Quote from: galambo on February 22, 2013, 04:30:58 AM

OpenCoins decision to go with an 80%/20% distribution, similar to Freicoin except we give our 20% to the miners, and the discussions which have occurred since this announcement have caused me to start thinking about the philosophy of this choice. I have come to the conclusion that a pre-mined distribution, as long as it is done fairly, is more decentralized than Bitcoins mining subsidy.

Bitcoins mining subsidy guarantees that a very small number people who have the following qualities will have Bitcoin: those who are technically capable in a practical but not theoretical sense and have a low self-evaluation of the value of their immediate time. I understand that may seem harsh or a difficult opinion to read. This is not to diminish the efforts of Bitcoin miners, because from the Gold Mines of Alaska to the Oil Fields of Texas some of Americas greatest wealth was made by people fitting this description. However, if your goal is to distribute a new currency to a broad cross-section of the worlds population then this is not the way to do it.

Mining subsidy is a design choice and not a moral certainty. There is no scientific principal by which a person can claim the original design for Bitcoin subsidy is superior to a "premined" coin with a fairly administered initial distribution. The choice to award X units of currency to the person who mines a block is completely arbitrary. The block reward should fundamentally be understood, by all Bitcoin users, to be one of the most obvious and common changes made to a new cryptocurrency. Altering this scheme should not be thought to be fraud unless there is direct proof that the scheme declared is unfair by definition.

The importance of subsidy in mining promotes the creation of large mining pools which increase the centralization of Bitcoin. It turns out, with the subsidy being the reason for Bitcoins existence for many, that the culture around Bitcoin has organized itself around collecting the subsidy and nothing more. I am describing the meta-stable arrangement where all of the mining power is concentrated in the hands of just a few web-savvy administrators, or mining pool operators. With the arrival of ASIC miners this situation is expected to become even worse. The miners are encouraged to pool their computing power to lower the variance of the subsidy, and for no other technical reason. For example, we do not see mining pools with protein folding computer services. Clearly this is not a possible end state for Bitcoin and services like p2pool are part of the remedy to this problem. A new definition for cryptocurrency is another possible solution.

I hope the discussion in this post has helped to explain why Freicoin, and by extension OpenCoins Ripple, may have chosen to distribute the coins primarily without mining. I believe that Freicoins distribution will be done in a fair manner, and believe at the moment that OpenCoin has the same intentions.

Handing a large portion of the currency to a central authority is a way of bootstrapping a currency into the hands of a central authority. I wrote that as a tautology for a reason-- it's self-evident, and calling it "decentralized" in comparison to anything at all is sheer confusion.

There are of course many ways that authority can then divvy up the funds it controls. There is indeed the potential for a much wider distribution than Bitcoin's coinbase initially reached. But history is rife with examples of why it's generally a bad idea to trust an authority to complete tasks that benefit the greater good, especially if they necessarily diminish that authority's power at the same time. Typically centers of power like to consolidate it instead. There are exceptions, like the GPL tricking copyright law into kicking its own ass, but until I see a comparable level of cleverness in how Ripple or Freicoin dole out their tokens I'll view them with skepticism. (Though I'll certainly play with them.)

jancsika

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