Quote from: TPTB_need_war on April 03, 2016, 04:43:48 AM

Quote from: smooth on April 03, 2016, 04:31:33 AM

Quote from: TPTB_need_war on March 31, 2016, 06:24:56 AM

Quote from: r0ach on March 31, 2016, 01:01:41 AM

Quote from: TPTB_need_war on March 31, 2016, 12:32:50 AM

Quote from: r0ach on March 31, 2016, 12:06:27 AM

Most people don't even realize Bitcoin has it's own decentralized exchange, but it does.

Which only 0.001% of the population can participate in profitably. And it ceases roughly 2033 or unless transaction fees scale up but there is a Tragedy of the Commons dilemma there as well.

It doesn't really even matter if it's profitable or not. You can define Bitcoin in one sentence:

The purpose of mining is to create a permanent two way peg, decentralized exchange, which thus results in a permissionless system.

The economic incentives are a side issue, but seem to work thus far. It's designed to bounce back and forth between profitable and unprofitable. The fact that it's deflationary creates a time opportunity cost reward to generally remain profitable over the long haul.

You missed the point entirely. Only 0.001% have the economies-of-scale to mine Bitcoin profitably. Sorry your argument fails on the economics of proof-of-work hash functions, unless you can argue there is one that can't be significantly optimized for an ASIC and economies-of-scale for cheaper electricity located next to utility scale hydropower (even free electricity perhaps if you do a handshake and wink in China with a Communist Party official).

R0ach's argument is valid, to a point. Even if only 0.001% can mine (hypothetical number of course) then 70000 can mine (importantly, as independent entities), enough to create a competitive market. If you believe the number is even much smaller than that, as I suggest has been the case with ASIC mining, then there may not be a competitive market and his argument fails (with respect to Bitcoin at least).

Satoshi's design makes the marginal miner lose relative share of the hashrate over time due to reinvestment of profits, because they are less profitable, so the ultimate end game is only the miners with the lowest costs.

In a normal market, the marginal producers are more nimble and can respond to changes in the market more quickly and thus they are always regenerated.

But Satoshi's design is static and the marginal miners have no competitive advantage in order to sustain their existence.

QED.

Quote from: TPTB_need_war on April 03, 2016, 05:14:42 AM

Quote from: smooth on April 03, 2016, 04:51:17 AM

As r0ach correctly pointed out, it is dynamic and there is always give and take. A particular marginal miner my drop out but another will take his place. Costs are always changing. Even political connections with a corrupt local official in China can disappear at a moments notice with one bullet. Nor does China have a monopoly on corruption, so cheap electricity appears elsewhere. The cycle continues.

This belies understanding that costs can't exceed income.

As the lowest cost producers scale up, they drive income to the level of their costs (thus no profit for any marginal miners). Otherwise they form an oligarchy to raise income (e.g. transaction fees), but then they can exclude the other miners.

The coinbase along with the price being driven by speculation is a short-term mitigating factor but that diminishes as the coin matures and becomes widely used. Then transaction fees dominate and coin exchange price becomes stable.

Sorry my QED was a strong one.

Also I think we were originally talking about the breadth of distribution of the coinbase, and 0.001% is even worse than a typical power law distribution of wealth. (Note Monero apparently has a CPU friendly hash and thus probably had better distribution percentage participation, but limited to those who know about mining it, which is unfortunately a very small number of people)

As you know, I am adamant about this, because I am intending to create a token that I believe can have very broad distribution and also defend against long-term centralization.