Quote from: don giovanni on April 20, 2013, 11:08:25 PM

Ultimately the issue you will run into with free handouts or enforced penalties is that neither provides an incentive to do anything in particular, that is people will continue to do whatever it is they want.

And this is the expected behavior. Unexpected and unprofitable behavior should be acknowledged as a possibility.

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Its specious to say that because we have X system that this will produce Y behavior in its users.

I am not sure who you're replying to, and Red has taken a crack, but I will take one as well.

It goes back to game theory. The Evil Guys or whomever may want to lower the value of the coin by minting unprofitably. However, with free coins given away, their unprofitability will be profit in the hands of others. The deeper they want to go, the more significant the investment that needs to be wasted to achieve further instability. This will likely only be accomplished when the network is small. These evil guys will make money for everyone else, and everyone is fairly likely to know what is happening, and no one is really worse for wear other than those who wasted the time, effort, and money to cause the problem. As transaction activity grows, the ability for anyone to do something like this diminishes.

What destruction are you accomplishing when you force other people to profit off of your expense? Evil Guys' attack fails at game theory.

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Now if you give spenders free money to spend, then its going to enter the economy unvalidated,

Incorrect. It is validated by those who wasted effort in creating new currency by minting.

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that means not only will you lower the price of coin (if that is your goal), but you will also lower the confidence in the value of the coin, this could have severe repercussions in the long run.

It will take some time for an "inertiacoin" to find its sweet spot. The sweet spot may move a few times as, for example, cheap electric economies start minting. But, as the network volume increases, a larger majority of the people around the world will have to be involved in all facets of the currency. Things will normalize. There are two big arguments against your "severe repercussions": 1) those who were already using the network will receive free money to account for losses in the value of each unit (market cap neutral), and 2) it does not affect other assets (this means that the currency will be seen as a "good deal", but only because it is selling for less than its cost to produce, not because it was cheaper than it was before). As the system grows, it will become more and more difficult to try to hide anything. The more you try to hide, the less of an effect you can have.

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The issue here is the effect speculators have on the market, and without a central bank there is only one way to handle them, by increasing the monetary supply in concert with demand, in a controlled validated manner, that is by bitcoins very design solely through its miners.

Speculators in an inertiacoin style market will have no more power over a regular market. They will not be able to manipulate the money supply in the same way they can with bitcoin. Buying large amounts over short periods is the surest way to lose money. Bubbles will not be caused by speculation because everyone can at least have an idea of what it would take them to create currency. This fact can't be hidden. Any short-term instabilities created in a small market will almost invariably benefit the general user base rather than the manipulators, at least if you give money away to transaction activity.