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0 sats \ 3 replies \ @BitcoinHistory OP 14 Nov 2023 \ parent \ on: Bitcoin P2P e-cash paper | Satoshi Nakamoto satoshi at vistomail.com Fri Oct 31 bitcoin
Ray Dillinger https://www.metzdowd.com/pipermail/cryptography/2008-November/014822.html bear at sonic.net Thu Nov 6 00:14:37 EST 2008 Previous message: Bitcoin P2P e-cash paper Next message: WPA broken even further Messages sorted by: [ date ] [ thread ] [ subject ] [ author ] On Tue, 2008-11-04 at 06:20 +1000, James A. Donald wrote:
If I understand Simplified Payment Verification correctly:
New coin issuers need to store all coins and all recent coin transfers.
There are many new coin issuers, as many as want to be issuers, but far more coin users.
Ordinary entities merely transfer coins. To see if a coin transfer is OK, they report it to one or more new coin issuers and see if the new coin issuer accepts it. New coin issuers check transfers of old coins so that their new coins have valid form, and they report the outcome of this check so that people will report their transfers to the new coin issuer.
I think the real issue with this system is the market for bitcoins.
Computing proofs-of-work have no intrinsic value. We can have a limited supply curve (although the "currency" is inflationary at about 35% as that's how much faster computers get annually) but there is no demand curve that intersects it at a positive price point.
I know the same (lack of intrinsic value) can be said of fiat currencies, but an artificial demand for fiat currencies is created by (among other things) taxation and legal-tender laws. Also, even a fiat currency can be an inflation hedge against another fiat currency's higher rate of inflation. But in the case of bitcoins the inflation rate of 35% is almost guaranteed by the technology, there are no supporting mechanisms for taxation, and no legal-tender laws. People will not hold assets in this highly-inflationary currency if they can help it.
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0 sats \ 2 replies \ @BitcoinHistory OP 14 Nov 2023
Satoshi Nakamoto https://www.metzdowd.com/pipermail/cryptography/2008-November/014831.html satoshi at vistomail.com Sat Nov 8 13:54:38 EST 2008 Previous message: This is a test. This is only a test... Next message: Bitcoin P2P e-cash paper Messages sorted by: [ date ] [ thread ] [ subject ] [ author ] Ray Dillinger:
the "currency" is inflationary at about 35% as that's how much faster computers get annually ... the inflation rate of 35% is almost guaranteed by the technology
Increasing hardware speed is handled: "To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they're generated too fast, the difficulty increases."
As computers get faster and the total computing power applied to creating bitcoins increases, the difficulty increases proportionally to keep the total new production constant. Thus, it is known in advance how many new bitcoins will be created every year in the future.
The fact that new coins are produced means the money supply increases by a planned amount, but this does not necessarily result in inflation. If the supply of money increases at the same rate that the number of people using it increases, prices remain stable. If it does not increase as fast as demand, there will be deflation and early holders of money will see its value increase.
Coins have to get initially distributed somehow, and a constant rate seems like the best formula.
Satoshi Nakamoto
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0 sats \ 1 reply \ @BitcoinHistory OP 14 Nov 2023
James A. Donald https://www.metzdowd.com/pipermail/cryptography/2008-November/014837.html jamesd at echeque.com Sun Nov 9 05:05:05 EST 2008 Previous message: Bitcoin P2P e-cash paper Next message: Bitcoin P2P e-cash paper Messages sorted by: [ date ] [ thread ] [ subject ] [ author ] Satoshi Nakamoto wrote:
Increasing hardware speed is handled: "To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they're generated too fast, the difficulty increases."
This does not work - your proposal involves complications I do not think you have thought through.
Furthermore, it cannot be made to work, as in the proposed system the work of tracking who owns what coins is paid for by seigniorage, which requires inflation.
This is not an intolerable flaw - predictable inflation is less objectionable than inflation that gets jiggered around from time to time to transfer wealth from one voting block to another.
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0 sats \ 0 replies \ @BitcoinHistory OP 14 Nov 2023
Satoshi Nakamoto https://www.metzdowd.com/pipermail/cryptography/2008-November/014842.html satoshi at vistomail.com Sun Nov 9 21:14:30 EST 2008 Previous message: Bitcoin P2P e-cash paper Next message: Bitcoin P2P e-cash paper Messages sorted by: [ date ] [ thread ] [ subject ] [ author ] James A. Donald wrote:
Furthermore, it cannot be made to work, as in the proposed system the work of tracking who owns what coins is paid for by seigniorage, which requires inflation.
If you're having trouble with the inflation issue, it's easy to tweak it for transaction fees instead. It's as simple as this: let the output value from any transaction be 1 cent less than the input value. Either the client software automatically writes transactions for 1 cent more than the intended payment value, or it could come out of the payee's side. The incentive value when a node finds a proof-of-work for a block could be the total of the fees in the block.
Satoshi Nakamoto
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