Ideally the best block difficulty is one that is extremely high so as to protect the block chain.
However, without adequate computing power an extremely high difficulty would make block generation take far too long.
So the difficulty is adjusted periodically to allow available computing power to generate a block in about 10 minutes.
The sole reason for changing block difficulty is to adjust for computing power available.
However computing power available does not readily equate to economic activity.
Initially it may to a great degree. Miners will come and go as the price rises and falls, but over time inefficient miners will be driven from the market by competition.
Left standing will be miners who have paid off hardware and low cost or free electricity who will stay and mine regardless of the block reward. Even if all they earn is transaction fees.
The block reward should be based on the value of altcoin.
If the value rises the block rewards continue to increase until the value returns to the set level.
If the value falls the block rewards continue to decrease (even to 0) until the altcoin value returns to the set level.

The issue is what to use to determine the value of altcoin.
It needs to be something that is constant.

For example, if the USD is used and  1 USD = 1 ATC
and the USD falls in value it will look as if ATC is increasing in value, but really it's just the USD losing value.
But block chain rewards would increase thereby decreasing the value of ATC to bring it in line with the devalued dollar.
Gold wouldn't work well either as the price fluctuates greatly due to varying demand as well as the values of the currencies used to purchase it.

>Or to look at it another way bitcoin miners will spend over $11 million dollars this year on electricity, which is 17.6% of bitcoin's market cap.
>In contrast the federal reserve printing budget is ~$650 million or 0.0812% of USD value.

The $11 million is for securing the integrity of the currency not printing.
The Fed may spend ~$650 million on printing but that doesn't include security costs.

How much is spent on...

Continually developing new measures to make the bills hard to counterfeit.
The Secret Service in their effort to stop counterfeiting.
Prosecuting counterfeiters.

What's the cost of counterfeiting that is successful?


Since mining is a true free market the cost to mine will always be dropping as miners seek to maintain or increase profit.
Eventually all miners will have free or near free electricity, the rest having been driven from the market due to their inefficiency.

@Rassah

> Mom, imagine your Bitcoin wallet is a stack of envelopes ...

Ok, yours was even funnier than mine.

> Regarding #3, personally, I think a few people with an ENORMOUS amount of money invested in a project have an ENORMOUS incentive to see the project succeed,

That's true, as long as they live long and prosper, and don't turn to the dark side

>In other words, had bitcoin started the way you suggested, we'd still have a few nerds with a little bit of cash

Or we'd have many with a little bit of cash. Bitcoin is attracting miners even at this extreme difficulty.
But it's not about mining, it's about commerce.
Having a handful of people that control a significant percentage of the entire money supply is not good.
I am not saying they shouldn't have made some money, but they sure took advantage of the position, and you can't blame them, but it didn't have to be that way and it's something the bitcoin economy will have to deal with, and it's not a selling point to the average joe.

>As for #4, Bitcoin is doing just fine on Android, and that OS has more users than iPhone, so even if Apple never allows any Bitcoin apps, it'll only hurt them (more) in the end.

I just used iPhone as a term to refer to people who can't or don't want to deal with anything technical not just those specific users.
Like the first MAC having only one button on the mouse. Two buttons were deemed too confusing.

@hugolp

>Op is an obvious troll.

When you don't agree with what someone says,
just label them a troll,
It's easy, just try it.
It saves you from having to come up with an intelligent response.
Simple, quick and easy.

@hugolp
>Some points even contradicted each other.

Just spouting that claim doesn't make it so.

>Other are just ridiculous (like number 2).

That's you're opinion.
I think you'll find many other people aggravated with having to deal with numerous addresses.

@evoorhees

> 1) It is pretty darn anonymous, actually. Find me the MyBitcoin thief,

For an individual to find that out, you are right, it's darn hard. I never said one person could do it (doesn't mean they can't though .  Multiple address will give you very good privacy but not anonymity.
If law enforcement chose to, they can subpoena all the traffic logs at the ISP. Get warrants, etc.
Alphabet agencies probably have their own logging at all major peering points on the Internet. Also placing enough peers on the bitcoin network can get you a lot of information.

