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>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 ince

>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.
- stale2002 9y ago
  The early adopters also took an extraordinary RISK in buying the coins, or spending the money mining them. Bitcoin being mainstream and safe is a very new thing. I remember just a couple years, everyone was freaking out because they were worried that China was going to ban bitcoin. And years before that, the worry was that the US, or whoever, would try to force AML regulations onto it. And a couple years before THAT the worry was that the US would do all of that AND arrest everyone involved in the system, and send them to jail for facilitating money laundering. Being involved in bitcoin was a risk for early adopters, and that risk was rewarded.
  - Freak_NL 9y ago
    Risk and reward should be in balance if you want to see Bitcoin as the type of currency people would actually use as a significant part of their economy. The first miners may have risked some (real) money, but that is nothing compared to the massive wealth¹ they would hold if Bitcoin ever did supplant local currencies — even if people used it just for coffee. The amount of (untaxed!) wealth owned by those early miners would dwarf that of Gates and Buffet. That kind of Ayn Rand level of capitalism doesn't seem to agree with most people — although it does seem palatable amongst Bitcoin aficionados. 1: https://cointelegraph.com/news/who-owns-bitcoin-universe-from-satoshi-nakamoto-to-winklevoss-twins-and-more https://cointelegraph.com/news/who-owns-bitcoin-universe-fro...
  - nosuchthing 9y ago
    Satoshi's design for the minting of supply to himself and the few individuals who scooped up the first 6-12 million coins is part of the design, for others to consider regardless. As mainstream adoption took place, we've now seen large capital holders acquiring BTC in proportion with their current wealth. The hodlers play a game of chicken prisoners dilemma, and it's worthwhile to consider what beanie baby they've acquired and how the sausage was made.
fleetingmoments 9y ago
If no Bitcoin is being minted and a certain amount is lost every year to burn addresses or mistakes, it stands to reason that at some point the amount Bitcoin in circulation would approach zero. A hacker group could grind the economy to a halt by gaining control of people's wallets and burning money, creating much larger deflation than what is caused by the economy growing. On the other hand, as far as I understand there is a huge number of inactive coins that no-one knows whether they've been lost or not. If those coins start moving it would effectively create a large inflationary pressure.

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.

stale2002 9y ago
The early adopters also took an extraordinary RISK in buying the coins, or spending the money mining them. Bitcoin being mainstream and safe is a very new thing. I remember just a couple years, everyone was freaking out because they were worried that China was going to ban bitcoin. And years before that, the worry was that the US, or whoever, would try to force AML regulations onto it. And a couple years before THAT the worry was that the US would do all of that AND arrest everyone involved in the system, and send them to jail for facilitating money laundering. Being involved in bitcoin was a risk for early adopters, and that risk was rewarded.
- Freak_NL 9y ago
  Risk and reward should be in balance if you want to see Bitcoin as the type of currency people would actually use as a significant part of their economy. The first miners may have risked some (real) money, but that is nothing compared to the massive wealth¹ they would hold if Bitcoin ever did supplant local currencies — even if people used it just for coffee. The amount of (untaxed!) wealth owned by those early miners would dwarf that of Gates and Buffet. That kind of Ayn Rand level of capitalism doesn't seem to agree with most people — although it does seem palatable amongst Bitcoin aficionados. 1: https://cointelegraph.com/news/who-owns-bitcoin-universe-from-satoshi-nakamoto-to-winklevoss-twins-and-more https://cointelegraph.com/news/who-owns-bitcoin-universe-fro...
- nosuchthing 9y ago
  Satoshi's design for the minting of supply to himself and the few individuals who scooped up the first 6-12 million coins is part of the design, for others to consider regardless. As mainstream adoption took place, we've now seen large capital holders acquiring BTC in proportion with their current wealth. The hodlers play a game of chicken prisoners dilemma, and it's worthwhile to consider what beanie baby they've acquired and how the sausage was made.

fleetingmoments 9y ago

If no Bitcoin is being minted and a certain amount is lost every year to burn addresses or mistakes, it stands to reason that at some point the amount Bitcoin in circulation would approach zero. A hacker group could grind the economy to a halt by gaining control of people's wallets and burning money, creating much larger deflation than what is caused by the economy growing. On the other hand, as far as I understand there is a huge number of inactive coins that no-one knows whether they've been lost or not. If those coins start moving it would effectively create a large inflationary pressure.