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Want to clarify I should have said “mining rewards” not fees

Fundamental assumption that you should try to refute if you respond: social consensus and fair distribution are far more important than scarcity as long as the distribution schedule is known, transparent, and can only be changed with broad social consensus.

Emcot 2y ago

Social consensus on the finite scarcity of bitcoin will persist over time because of human nature. Greed.

Suggesting an arbitrary inflation rate does two things: 1) shows you don’t respect the gift of perfect scarcity. We now have a definition of value that will not change over time- as with distance, temperature, weight…

And 2) that “fair” distribution can be anything but Discovery -> Extraction/Production -> Market Fit over Time. How does something distribute otherwise? Subjective intervention, sure. But there is nothing “fair” about that.

Sure. I agree with much of your statement especially in the fact that changing the protocol is a potentially a bigger problem than anything it would purport to solve.

However, I don’t buy into the “perfect scarcity” argument. “Perfect scarcity” would be a bitcoin protocol with no inflation whatsoever, unless you would also consider an alternate universe where Satoshi invented bitcoin with no hard cap as “perfectly” scarce just because future supply is always known and can’t be changed?

To me the conversation of scarcity and known supply are two different things. Suggesting any change to the issuance obviously violates the issuance transparency and that is a bigger problem than violating scarcity.

Inflation is theft.

Go buy nano then! Miners are stealing from you every day

Obviously sarcasm, but that’s a weak argument

ok...

Since inflation is a tax, the question begs, what are the taxes for? You have onus to explain why a tax is needed and what it is that it is fixing, over not taxing? What economic situation are we punishing or promoting?

What does inflation do for our current financial system? Does it help anything? Anyone? The answer is yes. It helps banks and governments to borrow. You see, borrowing in a deflationary currency means your debts GROW as time goes on. If you borrow inflationary currency your debts shrink as time goes on.

You can see how the incentives would promote debt, paper Bitcoin, among governments and corporations, if we were to have a perpetual inflation in the unit of account.

Why would Bitcoin, a base layer, globally neutral, want to promote debt and borrowing?

That would be choosing those today over those tomorrow, as your original post says. That is choosing the young, who are investing instead of saving like the old. That is choosing government and corporate and bank interests over the interests of the individuals of the world.

1. Bitcoin exists because if social consensus - people have to choose neutral money over gov money and they will do so if it fits their ideals.

2. Debt is always going to exist in a functioning society, neutral money ensures that no group has unfair access to debt creation via monetary tools.

3. Bitcoin is inflationary and will be inflationary for the next century. Does that mean it is promoting debt?

halalmoney 2y ago

I like to think that the same foresight which the Hodler generation used to acquire Bitcoin at rock bottom prices will be used after Bitcoin appreciates ten-fold (or whatever the actual increase will be). E.g. if grandpa sees that his grandkids are just waiting for him to die so that they can take over his citadel, grandpa will allocate his capital to initiatives that combine putting one’s house in order and making the world a better place.

By contrast, people who got rich through real estate and the stock markets did so in a way which entrenched the broken incentives of the status quo. They have demonstrated foresight but offered negligible efforts to making things better for society at large.

Thanks for the response! To me that sounds like trusting those individuals to redistribute fairly. I guess it seems to me that a shift from redistribution via a provably fair method PoW to a method that relies on the good-will of early adopters could be a negative aspect. Of course there are major issues with suggesting a change to bitcoin that would make it unlikely to happen, just trying to understand the trade-offs here

halalmoney 2y ago

I’m not sure that “fair distribution” is either desirable, possible, or a marker of a well-functioning system. I’m more interested in the cultural shift which Bitcoin will, I hope, contribute to: rewarding those who stood by their principles, encouraging healthy scepticism, greater emphasis on privacy, critical thinking and understanding the impact of good and bad incentives.

What's fair about choosing miners, a specific industry, over the distributed self-interested of the Hodler generation?

Proof of Work is provably fair in spending energy to get the Bitcoin reward, but you're talking about the economy of the broad social community, not of the specific and limited Bitcoin transactional layer. Those are two totally different worlds and Bitcoin has no business being concerned or nvolved in the other layers.

TCP/IP does not concern itself with Twitter vs TikTok - It's neutral to all applications built upon it's base layer.

Good point. I probably shouldn’t have said probably fair.

I guess my question ultimately comes down to this: if an open and permissionless mechanism (over trusted parties) was the better way to distribute in the early days then what makes it different in 100 years when the new generation had no say over the actions of their parents?

Hard cap vs inflation is arbitrary. Satoshi could have implemented the protocol with perpetual small inflation and we’d still all be here.

What is important is that the monetary policy is fixed and enforced by economic nodes.

Scarcity is not optional. This is the Blockchain not Bitcoin argument. You're saying the important bit is that we have a decentralized blockchain managed money, whatever the rules are. There's a fair amount of economic theory involved in the design of Bitcoin that you're not understanding.

lol, it absolutely is not the blockchain not bitcoin argument.

If the bitcoin protocol was created with a 1% perpetual inflation rate, I would still be here.

Are you saying you would hold out for a shitcoin copy of bitcoin with a fixed supply?

I'm saying in the age of private money we're entering, monetary policy will compete over the long haul, 100s of years.

When all the governments of the world are targeting 2% inflation, a Bitcoin with 2% inflation would not be sufficiently different in this competition, once the governments upgrade their network tech stack.

A different Bitcoin without that 2% inflation would win the monetary policy competition, so yes, I would 'hold out' for a Bitcoin copy that has the right monetary policy.

How could Bitcoin be modified to guarantee x% inflation? Inflation is when the money supply grows faster than production. (Deflation is the opposite.) Where is the measurement of the growth of production going to come from? Some sort of Ethereum-style oracle?

In these types of conversations, people generally use the more accurate definition of inflation; growth in money supply.

Production is not really relevant

Your definition implies that inflation can happen while the average price of goods and services falls. That doesn’t sound like common usage.

You’re correct, but bitcoiners are not common people

Yes, I was speaking strictly about inflation of the bitcoin supply not relative inflation in price of a CPI basket or something like that

The comment about was about as far away as you can get from supporting the “blockchain not bitcoin” argument. It was “not only is bitcoin the only one that matters, but it would still be the only one that mattered even if designed differently”.

I believe that there is a lot of economic theory that went into bitcoins design but there are many ideologies within economics. Economics is far from a hard science and the fact that bitcoin is the way it is doesn’t necessarily mean that’s the only way it would have worked.

That said, I do think the scarcity narrative has helped bitcoin adoption from a game theoretic standpoint. Just wondering if we will se unforeseen consequences of those choices down the road.

Not sure I understand. If my father borrows some money and uses it to build wealth (or just to consume), that doesn’t create any obligation for me to repay his debt. Only the government gets to spend money on one generation, and impose taxes or inflation on the next.

Aren’t we all born with nothing, except what our parents give us? We exceed that by producing wealth in our own lifetimes. Bitcoin doesn’t change that.

True, but where does the money we earn come from. In today’s system it comes from other humans who might be closely connected to those who printed it. In bitcoin it comes from either

1. someone who adopted bitcoin before you or

2. from a miner who competed in an open protocol to earn it.

What I’m asking is if the shift from more 2 to more 1 over time is a good thing. 1 feels more like the status quo than 2

Money is not wealth. Bitcoin could be modified to reward miners with 1000 BTC per block, forever. That wouldn’t create any more goods or services that human beings can consume.