>The block chain is unreliable in court, because coins can change ownership without the blockchain knowing (see Bitbills, for starters)

How can you make a blanket claim like that?
The prosecution presents evidence against an accused embezzler. From the wallet taken off his computer, from the computer taken from his house, they show all the transactions and huge amounts of money being transferred from and to various addresses contained in the wallet.
You are saying all the defense has to do is say it's not his wallet?

Another example.
A wife copies her husbands wallet and other info from his computer and then instigates divorce proceedings. Claims infidelity. She hires a P.I. who finds messages to a call-girl in info from husband's computer. To connect call-girl address to husband's wallet he sends payment to an address in the wallet he thinks is hers. Then contacts her and says hey you get my payment? When can we meet? She says, "Sure Hon". Now imagine if her wallet get's subpoenaed.

> 2) Solved with time and user-friendly, trusted online wallets.

So it's back to trusting a central authority. An entire peer-to-peer set-up so we can layer central authorities on top of it.

>3) Don't be jealous of other people who discovered the value of Bitcoin before others. I fail to understand why an "unequal" distribution of coins is a problem for anyone who's not ideologically a communist.

How much 'work' had to be done when mining with a low difficulty as compared to now? It would have nothing to do with "unequal" distribution, but fairness. They earned 50 bitcoin for doing a miniscule fraction of work compared to today, but that is NOT the point I was making. I never mentioned fairness, or unequal, or equal in my post. I was pointing out that a very few people are sitting on massive hoards of the entire money supply. I am saying that is not good. I am saying it wasn't necessary. It would be much better for the bitcoin community to not have huge hoards and instead have many more people holding the coins instead and that an equal reward for the same amount of work would have been the best way to do it.

> 4) Again solved with time and user-friendly, trusted online wallets.

Same reply. See above

>5) With "green addresses" and trusted nodes and a modicum of creativity this problem is solved. Legit e-wallets will arise that can certainly be trusted for small common lighting-quick transactions. Doesn't mean you need to store your savings there.

Again you've stepped away from bitcoin to using a central authority you need to trust.

> 6) I can send a micro-payment right now pretty easily. When there are "millions" of these payments, you can assume the price per bitcoin will be significant and thus processing issues will not be too problematic.

How do you do that? When I try to send 0.000005 it won't let me without forcing me to pay a transaction fee.

> 7) Over time (long-run) the price of Bitcoin will stabilize. And Bitcoin is actually inflationary, just not as fast as government fiat currencies. This inflation approaches zero, but Bitcoin will never be "deflationary" unless many people are losing their coins.

I disagree. Unless they change the limit of no more than 21 million coins, there will be deflation as more and more people use it. Plus there will always be some small but constant coin losses, due to accident, error, etc.
Imagine if over then next five years 10 million users start using it. On average all of them want to save a mere 2 bitcoins as a reserve they never spend, sort of a virtual savings.

> And deflation, as an economic problem, is contentious.

Yes, that is why I asked if anyone has ever studied a currency or economy that had perpetual deflation.

> Observe that you buy computers frequently, even though you know they'll be cheaper and more powerful in 2 months.

Computers are not used as a medium of exchange. That makes a huge difference. If they were they would be inflationary because as time goes by they are worth less.

@timmey

>> 1) It is NOT anonymous at all.
>  That Bitcoin is anonymous is what the media told you and not what bitcoin.org says.

Yes you are right. But I didn't say Bitcoin.org said it was anonymous. Don't put words in my mouth. That's unsanitary.
I was pointing it out because so many people think it is, for whatever reason, and use it as a selling point. It's really the opposite.
The forensics you can do with the block chain and a wallet are incredible.
It's like your medical records. They are private and it's quite difficult for just anyone to get a look at them, but they are not anonymous.

>Bitcoin is still Beta and not ready for mainstream adoption.

Oh ok.

>> 8 ) Since bitcoin is like cash, it's a thief's dream come true, because once you send the bitcoins, they're gone. The scammers and con artists will ceaselessly zerg the Internet from the
>> convenience of their terminals in far away lands, in their never ending quest to steal anything they can.
> As you said...it's like cash and cash can be stolen from you.

Yep, an unfortunate fact.

@ kjj

> 1. It would be trivial to delete old addresses when you are done with them.

The client does not support this by design. They could change it though. I think the reason they have it that way is that once the address is gone any coin sent to it from then on is good as gone too.

