but in my opinion that's a feature compensating for cheaper future storage and processing resources
Storage in the (not so far distant future) will not be free. Talk about "programmed destruction" yikes. What the bytecoin stuff does reduces all the generated coin, including subsidy what you're suggesting really is a duplicate of it, but less completely considered, please check out the bytecoin whitepaper. I suppose that leaving _out_ the fees at least avoids the bad incentive trap. It's still broken, none the less, and you really can't wave your hands and ignore the fact that subsidy will be pretty small in only a few years... esp with the same approach being apparently ineffective in bytecoin and monero when their subsidy is currently quite large.
I just read this whole thread and found it very interesting. After reading it, I decided to go back and re-read this:
Output Distribution Obfuscation (posted July 16, 2014), by Gregory Maxwell and Andrew Poelstra. (Involves use of cryptonote-based bytecoin (BCN) ring signatures, described as a possibility for bitcoin: "Using Bytecoin Ring Signatures (BRS), described at cryptonote.org, it is possible to disguise which of utxos is being referenced in any given transaction input. This is done by simply referencing all the utxos, then ringsigning with a combination of all their associated pubkeys."
http://download.wpsoftware.net/bitcoin/wizardry/brs-arbitrary-output-sizes.txt(This, in part, proposes "an output-encoding scheme by which outputs of *every possible size* are created alongside each real output (...) further requir(ing) that the "ghost outputs" are indistinguishable from the real ones to anyone not in possession of the outputs' associated private key. (With ring signatures hiding the exact outputs which are being spent, even spending a real output will not identify it as real.)" In this scenario, ghost outputs are chosen randomly, and users improve anonymity when selecting ghost outputs " by trying to reuse n for any given P, V."
(Background to this:)
So, my questions:
How would this output-encoding scheme work realistically for something of *every possible size?* And assuming this were applied to bitcoin as an option [much as SharedCoin is in blockchain.info], wouldn't it still come at a cost both in terms of size of the data corresponding to whatever transactions involved the scheme in the cases where users choose to utilize it, as well as corresponding additional fee(s)? How are the scalability issue(s) addressed? (Please also explain from both the scripting vs. no-scripting scenarios.)