I am a big fan of this essay:
http://www.truthcoin.info/blog/pow-cheapest/
It helped me realize how expensive it is to lock money into bonds. This essay makes it obvious that the Casper POS being designed for ethereum will be more expensive compared to POW.
I have invented another consensus method based on the lightning network. It is more affordable than any other method, by far.
https://github.com/BumblebeeBat/FlyingFox/blob/development/docs/consensus_price.md
I need help from the community to make this document more readable.
I will look at it this Sunday.
Awesome, thank you very much.
My proof demonstrates that it is
impossible for any peer-to-peer monetary system to be cheaper than proof of work. I'm not sure why you are trying to do something that I believe to be impossible...
I think that you should try to explain what it is about my proof that you don't find convincing, which leads you to reject it and attempt to construct a counterexample.
When you write:
Quote
This document is NOT about the cost of creating new coins.
...you admit that your system cannot survive in it's earliest stages.
Ignoring that, how expensive will the crypto-monetary system be when it is the case that no new coins are created? In Bitcoin, it will be the sum of all transaction fees. Here, presumably it is the same, and the fees go to channel operators.
Ignoring all of that, the block-creator always gets to exclude transactions which he/she doesn't like. What is the "heaviest chain" rule for selecting a blockchain history, if you wake up and see two blockchains of length 100,000, which forked awhile ago (such that each chain had a group that attempted to prevent members of the rival group from opening channels)?
Thank you very much for reading the essay and giving feedback.
Quote from: psztorc on February 08, 2016, 03:52:36 AM
I think that you should try to explain what it is about my proof that you don't find convincing, which leads you to reject it and attempt to construct a counterexample.
There are a couple problems with your proof:
1) you assume that only consensus mechanisms that produce coins are viable. If you are right, then bitcoin is on a path of death. Bitcoin is slowing down coin production by half every few years. If Satoshi consensus stops working at some point, then bitcoin might want to switch to Flying Fox consensus. It is optimized for a finite non-growing money supply.
2) you only consider consensus maintained by the destruction of resources that cost the same amount for both coin-holders, and people who don't own coins. like POW and liquidity and elections. There exists a resource that is affordable for coin-holders, and expensive for non-coin-holders. (the coins)
Here is a very simple counterexample: Every coin holder is forced to stay online 24/7. The portion of coins you have is how much control you have to add the next block.
There is no way to force the addition of blocks, or censor a block, unless you are part of a coalition of >51% of coin owners who wants the same thing.
None of the coins are "bonded". you can spend them to whoever you want during any block. We aren't losing value by the interest rate.
The cost of consensus is very low, practically zero, but the cost of owning coins is excessively high. Leaving a computer on 24/7 is unreasonable for most users.
Quote from: psztorc on February 08, 2016, 03:52:36 AM
how expensive will the crypto-monetary system be when it is the case that no new coins are created? In Bitcoin, it will be the sum of all transaction fees. Here, presumably it is the same, and the fees go to channel operators.
It is as expensive as the fees yes.
In Flying Fox, the rate of block creation isn't connected to time. It is connected to a certain volume of money. Every time >X coins are ready to be spent, the next block is ready to add to the chain. So the transaction fee is proportional to the amount of money spent.
In bitcoin there is a finite supply of 1 megabyte per 10 minutes, and a variable demand.
In Flying Fox the supply changes to meet demand.
Flying Fox has normal tx fees, the same as bitcoin. It has channel fees on lightning txs, just like the lightning network will on bitcoin. Unlike bitcoin, we don't have to pay miners to waste electricity constantly, instead we pay juries of random coin-holders to vote on the next block. So the block creation fee should be a lot lower, for the same level of security.
Quote from: psztorc on February 08, 2016, 03:52:36 AM
Ignoring all of that, the block-creator always gets to exclude transactions which he/she doesn't like. What is the "heaviest chain" rule for selecting a blockchain history, if you wake up and see two blockchains of length 100,000, which forked awhile ago (such that each chain had a group that attempted to prevent members of the rival group from opening channels)?
somewhere in between these 2 rules:
1) the chain that had the most money provably destroyed.