> 2. Nothing prevents anyone from using a single address for everything. 

If you do that anyone can see all your bitcoin transactions in the block chain. The creators recommend using different addresses.

>Oh, and I have never seen any indication that the multiple addresses scheme has ever caused any real problems for anyone, ever. 

Just because you haven't seen a problem with it doesn't mean there isn't one.

>Your story reminds me of late night infomercials full of actors pretending to be confounded by trivial every day tasks.

Interesting comment, but not germane to the actual issues.

>Oh, and Congress/the Fed has the ability to create new money out of thin air, without limit, so whatever problems you think this might cause for bitcoin are already true in the real world.

Yes, that's true. But wasn't one of the selling points of bitcoin that it's not like them? If you have a tiny handle full of people who control a significant percentage of the total money supply, a supply which is limited, and in fact will always be shrinking due to bitcoin loss.
Picking a catastrophic monetary system such as the Fed and saying bitcoin is better than that, isn't saying much.

>4. Yup.  And this is mostly caused by people living in first world countries, where responsibility is unheard of because almost nothing ever has any lasting consequences.

Well I don't know about that being the reason but thanks for agreeing.

>5. In the real world, you have two choices, instant and horribly inconvenient (cash), or slow and convenient (everything else). 

Well a credit/prepaid credit/debit card is fast and convenient.

>With bitcoin, you can make the fast/easy/cheap tradeoff on your own terms.

I don't know how you can do that without using a third party. Which again is the antithesis of the design of bitcoin, no central authority. I think no central authority is good. Because you can see what can happens with centralization, as in the case of mybitcoin.

>6. Miners and relays are allowed to set their own local policy for including/relaying transactions.  Oh, and if you really do want micropayments, just make sure your client is connected directly to one of the several mining pools that have a policy of including all valid incoming transactions.  And if you want to help make micropayments more useful for the world, set your own node to relay everything and publish the address so others can use it.

Can you explain how to do that? When I try to send 0.00008 the client demands a transaction fee of 0.001.
I can see why they are doing it, they want to prevent over load. If millions of micropayments were being done everyday the block chain would grow enormously.

>7. Many of us have studied plenty of economies that had inflation. 

Ok, but that's not what I asked. Many have studied the mating habits of the wildebeast. What does that have to do with deflation?
I said the best is stable, neither deflating nor inflating.

> perpetual inflation, because they always end.  Always.  And usually with a horrible mess and thousands dead.

I agree with that, I never proposed inflation.

>8. Wait a second.  Wasn't your first point that bitcoin isn't anonymous? 

Yes. But I did not say it's a thief's dream because it's anonymous. The point is not that they will do it because they are anonymous, they aren't. They can get caught just like with any other criminal activity. The point is the ease at which they can do it and the difficulty in getting it back. 

> Also, everything you say here is true right now in the real world.  It is just that in the real world, the costs of being careless are not paid by the careless, but by everyone, by way of higher prices and fees at vendors, banks and credit card companies.

Yes, I agree. Unfortunately it's a major problem with bitcoin. Look at the ripoffs that have happened already and it's only in its infancy. It's unavoidable. Any cash like currency will have to live with this problem.

1) It is NOT anonymous at all. In fact it's a government's dream come true. *All transactions* are irrefutably logged and available to everyone.
All you have to do is associate addresses with individuals. Which with government alphabet soup powers is not too difficult, not to mention hackers, trojans, key loggers, and real world eves-dropping/monitoring.
Also, imagine a court subpoena of your wallet or outright seizure. Every address you have ever used is in there and every expenditure and receipt is in the public block chain.
This is probably of little concern to most users but see #2 below.

2) The utter ridiculous hassle of having to deal with multitudes of addresses to get any measure of privacy or know who sent you bitcoins.
No Mom, that's your address this time, really, it just changes every time you use it. No it is him. The money Uncle Ted sent you was sent to this address see, that's how you know it's from him. No, that was the address from before, it's different now. No, when Chris sends you money it's this address. No, you're suppose to use this address for now with Aunt Sally. No, it still in the same wallet. No, they are all different ... ! ... look ... how about I just get you a prepaid VISA card?

