 1MB chain is still the longest chain.

Do you understand the difference now? I think this is not an idealogical difference at all, it is just a lack of understanding. My view on this is entirely factual.

So again, you need to accept the reality that the *fundamental* nature of Bitcoin is currently a system you defined as "totally useless". So I'm not sure why you continue to spend time on it.

The reason I am still here is I still think I might be correct. Obviously I am very pleased with how XT/Classic have failed so far, which helps convince me. Or as Peter R said "so far I am right". Don't worry, if you can demonstrate a simple majority is sufficient to impose a HF on a significant minority, I will leave.

 

[awemany]

Gavin stating it as it is:

 

[Erdogan]

@Roger_Murdock

I'm extremely skeptical of the feasibility of building perpetual inflation into a cryptocurrency for this purpose, because no matter how you design it, this is just a roundabout way of price-fixing the amount of security applied to the chain.

I see problems.

There is a strong Schelling point (I like Schelling points, maybe I overdo it) with zero money quantity inflation. If it is to be something else, what is it? 1%, 2% (like gold), 10% (keynesian style) or more (Zimbabwe style)? To function as money, it should be predictable, the rate does not matter, so why not zero.

It would be good to have integral support for verifying nodes, but how much (above), how can it be integrally determined how good is a node at verifying (someone spins up hundreds of nodes to make a statement about the best implementation, functions in the system), does speed, network mean anything, how much does it really cost, and how many do we need. We have discussed the market for noding, and there are some incentives in the market to run nodes, and the cost is not that great. I am skeptical to funding the nodes through inflation. There is no concept of POW for nodes.

EDIT: And regarding security in having enough mining power: I think this will be no problem, due to the special mining hardware (hardware for something unrelated can not temporarily be directed towards destruction of bitcoin), and the market have some inertia (a slow day with few transactions, a slow week, and probably not even a month with low transaction activity will stop mining).

But most of all it is the public relations point. Bitcoin is sound money, and zero inflation is a strong message. So unless the moon falls down, I will continue to support zero.

 

[Paashaas]

10 good reasons to buy Bitcoin

https://medium.com/@Technomage/10-good-reasons-to-buy-bitcoin-now-9c5438893df9#.2omr54lct

 

[albin]

Do you understand the difference now? I think this is not an idealogical difference at all, it is just a lack of understanding. My view on this is entirely factual.

The main thing that jumps out at me with this guy's tired line here is that it has this air of autism about it, where the only thing that exists is how things inside the system work mechanically, and that nobody outside the system reacting to what's going on makes a difference. As though any group of people would up and apply 51% hashrate to a hard fork without any communication with relevant full nodes.

(I'm using the third person btw because Sweetie was all upset because he couldn't address my one of my objections a while back, and refuses to communicate with an extremist like me!).

 

[lunar]

@Paashaas - possible double top on the number of daily bitcoin transactions, due to the insane blocksize quota?