2) the chain that has the most participation from validators.
In Flying Fox it is not possible for the chain to fork the way you describe. If 2 groups of validators were very determined to disagree on a particular block, it is like an auction. Whichever side is willing to throw away more money wins. It is more affordable for the side that has more validating power. The price of "raising" is at least 50% more than the previous raise. So it is a discrete process with exactly one winner. Everyone who stays online 24/7 can be certain that they are on the same chain they started with.
An attacker, instead of buying up tons of miners and wasting electricity, would be buying up lots of coins and provably destroying them. Which makes the rest of the coins more valuable. Flying Fox has anti-fragility built in. Attacking it makes it stronger.
It is possible to get a bunch of old private keys, and start building a fork from an old block.
This result is identical to taking the source code and launching a new chain from genesis block.
You treat it the same as any other altcoin. You go onto coinmarketcap.com or some exchanges to look up the exchange rate.
Either 1) you only have coins on the original chain, or 2) you have coins on both chains, and can't tell which is the original.
Either case is fine.
It cannot be profitable to make a fork by paying the jury of validators to double sign at every height.
The jury loses a safety deposit that is twice as big as the amount of money spent in the block.
The random seed is from a very long time ago. You would need >50% of the money in the blockchain to sustain the attack long enough for the random seed on each side to be different.
Quote from: zack on February 08, 2016, 05:04:30 PM
Thank you very much for reading the essay and giving feedback.
You're welcome.
Quote from: zack on February 08, 2016, 05:04:30 PM
There are a couple problems with your proof:
1) you assume that only consensus mechanisms that produce coins are viable. If you are right, then bitcoin is on a path of death. Bitcoin is slowing down coin production by half every few years. If Satoshi consensus stops working at some point, then bitcoin might want to switch to Flying Fox consensus. It is optimized for a finite non-growing money supply.
No, I don't.
""For simplicity, this section assumes that all P2P systems release new coins at the same schedule (ie, at a rate of 50 units per 10 minutes, a rate which itself halves every 4 years).
The following section will describe how changes to the schedule are irrelevant.""
This section describes how changes to the schedule (such as yours) do not remove the need for expensive proof of work: www.truthcoin.info/blog/pow-cheapest/#the-coinbase-rot-paradox-less-is-more
Quote from: zack on February 08, 2016, 05:04:30 PM
2) you only consider consensus maintained by the destruction of resources that cost the same amount for both coin-holders, and people who don't own coins. like POW and liquidity and elections. There exists a resource that is affordable for coin-holders, and expensive for non-coin-holders. (the coins)
Again, this is untrue. And furthermore, with a tiny assumption, that users are free to buy and sell coins (ie, that "a price exists", which -by the way- is a necessary assumption to even calculate the PoW expense, as it is defined with Bitcoin numéraire), it is irrelevant.
I agree that POW is a great solution for coin distribution.
I am going to make a fork of Flying Fox that uses POW for coin distribution.
A problem with using POW for consensus is that if 51% of miners switch, they can modify the blockchain software.
It is not good to give miners this power.
Even if POW is used to distribute the coins, we should still use FF-POS to maintain consensus. That way, any >2/3 coalition of coin holders could update the software.
Quote from: psztorc on February 10, 2016, 05:56:59 PM
This section describes how changes to the schedule (such as yours) do not remove the need for expensive proof of work: www.truthcoin.info/blog/pow-cheapest/#the-coinbase-rot-paradox-less-is-more
I agree that marketing the initial coins is expensive. And I see how it is like having 1 block with all of the POW at once.
Bitcoin created a lot of coins when the price of a bitcoin was < $0.01
It cost a lot less electricity to produce a bitcoin back then.
If more of the 21 million bitcoins were produced when the price is lower, then the total cost of electricity to produce the bitcoins would be a lot less.
The price is very low at the first block, practically zero. It seems like the most affordable time to create the coins. The least work needs be done.
