📅 Original date posted:2022-07-11
📝 Original message:I think the discussion has some anecdotic interest but has zero relevance
as far as any decision making is concerned.
Any extension of block rewards after the current deadline should only be
done if and only if the community agrees that it is the only way to keep
the network secure.
The fact that a mild inflation is sometimes compensated by coin loss is
like a bonus.
On Mon, Jul 11, 2022, 11:56 AM Stefan Richter via bitcoin-dev <
bitcoin-dev at lists.linuxfoundation.org> wrote:
> I very much agree with AJ here. This is something I remember discussing on
> Bitcointalk back in 2011: I find it highly intuitive that the amount of
> lost coins is not a constant fraction of the supply, because people get
> better at keeping their coins with increasing value, distribution and
> technology/best practices. I also think that we have observed this effect
> in practice since then. The bulk of coins that are supposed to be lost (via
> onchain analysis) haven't been moved since at least 2010. Of course, in
> most cases, we'll never know, but the assumption of constant loss rate
> seems unreasonable.
>
> Cheers
> Stefan
>
> Anthony Towns via bitcoin-dev <bitcoin-dev at lists.linuxfoundation.org>
> schrieb am Mo., 11. Juli 2022, 04:32:
>
>> On Sat, Jul 09, 2022 at 08:46:47AM -0400, Peter Todd via bitcoin-dev
>> wrote:
>> > title: "Surprisingly, Tail Emission Is Not Inflationary"
>>
>> > Of course, this isn't realistic as coins are constantly being lost due
>> to
>> > deaths, forgotten passphrases, boating accidents, etc. These losses are
>> > independent:
>>
>> This isn't necessarily true: if the losses are due to a common cause,
>> then they'll be heavily correlated rather than independent; for example
>> losses could be caused by a bug in a popular wallet/exchange software
>> that sends funds to invalid addresses, or by a war or natural disaster
>> that damages key storage hardware. They're also not independent over
>> time -- people improve their key storage habits over time; eg switching
>> to less buggy wallets/exchanges, validating addresses before using them,
>> using distributed multisig to prevent a localised disaster from being
>> catastrophic.
>>
>> > the *rate* of coin loss at time $$t$$ is
>> > proportional to the total supply *at that moment* in time.
>>
>> This is the key assumption that produces the claimed result.
>>
>> If you're losing a constant fraction, x (Peter's \lambda), of Bitcoins
>> each year, then as soon as the supply increases enough that the constant
>> reward, k, corresponds to the constant fraction, ie k = x*N(t), then
>> you've hit an equilibrium. (Likewise if you're losing more than you're
>> increasing -- you just need to wait until N(t) decreases enough that you
>> reach the same equilibrium point) You don't really need any fancy maths.
>>
>> But that assumption doesn't need to be true; coins could primarily be
>> lost in "black swan" events (due to bugs, wars or disasters) rather
>> than at a predictable rate -- with actions taken thereafter such that
>> the same event repeating is no longer the same level of catastrophe,
>> but instead another new black swan event is required to maintain the same
>> loss rate. If that's the case, then the rate at which funds are lost will
>> vary chaotically, leading to "inflationary" periods in between events,
>> and comparatively strong deflationary shocks when these events occur.
>>
>> Alternatively, losses could be at a predictable rate that's entirely
>> different to the one Peter assumes.
>>
>> One alternative predictable rate that seems plausible to me is if funds
>> are lost due to people not be careful about losing small amounts; even
>> though they are careful when amounts are larger. So when 10k BTC was
>> worth $40, maybe it doesn't matter if you misplace a hard drive with
>> 7500 BTC on it since that's only worth $30; but by the time 7500 BTC
>> is worth $150M, maybe you take a bit more care with that, but are still
>> not too worried if you lose 1.5mBTC, since that's also only worth $30.
>>
>> To mathematise that, perhaps there are K people holding Bitcoin, and with
>> probability p, each loses $100 (in constant 2009 dollars say, so that we
>> can ignore inflation) of that Bitcoin a year through carelessness. For
>> an equilibrium to occur in that case, you need:
>>
>> N(t) + k - (100/P * Kp) = N(t)
>>
>> where P is the price of Bitcoin (again in constant 2009 dollars) and k
>> is Peter's fixed tail subsidy. Simplifying gives:
>>
>> P = K * 100p/k
>>
>> But k and p are constant by assumption in this scenario, so equilibrium
>> is reached only if price (P) is exactly proportional to number of
>> users (K). That requires you to have a non-inflationary currency
>> (supply is constant) with constant adoption (assume K doesn't change)
>> that maintains a constant price (P=K*100p/k) in real terms even if the
>> economy is otherwise expanding or contracting.
