Re: A proposed solution to adjust for lost Bitcoins: wallet 'heartbeats'
Let's consider a scenario. Let's assume that FBI/CIA/Other US govt agencies start a new supercomputer, and gain 60% in one day.
But there is no action without reaction. China & other countries who don't like USA immediately assume, that Bitcoin is probably a danger to US dollar and because China really wants to get rid of dollar, they put one of their newly built supercomputers into mining Bitcoins, so dollar will fall even more quickly.
Also, other "wild" miners join the game - some (ideological) to protect Bitcoin, but most because USA admitting that Bitcoin is dangerous confirms that is it valuable. So not only the attacker's network share drops below 40 or even 30%, but Bitcoin value skyrockets.
Now that I read your cogent argument, I'm convinced that China will step in to save the network. The network is not in danger at all and never will be. Hats off.
(Well i guess I'm not used to people giving up so quickly in long discussions, but that's OK too)