3) A very very tiny handful of people own a significant percentage of the entire money supply.
When the difficulty was extremely low the mining pay out should have been at a tiny fraction of a bitcoin instead of 50, and then increased as the difficulty increased, up to a limit of say 100 at a difficulty of 2 million, then slowly decrease due to time as slated to do. This would have provided a chance for bitcoin to be dispersed into far more hands.
It still would have given bitcoins to the creators and first users just not at a mega-royal amounts.
As it is, we have a few people sitting on gargantuan hoards.
In comparison, it would be like a handful of people having 3-4 trillion U.S. dollars sitting around. Yes, over the years as more dollars were created the dollars would be worth less and a smaller percent of the total supply. The exact opposite is true with Bitcoin.

4) The complexity of the entire system is easily handled by tech people but the iPhone crowds can't and won't try to figure it out and if they do try they will get aggravated by the complexity and fleeced because they don't know how to protect their wallet or privacy. In other words, it's the Linux of the currency world. BTW I have a strong suspicion that Torvalds is Satoshi! (j/k)

5) The slowness of the transactions. Waiting ten minutes or more to be sure the payment is valid is a huge draw back.
Of course you can use places like MyBitCoin for immediate payments, but wasn't one of the main selling points of Bitcoin that no middleman had to be trusted?
Well not if you want timely transactions. So it's really no longer a selling point. Especially in the wake of MyBitcoin.

6) The lack of ability to do true micro payments (less than USD 1 cent). Due to the concern of network bog down with millions of micro payments, they enforce transaction fees that make micro payments worthless. Solution? Yep, back to a middleman. Please visit my site: BitcoinMiddleman.com(j/k I just made that site up.)

7) The best medium of exchange is stable, neither inflating nor deflating.  The response is that bitcoins are divisible to eight decimals places.
So what. That doesn't change the fact that it's deflating. Yes, holding onto a deflating currency is great, especially for those holding huge amounts, but what does constant deflation do to the Bitcoin economy at large? Has anyone studied any economy or currency that had *perpetual* deflation?

8 ) Since bitcoin is like cash, it's a thief's dream come true, because once you send the bitcoins, they're gone. The scammers and con artists will ceaselessly zerg the Internet from the convenience of their terminals in far away lands, in their never ending quest to steal anything they can.

>This is technically untrue. There is no "luck" in probability.

I said at the start, statistically there is no difference.

Now, if you are going to consider a luck factor(which has nothing to do with probability) that is another thing. Leave it up to the individual as to whether they will consider such a factor. But I don't think this is the forum to discuss philosophy. metaphysics,  or quantum physics.

> what about CPU miners? depending?

Forget about CPU mining unless difficulty drops below 500k, maybe more.
AMD GPUs are for more efficient at doing mining.
Using a CPU is like entering a horse into a car race.

Look here to see how much faster GPUs are over CPUs.

https://en.bitcoin.it/wiki/Mining_hardware_comparison

This is a good open source Windows program for securely erasing files.

http://eraser.heidi.ie

Note: No secure/wipe/erase program will work on SSDs (Solid State Drives).

Statistically the payoff is the same whether you solo or pool.
The difference is in the speed of payout.

Which would you prefer $1 a day for a year, or a lump amount of $365 a year from now. It's the same dollar amount.

Statistics do not guarantee anything. Soloing, you could hit the payoff in one day or have to wait three years+. Pooling evens this out to a very great degree.
So typically pooling is the best choice. However if you want to factor in luck then consider the following:

If you are a person who is known to be unlucky, do not do solo. Pooling is the way to go.
If you are a person who is known to have good luck, go solo. You will earn more as your above average payoffs will not be divided among others.
If you have no idea about your luck or are typical, go with pooled mining.

I won't die, but it might become the Esperanto of the currency world. (A novelty used by small number of people.).

Use this site to see how much you can earn with your hardware:

http://bitcoinx.com/profit

I think you will find at current market prices and difficulty that mining will lose you money.

Does this idea require people to trust a third party with their bitcoin, like people trusted mybitcoin.com?

You can get a tiny amount from here: freebitcoins.appspot.com

Unless your electricity is free or close to free, mining for bitcoins at current difficulty and price level is not worth it at all.

They best way to get bitcoins is earn them(sell something) or buy them.