Quote from: psztorc on February 10, 2016, 05:56:59 PM
Quote from: zack on February 08, 2016, 05:04:30 PM
2) you only consider consensus maintained by the destruction of resources that cost the same amount for both coin-holders, and people who don't own coins. like POW and liquidity and elections. There exists a resource that is affordable for coin-holders, and expensive for non-coin-holders. (the coins)
Again, this is untrue. And furthermore, with a tiny assumption, that users are free to buy and sell coins (ie, that "a price exists", which -by the way- is a necessary assumption to even calculate the PoW expense, as it is defined with Bitcoin numéraire), it is irrelevant.
If an attacker was willing to purchase >2/3 of the coins, he would have control of flying fox the same way someone with >1/2 of bitcoin miners has control of bitcoin.
Flying Fox is only secure to a factor of 2. An attacker willing to destroy 2 of his own coins can also destroy 1 of someone else's coins.
Similarly, the truthcoin oracle is only secure to a factor of 1. An attacker willing to buy >1/2 of the votecoins in a branch can break the outcomes of that branch.
I don't see how this attack is a problem. Could you give more details?
If your system is rewarding "miners" with transaction fees, it is still paying out coins.
So you still need to explain why you think that my general proof is wrong.
I think we have been approaching the POW vs POS problem from the wrong direction. Comparing cost of consensus mechanisms is the wrong way to think about this.
It is bad to connect the consensus mechanism to the coin creation mechanism, because the rate of coin creation should be determined by the demand for new coin.
When the demand for gold goes up, we invest more into mining, and rate of gold production increases to meet demand.
When the demand for bitcoin goes up, we invest more into mining, and the rate of coin production stays static.
Having a fixed unchanging rate of supply is bad. It makes the currency price very volatile.
What we really want is for it to always cost 1000 coins of POW to produce 1000 cryptocoins.
If we disconnect the consensus from coin creation, then we can create something much more elegant. We can sell small amount of coins for small amounts of POW to determine the current exchange rate between coins and POW, then offer to sell any amount of coins at the current exchange rate. The resulting blockchain would be able to grow it's market cap very quickly when it needs to, without changing the price of individual coins.
I designed a mechanism for efficiently determining the price https://github.com/BumblebeeBat/FlyingFox/blob/development/docs/coin_creation.md
That way we can sell unlimited coins at the current price.
Quote from: zack on February 13, 2016, 07:22:27 PM
I think we have been approaching the POW vs POS problem from the wrong direction. Comparing cost of consensus mechanisms is the wrong way to think about this.
Yes, because as I and other have patiently explained many many times, all crypto-monetary consensus mechanisms must cost exactly the same.
Quote from: zack on February 13, 2016, 07:22:27 PM
It is bad to connect the consensus mechanism to the coin creation mechanism, because the rate of coin creation should be determined by the demand for new coin.
Because the units of money are of type="fractional" (http://www.truthcoin.info/blog/pow-cheapest/#the-units-of-money-are-fractional), the creation of money is inherently redistributive -- it is a tax on some and a subsidy to others. The topic of what, if anything, should influence the rate of coin creation (particularly in the context of open source software (http://www.truthcoin.info/blog/deflation-the-last-word/)) is very complex. I do not agree that it "should" be determined by the demand for new coin (whatever that would mean).
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.
Going to each individual bitcoin owner and asking them to sell 94% of their coins is very difficult.
If someone tried this with $100 billion by trading, I bet they would own less than 1/2 of the bitcoin at the end, because the price would keep going up.
The mechanism I describe for flying fox would allow them to own the full 94% they paid for.
Quote from: zack on February 16, 2016, 01:54:08 PM
The mechanism I describe for flying fox would allow them to own the full 94% they paid for.
Can you describe why you think that that is desirable? Most would say that the asset should serve it's current owners, not prospective new owners.
Quote from: psztorc on February 16, 2016, 03:06:48 PM
Most would say that the asset should serve it's current owners, not prospective new owners.
