Post
Topic
Board Economics
Re: The deflationary problem
by
Sweft
on 12/04/2013, 19:19:01 UTC
So your saying you expect it to stop?  I find little evidence that it will ever stop, the continual halfing every 4 years of mining rewards clearly points to a about ~20% deflation per year over the long term as the price of BTC must rise to keep mining profitable.
Not necessarily. Fees can rise, as well.

Once we get closer to market saturation, and have a better developed economy - by which I mean more goods and services valued directly in bitcoin - we'll see a lot smoother price movements.

I already addressed this issue, please read the thread.

Fees are capped at 100% so increasing fees cannot support exponential growth.
If bitcoin is still experiencing exponential growth in 2140, the world will have much greater problems than securing the bitcoin network, because that will require many times the current world population and that the population also be growing exponentially.

Network hash must grow at least at the rate of Moore's Law.  This is also known as Sweft's Law.  If Bitcoin fails to satisfy this condition, then it will be prone to attack.

Because if Network hash rate doesn't at least keep up with computing power, it can be outcompeted, and lose the 51% battle?

You seem to have forgotten the second half of Moore's law. Hardware also gets cheaper as it gets more powerful. Fees will more than keep miners in the latest hardware.


I think you are one step closer to realizing the problem.

Hash must always grow.  

The inclination of early Bitcoin theorists was that Hash would fall if miners did not profit, and the mechanism would regulate itself until miners profited.  This is true for mining profit and always will be.

But if miners do not profit, and the difficulty must come down for them to profit, then the whole network can potentially become compromised.

Thus, as i originally stated hash must increase in accordance with Moore's Law, as well as difficulty, and the protocol should reward mining profit through inflation rather than punish it with deflation.