>>
>> More importantly, just from a goals point of view, x is something we
>> should be finding ways to minimise it over time, not leave constant.
>> In fact, you could argue for an even stronger goal: "the real value held
>> in BTC lost each year should decrease", that is, x should be decreasing
>> faster than 1/(N(t)*P).
>>
>> Cheers,
>> aj
>>
>> _______________________________________________
>> bitcoin-dev mailing list
>> bitcoin-dev at lists.linuxfoundation.org
>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev at lists.linuxfoundation.org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
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Giuseppe B [ARCHIVE] /
npub1sp…2z75w
2023-06-07 23:11:35
in reply to nevent1q…820j
Author Public Key
npub1spdrln2clr763n86lhsx7g9hpu0w5cv9hasv4amyyqdde96r7h8s72z75wPublished at
2023-06-07 23:11:35Event JSON
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"content": "📅 Original date posted:2022-07-11\n📝 Original message:I think the discussion has some anecdotic interest but has zero relevance\nas far as any decision making is concerned.\n\nAny extension of block rewards after the current deadline should only be\ndone if and only if the community agrees that it is the only way to keep\nthe network secure.\n\nThe fact that a mild inflation is sometimes compensated by coin loss is\nlike a bonus.\n\nOn Mon, Jul 11, 2022, 11:56 AM Stefan Richter via bitcoin-dev \u003c\nbitcoin-dev at lists.linuxfoundation.org\u003e wrote:\n\n\u003e I very much agree with AJ here. This is something I remember discussing on\n\u003e Bitcointalk back in 2011: I find it highly intuitive that the amount of\n\u003e lost coins is not a constant fraction of the supply, because people get\n\u003e better at keeping their coins with increasing value, distribution and\n\u003e technology/best practices. I also think that we have observed this effect\n\u003e in practice since then. The bulk of coins that are supposed to be lost (via\n\u003e onchain analysis) haven't been moved since at least 2010. Of course, in\n\u003e most cases, we'll never know, but the assumption of constant loss rate\n\u003e seems unreasonable.\n\u003e\n\u003e Cheers\n\u003e Stefan\n\u003e\n\u003e Anthony Towns via bitcoin-dev \u003cbitcoin-dev at lists.linuxfoundation.org\u003e\n\u003e schrieb am Mo., 11. Juli 2022, 04:32:\n\u003e\n\u003e\u003e On Sat, Jul 09, 2022 at 08:46:47AM -0400, Peter Todd via bitcoin-dev\n\u003e\u003e wrote:\n\u003e\u003e \u003e title: \"Surprisingly, Tail Emission Is Not Inflationary\"\n\u003e\u003e\n\u003e\u003e \u003e Of course, this isn't realistic as coins are constantly being lost due\n\u003e\u003e to\n\u003e\u003e \u003e deaths, forgotten passphrases, boating accidents, etc. These losses are\n\u003e\u003e \u003e independent:\n\u003e\u003e\n\u003e\u003e This isn't necessarily true: if the losses are due to a common cause,\n\u003e\u003e then they'll be heavily correlated rather than independent; for example\n\u003e\u003e losses could be caused by a bug in a popular wallet/exchange software\n\u003e\u003e that sends funds to invalid addresses, or by a war or natural disaster\n\u003e\u003e that damages key storage hardware. They're also not independent over\n\u003e\u003e time -- people improve their key storage habits over time; eg switching\n\u003e\u003e to less buggy wallets/exchanges, validating addresses before using them,\n\u003e\u003e using distributed multisig to prevent a localised disaster from being\n\u003e\u003e catastrophic.\n\u003e\u003e\n\u003e\u003e \u003e the *rate* of coin loss at time $$t$$ is\n\u003e\u003e \u003e proportional to the total supply *at that moment* in time.\n\u003e\u003e\n\u003e\u003e This is the key assumption that produces the claimed result.