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This paper mainly focuses on the miner-transaction fee-protocol economics, completely neglecting the real world economic interactions and history of BTC. Satos

This paper mainly focuses on the miner-transaction fee-protocol economics, completely neglecting the real world economic interactions and history of BTC. Satoshi's core design of bitcoin minting favored early adopters to mint coins at extremely low cost and processing power, this is why someone traded 10,000 bitcoins for two pizzas because it took no effort to generate those early on. Satoshi decided to decrease the amount of rewards as the network grew older and presumably more users would adopt it, why? This is a marketing gimmick seen with beanie babies and base ball cards where the cost of production is low yet you tell customers the supply is very limited so you must act quick while supplies last. And the supplies of this type of service are increasing with every day as alternative networks offering the same service (blockchains, trustless distributed databases) are increasingly sprouting up. The question speculators should be considering when evaluating the economic worth in trading bitcoins or any other altcoin should certainly take into consideration what value the network provides them versus alternative service networks, what the risk of volatility in each network is especially because extreme drops in value are much easier than rises in price as liquidity is severely limited and many "whale" accounts often own enough supply of coins to crash the entire market [1] [2] [3]. Exchanges like MTGox, Bitfinex, etc have been suspected of manipulating exchange rates and insider trading via maliciously scripted exchange bots within the exchange [4] [5] [6]. [1] https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html https://bitinfocharts.com/top-100-richest-bitcoin-addresses.... [2] https://etherscan.io/tokenrichlist https://etherscan.io/tokenrichlist [3] ETH had a presale which sold for $0.35 USD - $0.45 USD. The vast majority of cryptocoin variations premine or rapidly mint their supply, and then game speculators to pass the bag off to greater fools in what is essentialy a pyramid scheme backed by a network of databases running double-entry bookkeeping marketed as magic technology that's changing everything. [4] https://www.theguardian.com/technology/2014/may/29/bitcoin-bots-bought-millions-in-the-last-days-of-mt-gox https://www.theguardian.com/technology/2014/may/29/bitcoin-b... [5] https://medium.com/@bitfinexed/are-fraudulent-tethers-being-used-for-margin-lending-on-bitfinex-5de9dd80f330 https://medium.com/@bitfinexed/are-fraudulent-tethers-being-... [6] https://medium.com/@bitfinexed/meet-spoofy-how-a-single-entity-dominates-the-price-of-bitcoin-39c711d28eb4 https://medium.com/@bitfinexed/meet-spoofy-how-a-single-enti...

AgentME 9y ago
>Satoshi decided to decrease the amount of rewards as the network grew older and presumably more users would adopt it, why? Mining needed to have a way to incentivize miners before transaction fees were common, and there needed to be a system to get bitcoins out into users' hands to begin with. Once a critical mass of users have bitcoins and transaction fees support mining, there's less reason to continue minting new bitcoins. It could be argued that continuous minting creating inflation would be desirable, but that's a big free parameter that there isn't a known best way to calculate. Bitcoin's monetary supply code was intended to function long-term, and if minting was to continue indefinitely, it's debatable what the minting rate should be, and if it was gotten wrong, it would be extremely controversial to ever change. (Some people might think 2% is a good inflation rate, but what if that's specific to now? Say economic and population growth slow down; 2% could be too much inflation.) Having the cap approach a maximum limit instead of increasing forever seems to have been a much easier decision to make and get others to trust. If there's a fixed amount of Bitcoin, then as long as Bitcoin's usage isn't decreasing, it's straightforward to imagine that the value of Bitcoin shouldn't approach zero. >And the supplies of this type of service are increasing with every day as alternative networks offering the same service (blockchains, trustless distributed databases) are increasingly sprouting up. A big part of Bitcoin's value is the network effects of its current user-base. The creation of an altcoin doesn't immediately fully dilute the supply of useful bitcoin-like cryptocurrency if it doesn't have the userbase.
- nosuchthing 9y ago
  There was no "getting bitcoins out into user's hands" other then Satoshi and the small group of minters who generated the majority of early coins. It was designed to exploit late adopters, more so when the published price is controlled by only a few unregulated black box exchange "markets". If you look at the coin supply minted over time, in the first year ~3,000,000 coins were minted, 1/7th the total supply minted to a very very small group of humans. By 2014 half the entire supply was minted. These coins are now in in the pockets of a very very limited amount of users who spent very little resources to mint these and be granted credits in Satoshi's database. Think about this. There's no real network effect when migration to any of the other altcoins is just as easy. It becomes incentived more so when actual usage of the BTC network is cumbersome with latency of up to several hours, and or $10-$20 transaction fees.

AgentME 9y ago

>Satoshi decided to decrease the amount of rewards as the network grew older and presumably more users would adopt it, why? Mining needed to have a way to incentivize miners before transaction fees were common, and there needed to be a system to get bitcoins out into users' hands to begin with. Once a critical mass of users have bitcoins and transaction fees support mining, there's less reason to continue minting new bitcoins. It could be argued that continuous minting creating inflation would be desirable, but that's a big free parameter that there isn't a known best way to calculate. Bitcoin's monetary supply code was intended to function long-term, and if minting was to continue indefinitely, it's debatable what the minting rate should be, and if it was gotten wrong, it would be extremely controversial to ever change. (Some people might think 2% is a good inflation rate, but what if that's specific to now? Say economic and population growth slow down; 2% could be too much inflation.) Having the cap approach a maximum limit instead of increasing forever seems to have been a much easier decision to make and get others to trust. If there's a fixed amount of Bitcoin, then as long as Bitcoin's usage isn't decreasing, it's straightforward to imagine that the value of Bitcoin shouldn't approach zero. >And the supplies of this type of service are increasing with every day as alternative networks offering the same service (blockchains, trustless distributed databases) are increasingly sprouting up. A big part of Bitcoin's value is the network effects of its current user-base. The creation of an altcoin doesn't immediately fully dilute the supply of useful bitcoin-like cryptocurrency if it doesn't have the userbase.

nosuchthing 9y ago
There was no "getting bitcoins out into user's hands" other then Satoshi and the small group of minters who generated the majority of early coins. It was designed to exploit late adopters, more so when the published price is controlled by only a few unregulated black box exchange "markets". If you look at the coin supply minted over time, in the first year ~3,000,000 coins were minted, 1/7th the total supply minted to a very very small group of humans. By 2014 half the entire supply was minted. These coins are now in in the pockets of a very very limited amount of users who spent very little resources to mint these and be granted credits in Satoshi's database. Think about this. There's no real network effect when migration to any of the other altcoins is just as easy. It becomes incentived more so when actual usage of the BTC network is cumbersome with latency of up to several hours, and or $10-$20 transaction fees.