From what I understand, if I want a transaction to finalised, I send to my peers I'm connected to, who send it to peers they're connected to, until eventually one of those people solve a block.

Whatever person solves the block which includes my transaction, gets, along with the 50 bitcoins for solving the block, any transaction fees offered in any transactions they've included in the block.

These transaction fees give nodes incentive to include transactions in blocks.

However, is there any incentive for nodes to propagate transactions. Say node A a transaction to node B. Is there any incentive for node B to send the transaction to node C, or are nodes just altruistic when it comes to propagating transactions?

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Also, I was just wondering, what's the current average transaction fees included in solved blocks? Is there a graph of this over time? I'm interested at the moment whether transaction fees or the 50 bitcoins for solving the block is greater.

Can a miner contributing to a pool know when they solve the block?

If so, could a mean miner not contribute any blocks they solve, getting coins from the pool whilst never contributing anything useful back?

I know this wouldn't help the mean miner, but it would hurt the pool operator and all other users of the pool.

You're right on the second half, I don't think the US will default.

But to say the US$ is a stable investment is ridiculous.

Lets say I sell you 100 "Clinton Credits" for $10 each. Then you loan me 100 "Clinton Credits", with the expectation I pay you back 110 "Clinton Credits" at the end of the year.

Meanwhile, during the year, I redefine "Clinton Credits" so they're only worth $1 each.

I pay you back your 110 "Clinton Credits" at the end of the year, which you can then trade in for an 89% loss.

This is not a stable investment.

A promise to get repaid in fiat currency isn't really a promise if the lender controls the value of it. The only thing you can be sure of is that if you get paid back rubbish money everyone else will.

Further to this, do nodes have any individual incentive to propagate new blocks? Either carrot (i.e. they get coins for it, are prioritized to receive new block updates or some other incentive) or stick (i.e. they're seen as bad neighbors if they don't and their neighbor nodes drop their connections)?

Thanks for the replies 861362 and Maged, I think things make more sense now.

Also, another question:

(3) Does the creator of the new block get to keep all the transaction fees (i.e. do new block finders get more than 50 bitcoins)?

So I'm guessing the 10 minute average block generation time is a balance between transaction processing time and minimizing network splits yes?


So is this saying that some nodes in the network (say the top tier nodes) would need a copy of every transaction ever?

Hi

I'd like to have a whitelist to post some questions in a more technical forum. Whilst I'm no expert, I think my questions have indicated that I have some understanding of how bitcoin works and I'd like to learn more.

Thanks

Hi

I just have a few questions about how Bitcoin operates. I did have a read through Satoshi Nakamoto's paper, but I'm not I got everything.

(1) It is my understanding that the network generates new blocks roughly every ten minutes, and these new blocks contain the recent transactions. Each new block depends on a hash of all previous blocks, building a chain.

But what happens if two new blocks are generated at a similar time? Is only one accepted by the network, or are they both excepted, and is this split in the chain then merged somehow?

I'm guessing this ten minutes is a compromise between new block clashes and network traffic and transaction confirmation speed?

(2) If you want to confirm transactions are valid, I assume you need to know how much is in each wallet in the network. Does this mean that every node in the network that wants to confirm transactions are valid needs a copy of all the current balances of all wallets in the network? And can't this grow without bound as wallets can contain very small fractional amounts of bitcoins?

But it isn't necessarily deflationary. As evidenced over the past few days, bitcoins can be quite inflationary.

With gold, as it's price goes down, people stop mining it, and importantly, less of it is produced. With bitcoin, the network just keeps spitting out coins at a constant rate (at least for the first 4 years).

This means there is no reliable lower limit on the cost of mining bitcoins, besides difficulty 1. If the price of bitcoin goes down, quite perversely, it becomes cheaper to mine bitcoins. This causes the price to go down further.

The system I suggest is more like gold, which I think would result in steady long term deflation in real terms.

I'm not so sure. Like I said, unlike gold, bitcoin does not have a feedback mechanism where more gold is mined when the price is higher. This I believe stablises the price.

When the market doesn't control the supply side, you've only got half the equation. I feel this makes it harder for bitcoin to achieve stable prices, whereas I think my proposal will address that.

Hi

I've been keeping my eye on Bitcoin for a while, but I haven't myself bought in, besides the few fractions of Bitcoins I've generated over the last few weeks.

I've been looking at the recent price rises and then falls, and I've been thinking about how to make the price of Bitcoins more stable.

I suggest that the following are good features for a stable currency:

(1) A process for the release of new currency that formulaic, not arbitrary and can not manipulated by anyone other than the market as a whole.
(2) Negative feedback mechanisms which stablise the value.

Typical fiat currencies attempt to do (2) through the central bank controlling the money supply, though it is debatable how well they perform that option.

On the other hand, they do not meet (1), as the price of money (interest rates) is not controlled by the market, but by the central bank.

Bitcoin clearly on the other hand, meets (1). But it has no mechanism for slowing the supply of new currency when the price goes down, or raising it when the price goes up. Bitcoins are released at a constant rate.

I propose to address this by the following change:

"Change the difficulty of generating bitcoins to be proportional to the number of Bitcoins in existence"

This I believe has a number of advantages over the current system:

(1) Whilst there is an early adopter bonus, it would not be as strong as it is currently.
(2) The cost of mining Bitcoins is more predictable, particularly over the medium term.
(3) There is a negative feedback mechanism. When the cost of generating bitcoins falls below the price, new supply increases, and vica versa.

Bitcoin has been compared to gold, but even gold has this negative feedback mechanism, in that when the price is high, more is mined and less is mined when the opposite is true.

I think Bitcoin needs such a mechanism for it to be a stable currency in the future.

I realise this will mean forking the network, but if people think this is a better way of doing things, perhaps new adopters of bitcoin should go with this approach. I believe it would require minimal changes to the client, which I'm happy to look into myself if there is interest, or would appreciated if someone else does also.

If this has been discussed elsewhere in the past, please feel free to direct me to it.

Any thoughts/improvements would be appreciated.

Clinton