Re:Bitcoin and positive vs. normative economics
by natrius on Sunday December 29, 2013 @01:16PM
(#6980535)
This is the biggest practical flaw I've understood so far, but it still seems fixable. If Bitcoin becomes uncompetitive with traditional payment systems and mining activity decreases, miners could collectively decide to alter the mining reward.
Re:Bitcoin and positive vs. normative economics
by saalweachter on Sunday December 29, 2013 @04:32PM
(#6981489)
The problem with keeping mining rewards high is that Bitcoin is supposed to be deflationary.
Right now the mining rewards being minted increase the Bitcoin supply at a rate of 11% per year. If demand for Bitcoin were constant, this would amount to 11% inflation. Demand for Bitcoin is currently increasing, so it is net deflationary, but this only lasts as long as the demand for Bitcoin is growing constantly. If you kept mining rewards high after the demand for Bitcoins had stabilized, you'd have five times the inflation of the dreaded US dollar, as you paid for your infrastructure costs through inflationary taxation.
(Which Benjamin Franklin and I actually like, but that's another issue entirely.)
If 90% of the network is powered down to reduce transaction fees, that gives someone the opportunity to buy up 20% of it on the cheap and corrupt the network. Bitcoin has to use as many resources as possible to stay secure.