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Comment by Aqueous | Hacker News Reader

Litecoin seems to solve the wrong problem with Bitcoin.

Bitcoin's mining difficulty is calibrated fine for having a fixed limit. It's the fact that Bitcoin and Litecoin both stop at a fixed amount of units that makes them ultimately deflationary currencies that don't reward spending.

BitCoin is unique in that you can get an exact, real time measure of how the 'economy' is doing, whereas with the American economy these measures are extrapolated based on statistical work. Somebody should fork bitcoin and create a monetary policy adjustment algorithm that responds to changes in the transaction rate and prints more money (i.e., adjusts mining difficulty) in response. They should also remove the fixed ceiling.

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I'm not sure why people have a problem directly with the fixed bitcoin limit. Unless there are some radical changes in medicine in the next few years, none of us will ever live to 2140 to see it.

The fixed BitCoin limit means the rate of production of BitCoin is also fixed, or changes in a determined way. It can't be decreased or increased in response to changes in the rate of spending. I think a monetary policy algorithm might actually adjust the rate of production of the coin upwards to counteract deflation.

I imagine you'd struggle to do that reliably though. There's little indicators in the blockchain as to what an individual coin is worth, and relying on any external source for data would ruin the decentralised mantra that the currency is built upon.

you mean the exchange rate? it wouldn't need to know the exchange rate, just what volume of bitcoin is changing hands at any given point in time which is part of the blockchain.

This could be fairly easily manipulated, though.

I could make two node spam transactions between themselves to drive the rate up, or make non-relay nodes to poison the network and make it go down. There's no way of really knowing how many parties are using the blockchain.

Actually Litecoin MIGHT jsut solve "the deflation problem":

More specifically, having a number of BTC clones of "varying degrees of 'dilution'" in constant competition might, via emerging floating "exchange rates" (from arbitration traders), "balance" what the missing "monetary overlord" cannot technically pull off. Could that be? Ever-evolving store-of-value versus medium-of-exchange demand in the network may be ever-shifting to the various currencies based on their intrinsic un-changable core "policies" (inflationary Freicoins vs. deflationary Bitcoins) and other market dynamics, no?

I'm no game theorist right now so I can diagram it out but hey, something to think about, no? It just "might" contribute to "easing" the "problem".

Also, I do love me some "quotation marks".

I agree that someone should fork bitcoin and fix the mining problem. But screw transaction rates, the mining difficulty shall be determined by the nodes (people) participating in the network. Periodically, every node votes and a (weighted) average determines future mining difficulty. It may be a technical problem, but it may also be the right solution. And it will make the bitcoin more democratic.

This kind of sounds like people setting interest rates. I've heard that's gone well for us... Twice.

Of course, otherwise people will treat bitcoins like oil, another scarce resource, and not use either. Land too is limited, which is why it's never sold. /s

What this talk of the future value of things requires is a full understanding of opportunity cost, etc. If all you ever did was buy food, you'd get more if you didn't buy today and bought tomorrow, assuming food prices remained stable and your BTC increased. But you need food today.

Similarly, you might want to start a business which would be more profitable than waiting for bitcoins to appreciate.

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