If that were true, then every time a new address is added to the system, we should require a 100 bitcoin fee, which is shared among everyone who already had coins.
Adding arbitrary fees to new users and giving the money to old users is often bad.
Linear rate of coin creation doesn't punish new users exactly, it only punishes new rich users.
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.
Quote from: zack on February 18, 2016, 05:19:28 PM
Quote from: psztorc on February 16, 2016, 03:06:48 PM
Most would say that the asset should serve it's current owners, not prospective new owners.
If that were true, then every time a new address is added to the system, we should require a 100 bitcoin fee, which is shared among everyone who already had coins.
Say there are two assets, one which costs a fee to send, and the other costs fee + 100 BTC to send.
Why would I, as a current owner, prefer to own the one that is more expensive to send? That would be like owning an air conditioner which uses hundreds of times the electricity...not at all in my interest (as a "current asset owner").
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.
Quote from: zack on February 18, 2016, 05:19:28 PM
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.
One thing at a time, please.
Previously, you said:
Quote from: zack on February 16, 2016, 01:54:08 PM
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:
Quote from: zack on February 22, 2016, 05:17:25 PM
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").
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.
Quote from: zack on February 22, 2016, 11:19:41 PM
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.
Quote from: psztorc on February 22, 2016, 11:50:17 PM
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.
Quote from: zack on February 23, 2016, 01:37:16 AM
Quote from: psztorc on February 22, 2016, 11:50:17 PM
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.
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.
Is it a good idea to have "inches" and "centimeters" so rigidly connected?
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.
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.
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?
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.
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?
>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.
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)
> How would you change bitcoin's reward schedule to allow for a faster growing market cap?
I wouldn't change it at all. Bitcoin is the e-gold, alternative to managed fiat currencies.
That being said, I've previously argued (http://www.truthcoin.info/blog/mining-heart-attack/) that this particular version of a fixed reward schedule might have some problems, and we should soft fork it to a different reward schedule.
Oh, you think that bitcoin's reward schedule results in the largest market cap.
Could you explain why diluting the shares in exchange for investment at a higher valuation would lower the market cap?
Market cap = price of a share * number of shares.
If we increase the price of a share at the same time we increase the number of shares, it seems like the market cap would have to increase.
> Could you explain why diluting the shares in exchange for investment at a higher valuation would lower the market cap?
Question contains a false premise. (The words "valuation" and "market cap" refer to the same thing.)
Sorry for using the wrong words again. Since you are such a good word-ist, why don't you tell me which words are right?
I have explained it enough times that you know what concept I am getting at.
http://paulgraham.com/equity.html
The same way a startup is willing to increase the number of shares when a new investor gives investment that prices the startup at a higher valuation.
A blockchain should be willing to increase the number of coins when a miner gives enough POW to give the blockchain a higher valuation.
Why don't you write down an example of what you are talking about? Put all BTC and share-units in percentage terms. Do not say "50 BTC" or "1000 shares", just say "4% of the BTC" or "before the dilution, X owns 2% of the company".
Before dilution:
A owns 33% of the coins.
B owns 33% of the coins.
C owns 33% of the coins.
33% of the coins is worth about the same as 10,000 meals of food.
The investment that dilutes is:
D burns electricity worth about 10,000 meals of food in POW.
After dilution:
A owns 25%
B owns 25%
C owns 25%
D owns 25%
25% of the coins is worth the same as about 10,000 meals of food.
Maybe we should charge D a couple percentage higher or lower than that, I am not sure.
It seems that no one is better or worse off. A B and C own 10,000 meals of food, before and after. D has 10,000 food meals, and switches them from one form to another.
How, exactly, is the new system worth 40,000 meals of food (10K more), when nothing of interest seems to have happened? Could the value have increased from 30,000 to 40,000 *without* D's contribution?
Quote from: psztorc on March 07, 2016, 03:55:46 PM
How, exactly, is the new system worth 40,000 meals of food (10K more), when nothing of interest seems to have happened?
Its worth 40k because D used POW to invest 10k into it to get control of 25% of the coins.
