Author: Ilan Oh 2017-10-13 12:27:17
Published on: 2017-10-13T12:27:17+00:00
The current value of Bitcoin is driven by the difficulty in mining it rather than by demand. The supply guides the market, so even with a fixed demand, the price would increase as the difficulty grows. At the beginning of the "mining-price" cycle, the incentive was to contribute to the network and create one's own supply. Mining infrastructure follows the price, which means that if Bitcoin were still trading at 1 USD per coin, nobody would build mining infrastructure to the same level as today, with 5000 USD per coin.A faster responding difficulty algorithm would prevent miners from switching to an inferior coin simply because it provides them with more "protection money" from fees. This would enable them to bully Bitcoin Core out of existence, even in the presence of slightly larger hodler support. The goal should be to have a better difficulty algorithm in place to be used in the next BTC "Core" fork, not to have a bunch of BTC clones that merchants and buyers use equally but for future security.Constant value is defined as being neither inflationary nor deflationary. Bitcoin's deflationary quality created a massive marketing advantage as well as paid the creator about a million dollars an hour. The discussion on the bitcoin-dev mailing list revolves around whether a coin with 2x more transactions, 22% lower price, and 22% lower fees per coin transferred can attract more merchants, customers, and miners.The assumption is that hodler security concerns will be outweighed by the benefits of increased usage. However, some argue that user needs should be met on the chain that has good developers who are likely to innovate methods to reduce limitations. Bad money can drive out good, especially if market determination is not efficient. A faster measurement of hashrate for difficulty enables more efficient and correct economic determination, preventing the biggest coin from bullying forks that have better ideas.Developers must strive to expand the coin quantity to keep value constant, which is the foundation of the 5 characteristics of an ideal currency. This is a massive departure from the conception of Bitcoin as having a fixed limit and effectively becoming deflationary. It will lead to massive economic distortions in favor of those who receive newly-minted coins. Hardforks require massive coordination effort that cannot feasibly be done within a month. Devs are a governing authority under the influence of users, hodlers, and miners, and the fewer back-incompatible changes to a coin, the better.
Updated on: 2023-06-12T21:43:28.978050+00:00