consensus method even cheaper than POW

[zack]

No one would prefer the assets that have crazy expensive fees attached.
They don't want to pay a huge fee to sign up. They don't want to pay a huge fee to use it.

A too slow rate of coin creation results in massive fees for new rich users who want to purchase an amount of the coin on the order of the market cap.
A too fast rate of coin creation results in massive fees for ongoing usage of the coin, by inflation.

A linear rate of creation will usually be either too slow, or too fast. It can't adapt.

The value of the coins is approximately equal to the value of the resources destroyed in creating those coins.

If a rich person spends 2x the market cap of bitcoin buying bitcoins, no resource is destoyed. The USD don't get destroyed, they go to other bitcoin holders who sell. So the market cap can't increase.
So the rich person ends up with less than 50% as much value as they started with.

How are you suggesting we burn value to get the market cap to grow? By advertising?
That is just as expensive as POW, but unlike POW the profit isn't going to the advertiser/miner, it is going to everyone holding coins.

[psztorc]

One thing at a time, please.

Previously, you said:

For example, imagine a group of people who owned $100 billion wanted to convert all that money to bitcoin. They should own 94% of all the bitcoin after this transaction, because all existing bitcoin is only worth 6% of the amount they are buying.

And I responded by saying that this was false, the "should" not own any default percentage of anything. The asset is not entitled to do anything for people who aren't owners of it. The "group of people" may own $100 billion, but Bitcoin has no way of knowing (nor should it) how many USD someone has.

You responded with a counter-example about fees, which I explained was actually not a counter-example.

Now, it seems that you agree:

No one would prefer the assets that have crazy expensive fees attached.

If you agree, then you have yet to state your goal ("what you are trying to accomplish").

[zack]

I want to make a blockchain with a $ trillion market cap.

There are 2 ways to increase the market cap of a cryptocurrency:
1) burning value by advertising.
2) burning value by mining.

No one wants to do (1), because the reward goes to every coin holder. The person who pays for the ads gets an insignificant portion of the reward.

(2) works great, but in bitcoin it is a small continuous rate. It will take too long.

My goal is to have a blockchain that sells at the correct price, like bitcoin does, and also changes the number of coins sold depending on how many coins people want to buy at that price, so that the market cap can grow very fast.

[psztorc]

I want to make a blockchain with a $ trillion market cap.

There are 2 ways to increase the market cap of a cryptocurrency:
1) burning value by advertising.
2) burning value by mining.

Do you really not know how prices are determined? Obviously the two correct answers are "supply" and "demand".

You might consider improving your education, before pouring your scarce time into new theories. There are many free econ textbooks online, and you can usually learn math from a textbook's practice questions. I recommend listening to all of Chris DeRose's "Bitcoin Uncensored" podcast on Soundcloud, if you are still reading Vitalik you will be wasting most of your time, I'm afraid.

[zack]

Do you really not know how prices are determined? Obviously the two correct answers are "supply" and "demand".

Sure, price is from supply and demand, I don't see how that relates.
I was making a claim about the market cap, not the price.
I claim that the only way to raise the market cap is by doing POW, which can possibly take the form of advertising.

[psztorc]

Do you really not know how prices are determined? Obviously the two correct answers are "supply" and "demand".

Sure, price is from supply and demand, I don't see how that relates.
I was making a claim about the market cap, not the price.
I claim that the only way to raise the market cap is by doing POW, which can possibly take the form of advertising.

For anything with a fixed supply-schedule (all crypto-currencies), the market cap is the price...just expressed in different units. It is no different from measuring someone's height as 6.1 feet vs 73.2 inches.

To increase the marketcap, if supply is to be fixed, one must increase demand. If advertising increases demand, then advertising will increase the market cap. However, I don't think Bitcoin's marketcap ("price") increases because of advertising. Instead, I think demand comes from the need for things like monetary sovereignty, fungible value transfer, cheap international transfers, association with new technology, etc.

[zack]

Looking at an example from the startup world. Lets say you own 10% of a small company, and someone shows up to make a huge investment, buying 50% of the company at a price that makes the company worth 10x more.
Now you don't own 10%, you only own 5%, but the company is worth 10 times more, so your investment is worth 5x more, even though you have a smaller percentage of the total. Your shares got diluted, but you still earned profit.

Now compare against a blockchain example:
Imagine a blockchain with a market cap of $4 billion.
You own 10%.
An investor wants to invest in the blockchain similarly to how they invest in startups. They want to buy in very rapidly. Over the course of a week, he spends $1 billion mining the cryptocurrency.

This should dilute your shares, and increase the market cap, just like the startup example.

The new market cap $4+$1 =  $5 billion
20% is how much they paid, so they should own 20% of the coins.
You only own 8% now, not 10%, but it is worth the same amount as before.

[psztorc]

Is it a good idea to have "inches" and "centimeters" so rigidly connected?

[zack]

http://paulgraham.com/equity.html
Paul Graham seems to think that diluting the shares can be worth it when the investor increases your valuation enough.

[psztorc]

If you think that share dilution changes the relationship between market cap and price (a fixed MC = P * SO), then you are too ignorant of rudimentary financial concepts to post anything of value to anyone, sorry.

This is not even finance, it is 4th grade multiplication.

[zack]

Sorry if I typed something that seemed contrary to a rudimentary financial concept. I have 2 questions:

If a fixed supply of shares is best, why are startups willing to dilute shares when they get investors?

for gold, doubling mining investment rate doubles the rate of gold production. Bitcoin is unique in that doubling the rate of investment doesn't change the rate of production at all. Can you give any reasoning for why it is bad to change the rate of production relative to investment for new coins, but good to change the rate of production to keep it at a fixed ratio to the current price of a coin?

[psztorc]

At any given time, there will be 12 inches in every foot.

At any given time, the market cap will be equal to the 'price per share' multiplied by 'the total number of shares outstanding'.

It does not matter if a tree grows from being 40 inches to 50 inches, or the tree is measured in centimeters instead of inches, there will still be 12 inches in each foot.
It does not matter if the price per share rises, or if there is share dilution, the relationship between price and marketcap will be the same.

[zack]

Yes of course, I do not doubt this.


Can you answer the questions?:

If a fixed supply of shares is best, why are startups willing to dilute shares when they get investors?

for gold, doubling mining investment rate doubles the rate of gold production. Bitcoin is unique in that doubling the rate of investment doesn't change the rate of production at all. Can you give any reasoning for why it is bad to change the rate of production relative to investment for new coins, but good to change the rate of production to keep it at a fixed ratio to the current price of a coin?

[psztorc]

>Can you answer the questions?

Sure, but I don't think they will help, as you are very confused about much simpler issues.


> If a fixed supply of shares is best, why are startups willing to dilute shares when they get investors?|

Question contains a false premise. (A fixed supply of shares is not always best.)


> Can you give any reasoning for why it is bad to change the rate of production relative to investment for new coins, but good to change the rate of production to keep it at a fixed ratio to the current price of a coin?

No.

[zack]

Yes, that is what I think too.

How would you change bitcoin's reward schedule to allow for a faster growing market cap?
(Where market cap is means how many meals you could buy if you could sell all the coins at the current price)