If 25% is worth 10k, then 100% must be worth 40k.
Quote from: psztorc on March 07, 2016, 03:55:46 PM
Could the value have increased from 30,000 to 40,000 *without* D's contribution?
Advertising is another way to increase the value of a blockchain.
Quoting you from your essay "Nothing is Cheaper than Proof of Work":
So-called "alternatives" to Proof-of-Work "waste" just as much "work".
This "marginal cost" = "marginal revenue" concept actually applies to every transaction in the entire world, including all future blockchain tech.
Quote from: zack on March 09, 2016, 01:17:21 AM
Quote from: psztorc on March 07, 2016, 03:55:46 PM
How, exactly, is the new system worth 40,000 meals of food (10K more), when nothing of interest seems to have happened?
Its worth 40k because D used POW to invest 10k into it to get control of 25% of the coins.
If 25% is worth 10k, then 100% must be worth 40k.
Yes, yes, obviously. But
why did D invest 10k? He didn't seem to get anything out of doing so.
Electricity is a terrible way to store your wealth. Batteries cost more than the energy they can hold.
Converting your value into cryptocurrency lets you store it for the future.
Bitcoin miners also operate on the threshhold of profitability. They burn as much electricity as they get paid in bitcoins.
So I could ask the same of bitcoin: /why/ does anyone mine bitcoin? They don't seem to get anything out of doing so.
If it is true that miners need to make a sliver of profit, we could charge slightly less to produce coins. So 999 meals worth of electricity turns into 1000 meals worth of cryptocurrency.
If a miner manages to double the value of the system as measure in meals, then paying him a mere 0.05% of everything is a small cost.
Because of network effects, the coins probably increased in value (as measured in meals of food) by more than 0.05%
There are also arguments for why we should charge 1001 meals of electricity to create 1000 coins. Like the stuff Paul Graham said in his essay http://paulgraham.com/equity.html
I summarize his advise: Only dilute the shares if they are willing to buy in at a high enough price that the part of the company you own afterwards is worth more than what you owned before.
Maybe we need to do experiments to find the best price for producing coins.
Or we could use a prediction market to adjust the price over time. The prediction market could be maximizing market cap measured in meals, or value of a coin measured in meals, or some combination of those 2.
Or we could let the validators vote on how the price should change. Under Flying Fox consensus the distribution of validators is almost the same as the distribution of coin holders, so their incentive would be to choose the price that maximizes the value of the current coins as measured in meals.
A blockchain has a mechanism for distributing coins. All existing distribution mechanisms fail in one of two ways:
1) They grow too slowly. They don't dilute shares when new investment happens. For example, in NXT, the only way to get coins is if you buy them from someone who already has some. You can't do work to create new coins.
2) They grow too fast. Miners are able to create coins at too low of a price. The excessive selling pressure from miners continuously lowers the value of shares. It is the cryptocurrency version of hyperinflation.
All existing blockchains distribute coins poorly because they tie the coin creation mechanism to the consensus mechanism.
Flying Fox fixes this. The consensus mechanism is disconnected from coin creation mechanism. The rate of coin creation adjusts so that it is never too slow or too fast.
Quote from: zack on March 10, 2016, 11:33:51 PM
All existing distribution mechanisms fail in one of two ways
Bitcoin's seems to be doing fine. To me, anyway.
The mechanism I posted before I only capable of measuring when the price goes down.
We need a separate one to measure the price going up.
Mining should be split into 2 transactions. The first transaction is an auction, only a finite number of people can mine a finite amount of coins. The second transaction is where they provide the work they signed up to provide.
90% of the time we sell coins at the current price.
The last 10% we sell variable numbers of coins for very short periods of time at slightly below the current price.
We look at how much of a fee the miners are willing to pay for the privilege of mining these more affordable coins. Based on this fee, we can see how the price of the coin would change in response to changing the rate of production. It is the supply/demand curve.
Once the curve is measured, we can choose the next price to sell coins at. Optimizing for the two goals of increasing the market cap, and increasing the price per share.