Quote from: m_murfy on August 19, 2014, 11:21:42 PM

MaxCoin Public Service Announcement 19/08/2014

Sources:
http://maxcoinnews.net/maxcoin-public-service-announcement-19082014/
http://www.maxtalk.org/index.php?topic=230.0

Introduction
This is a public service announcement to all members of the MaxCoin community.

The MaxCoin Dev Team is implementing some important changes to the mining protocol which will take effect on Friday, 5th September 2014 from block 600,000 onwards. This announcement outlines the details of the protocol modifications and the rationale behind their implementation.

Please be sure to read this entire announcement as you may need to take action in order to be prepared for the upcoming changes. Failure to follow these instructions could result in the loss of coins.

Be sure to check news.maxcoin.co.uk and our twitter account @maxcoinproject for further information about the availability of the updated wallet software.

Brief Explanation
The MaxCoin protocol will be modified on Friday 5th September 2014 to address certain unanticipated inflation effects that have resulted from an earlier update to the protocol. This change will slow the rate of mining in the near term and spread it out over the long term. The total number of coins to be mined will remain unchanged at 100,000,000. A checkpointing protocol will be implemented in order to provide additional security to the blockchain.

Detailed Explanation
At block 140,000 it was decided to half the block reward from 96 coins/block to 48 coins/block and bring down the total coin limit from 250 million MaxCoin to approximately 100 million. This decision was taken as a result of calls from the community to address the issue of excessive coin inflation. The result of this action however has had a contradictory effect to the long term MaxCoin inflation curve.

We have now reached 33 million MaxCoin mined, which represents about 31% of the total coins that will exist. In contrast, bitcoin is at 13 million coins of their 21 million total. Thats 60%. It took 6 years for the bitcoin inflation curve to create twice as much as MaxCoin has in 6 months.

Compared to the 10 minute blocktime of Bitcoin, MaxCoin has a very short blocktime of only 30 seconds. It also has a shorter interval between block reward halvings, 4 years in the case of bitcoin vs 1 year in the case of maxcoin. The combination of fast blocktime and shorter block reward halving interval means the inflation curve is heavily left shifted with a very large slope at the start. This means coin inflation from block rewards is heavily frontloaded in the early adopter phase of the network.

The above chart shows the inflation curves over a period of 40 years. Bitcoin is in blue, the original MaxCoin curve is in green and our current protocol after halving the block reward early at block 140,000 is in red. The chart highlights an important and unanticipated change to the inflation curve our early halving of the block reward and reduction of the total coin limit has resulted in. This change to the protocol has not only worsened the problem of excessive inflation by approximately 25% it has also resulted in a significant reduction in the period of time over which block rewards are paid. We will now reach our total of 100,000,000 MaxCoin in only 7 years, after which the block reward will go to 0. Prior to the halving, it would have taken 55 years to issue 100% of the MaxCoin that will ever be created, however that period has been reduced unintentionally by a significant amount. With this model, after year 7 the network will have to sustain the mining process solely by the payment of transaction fees.

This is far from a desirable inflation curve for a coin to adopt and as such, the following changes to the protocol will be implemented as of block 600,000 to rectify the problem once and for all:

Total coin limit will remain unchanged at 100,000,000 maxcoin
Blocktime will be increased from 30s to 60s
Block rewards will be reduced from 48 to 16 MaxCoin/block
The block reward halving interval will be increased from 1 year to 4 years
Block rewards will half from the new block reward level of 16 MaxCoin/block
The block reward payments period will be increased from 7 years to 28 years
Checkpointing will be implemented to provide additional blockchain security

The chart below illustrates the effect the above changes will have on the inflation curve of MaxCoin. It shows our current inflation curve in red, the original MaxCoin curve in green, and the new curve in purple. The blue line represents the inflation curve of bitcoin for the purposes of comparison.

The modifications being implemented by the Dev team will not affect the total amount of MaxCoin to be issued. That will remain unchanged at 100,000,000. Instead, the inflation curve will be stretched out further to the right such that the mining of coins is spread out over a longer period of time. This will ensure that the network will be sustainable by block reward payments over the next three decades.

This new PoW inflation scheme has lower levels of coin inflation in the early years and more closely approximates the bitcoin inflation curve. It will result in coins being created over a period of 28 years instead of just 7. This is much more in line with the the coin generation period specified by the bitcoin protocol.

Notice to Mining Pools and Exchanges
The changes above will require a hard fork of the chain, and as such necessitate that all mining pools and altcoin exchanges update their clients prior to block 600,000 to prevent disruption to the MaxCoin network. We will contact all of the major exchanges and mining pools directly to ensure they are aware of the upcoming changes to the protocol, giving adequate time to update their wallets in advance of the fork.

Notice to Holders of MaxCoin
To prevent loss of your coins DO NOT send any transactions using the old MaxCoin wallet software after block 600,000 on Friday 5th September 2014. You must update your MaxCoin wallet by downloading the new version from either github or maxcoin.co.uk prior to sending coins from your wallet, or they may be lost. If you are keeping your coins on an exchange (while not advisable) you will not have any problems as long as you eventually withdraw the coins to the updated wallet software.

Future Update
In addition to this update, the Dev team is currently developing and testing a new hybrid mining scheme that will potentially replace the existing pure PoW coin distribution method. A new scheme will however continue to adhere to the inflation scheme that has been laid out above. The timing of the release of the new coin distribution method is still being determined but it will take a few months for all development work and testing to be complete. So stay tuned to news.maxcoin.co.uk and @maxcoinproject for more information in the near future!

Bump because majority of network is still on 0.9.1 and even older wallet versions - upgrade on time and help network switch to new version with as little troubles as possible.

Wallet version 0.9.2 is available at http://maxcoin.co.uk