Quote from: canonsburg on June 08, 2014, 05:50:50 PM

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If you have a real-life fortune, surely you are paying something in some form or the other to secure that fortune from threats. If you have a digital fortune stored in the blockchain you can equally assign some funds (mining costs) to secure your fortune from threats. This means that large stakeholders (aka bagholders) have a vested interest in protecting the network. These stakeholders can operate even when the mining reward is negative for the average miner because the alternative is a non-option. Their cost/reward analysis is different than the average guy because they are co-factoring that if they had the wealth in physical form they'd still have to pay to secure it.

So you have the mining equilibrium plus the stakeholder backup to secure the network.

Then the end result is still the same. It is the same if you have a deflationary currency as if you have a inflationary currency.

If you have large stakeholders with lots of wealth to protect then just like in the real world, people have to pay a "vault fee" to keep their gold secure. Say this is 1% per year to keep it in some vault. So large stakeholders either become miners and paying an amount of electricity equal to the vault fee or pay someone else to secure the network for them, which again would be equal to the vault fee.

But if you have an inflationary currency where there is a percentage increase or as some have proposed a fixed subsidy for miners, then the large stakeholders will lose some percent per year due to inflation, in an ideal situation, this would likely be the same as the vault fee. So stakeholders will still lose say 1% of their holdings per year, equal to the "vault fee" but this would just be inflation.

So either way, you still lose. As others like to say, there is no such thing as a free lunch.

Thanks Canonsburg. That was essentially the post I was going to write.

There is one shared cost with a post-distribution cryptocurrency: we must pay to secure the network against double spending. How much we have to spend depends, I suppose, on some measure of the "maliciousness of the world." But whatever that cost is, it is more a function of the civility of society than it is a function of the implementation details of the coin.

We can pay for this cost with transaction fees, by gently increasing the monetary base, by some combination of the two, or possibly by some other method. In a free market, the manner in which this cost is shared will slowly evolve towards an efficient solution.

I think it is already fairly obvious that the most efficient solution is a single ledger with a very large market cap. The cost, C, to attack the network increases monotonically with the trade, Q, that takes place on that ledger. However, the benefit that an economically-motivated attacker can accrue is approximately static (or at worst increases with Q a slower rate than C). For example, it is much cheaper on average for an attacker to double-spend a $1000 payment on the DOGE network after 30 min of confirmations than it is to double spend a $1000 payment on the bitcoin network after 30 min.