Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

On the Instability of Bitcoin Without the Block Reward [pdf]

cs.princeton.edu

Post reply on HN
Print view View original

51–60 of 232 posts

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#51

Post by wildbunny »

CJefferson wrote: post #48

I've been interested in what will happen without the block reward. One (small) thing which really irritates me about bitcoin is how it is claimed it is "not inflationary", yet for it's entire existence so far, the block reward has made it more inflationary than all major currencies -- it's easy to claim that at some point in the future you will stop inflation, I'll believe it when I see it.

You don't need to 'claim' anything. It's written into the rules of the blockchain. You cannot change the rules like that and expect to have your blocks appended to the canonical chain.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#52

Post by kybernetikos »

cyphertruck wrote: post #33
coliveira wrote: post #17

Earlier quoted context omitted.

The whole economy depends on people spending. If everybody starts to hoard currency, economy will implode. That's why deflation is worse than (light) inflation, from an economic standpoint.

The idea that when purchasing power increases people spend absolutely nothing is the basis if this rationalization for inflation, and it isn’t supported by logic or experience. They actually spend more and more productively, because instead of barely getting by they are able to accumulate capital and start businesses.

Surely with a deflationary currency, interest rates would need to be significantly higher, making it harder to borrow the capital you need to start a business.

As someone with capital the expected rate of return will have to be high to make it worth lending rather than just holding on to it in a deflationary situation.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#53

Post by Nextgrid »

elcomet wrote: post #24
xiphias2 wrote: post #3

This is the first interesting paper I see here on HN about Bitcoin. While many people think that Bitcoin's energy usage is too high, I honestly hope that it's high enough to deter a nation state sized attacker. Many Bitcoiners argue that miner rewards shouldn't decrease more, but at the same time it's too late to change the concensus on it.

> I honestly hope that it's high enough to deter a nation state sized attacker. What's the point though? Bitcoin has no real use case apart from speculation.

Besides speculation there is a minority who does use it as an actual currency, often in countries where their domestic currency is unusable (sanctions, inflation, etc).

Also, just because there isn't a use-case now doesn't mean it isn't valuable to keep a currency immune to government interference around just in case you end up having a use-case for it later.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#54

Post by choward »

_7fvc wrote: post #18
generalizations wrote: post #13

Earlier quoted context omitted.

> Inflation discourages hoarding. People have incentives to spend. I'd rather we use a coin that people want more of (deflationary), rather than a coin people want less of (inflationary). There's no inherent reason we want there to be incentives to spend, unless you're some central planner trying to keep the populace invested in society.

You're comparing want (saving) and utility (spending). They're contradictory. They have different purposes. A functioning money system needs to have: (1) A Store of Value (2) A Medium of Exchange (3) A Unit of Account. Bitcoin is mostly a Store of Value. It doesn't have the other 2 functions. We can try to fit all 3 into Bitcoin. The Gold Standard failed to do it. The US Dollar system is failing. Bitcoin will likely…

> The US Dollar system is failing.

What makes you think that?

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#55

Post by jrek »

cyphertruck wrote: post #33
coliveira wrote: post #17

Earlier quoted context omitted.

The whole economy depends on people spending. If everybody starts to hoard currency, economy will implode. That's why deflation is worse than (light) inflation, from an economic standpoint.

The idea that when purchasing power increases people spend absolutely nothing is the basis if this rationalization for inflation, and it isn’t supported by logic or experience. They actually spend more and more productively, because instead of barely getting by they are able to accumulate capital and start businesses.

It's supported by both logic and experience.

It's easy to see logically if we flip the relationship. If house prices are steadily increasing (equivalent to inflation, where my purchasing power is decreasing), I want to convert my money into a house as quickly as possible. If house prices are decreasing (equivalent to deflation, where my purchasing power is increasing), I want to hold off as long as possible.

In recent experience, the rapid deflation of bitcoin has coincided with its identity pivot from medium of exchange to store of value - because why would you spend an appreciating asset?

That's not to mention the other side of the coin that deflation is necessarily accompanied by decreases in nominal income (because all the products you sell are cheaper in dollar terms, by definition) and nominal salaries.

And as coliveira stated, the economy depends on spending - and that applies just as much to an open free market economy. To suggest that the desire to want people to spend is somehow a feature unique to planned or state-run economies is nonsense.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#56

Post by bawolff »

troysk wrote: post #31
Paul-E wrote: post #12

One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardwar…

They talk about miner turning off the system just after they have mined a coin as they probability of getting another soon is very low while the cost of running the system same.

That sounds like gambler's fallacy.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#57

Post by bouncycastle »

Paul-E wrote: post #12

One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardwar…

Very unlikely it will be turned off, the miners could still keep mining other coins while mining bitcoin blocks even if there is no BTC reward. See "merged mining" https://blog.bitmex.com/the-growth-of-bitcoin-merge-mining/.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#58

Post by drdeca »

AaronFriel wrote: post #39
cyphertruck wrote: post #25

Earlier quoted context omitted.

Not to disagree, but to emphasize that the idea that the only way to increase bitcoin capacity is increasing the block size is in error. You didn't push that idea but others do. Nearly every release of bitcoin over past 8 years has increased capacity or efficiency, often both.

How many kWh does one transaction consume? Is that higher or lower than 8 years ago?

I don’t think individual transactions are meaningfully tied to an energy cost.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#59

Post by ajkdhcb2 »

chrisco255 wrote: post #15

Why can't Bitcoin simply transition to proof of stake after mining dries up? Once there are few or no bitcoins left to mine then PoW is a lot of ceremony for very little security gain at that point (and perhaps opens up risks that this paper points out).

The bitcoin community is at a general consensus that PoS is inherently insecure
Post reply on HN