\n\u003e\u003e\n\u003e\u003e If you're losing a constant fraction, x (Peter's \\lambda), of Bitcoins\n\u003e\u003e each year, then as soon as the supply increases enough that the constant\n\u003e\u003e reward, k, corresponds to the constant fraction, ie k = x*N(t), then\n\u003e\u003e you've hit an equilibrium. (Likewise if you're losing more than you're\n\u003e\u003e increasing -- you just need to wait until N(t) decreases enough that you\n\u003e\u003e reach the same equilibrium point) You don't really need any fancy maths.\n\u003e\u003e\n\u003e\u003e But that assumption doesn't need to be true; coins could primarily be\n\u003e\u003e lost in \"black swan\" events (due to bugs, wars or disasters) rather\n\u003e\u003e than at a predictable rate -- with actions taken thereafter such that\n\u003e\u003e the same event repeating is no longer the same level of catastrophe,\n\u003e\u003e but instead another new black swan event is required to maintain the same\n\u003e\u003e loss rate. If that's the case, then the rate at which funds are lost will\n\u003e\u003e vary chaotically, leading to \"inflationary\" periods in between events,\n\u003e\u003e and comparatively strong deflationary shocks when these events occur.\n\u003e\u003e\n\u003e\u003e Alternatively, losses could be at a predictable rate that's entirely\n\u003e\u003e different to the one Peter assumes.\n\u003e\u003e\n\u003e\u003e One alternative predictable rate that seems plausible to me is if funds\n\u003e\u003e are lost due to people not be careful about losing small amounts; even\n\u003e\u003e though they are careful when amounts are larger. So when 10k BTC was\n\u003e\u003e worth $40, maybe it doesn't matter if you misplace a hard drive with\n\u003e\u003e 7500 BTC on it since that's only worth $30; but by the time 7500 BTC\n\u003e\u003e is worth $150M, maybe you take a bit more care with that, but are still\n\u003e\u003e not too worried if you lose 1.5mBTC, since that's also only worth $30.\n\u003e\u003e\n\u003e\u003e To mathematise that, perhaps there are K people holding Bitcoin, and with\n\u003e\u003e probability p, each loses $100 (in constant 2009 dollars say, so that we\n\u003e\u003e can ignore inflation) of that Bitcoin a year through carelessness. For\n\u003e\u003e an equilibrium to occur in that case, you need:\n\u003e\u003e\n\u003e\u003e N(t) + k - (100/P * Kp) = N(t)\n\u003e\u003e\n\u003e\u003e where P is the price of Bitcoin (again in constant 2009 dollars) and k\n\u003e\u003e is Peter's fixed tail subsidy. Simplifying gives:\n\u003e\u003e\n\u003e\u003e P = K * 100p/k\n\u003e\u003e\n\u003e\u003e But k and p are constant by assumption in this scenario, so equilibrium\n\u003e\u003e is reached only if price (P) is exactly proportional to number of\n\u003e\u003e users (K). That requires you to have a non-inflationary currency\n\u003e\u003e (supply is constant) with constant adoption (assume K doesn't change)\n\u003e\u003e that maintains a constant price (P=K*100p/k) in real terms even if the\n\u003e\u003e economy is otherwise expanding or contracting.\n\u003e\u003e\n\u003e\u003e More importantly, just from a goals point of view, x is something we\n\u003e\u003e should be finding ways to minimise it over time, not leave constant.\n\u003e\u003e In fact, you could argue for an even stronger goal: \"the real value held\n\u003e\u003e in BTC lost each year should decrease\", that is, x should be decreasing\n\u003e\u003e faster than 1/(N(t)*P).\n\u003e\u003e\n\u003e\u003e Cheers,\n\u003e\u003e aj\n\u003e\u003e\n\u003e\u003e _______________________________________________\n\u003e\u003e bitcoin-dev mailing list\n\u003e\u003e bitcoin-dev at lists.linuxfoundation.org\n\u003e\u003e https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev\n\u003e\u003e\n\u003e _______________________________________________\n\u003e bitcoin-dev mailing list\n\u003e bitcoin-dev at lists.linuxfoundation.org\n\u003e https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev\n\u003e\n-------------- next part --------------\nAn HTML attachment was scrubbed...\nURL: \u003chttp://lists.linuxfoundation.org/pipermail/bitcoin-dev/attachments/20220711/a217aea1/attachment-0001.html\u003e",
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