[cryptography] Bitcoin observation

Jon Callas jon at callas.org
Wed Jul 6 18:18:13 EDT 2011


On Jul 5, 2011, at 11:30 AM, Steven Bellovin wrote:

> 
> On Jul 5, 2011, at 2:44 57AM, Jon Callas wrote:
> 
>> I was sitting around the other weekend with some friends and we were talking about Bitcoin, and gossiping furiously about it. While we were doing so, an interesting property came up.
>> 
>> Did you know that if a Bitcoin is destroyed, then the value of all the other Bitcoins goes up slightly?
> 
> Mmm -- the curve isn't monotonic; once the distribution of bitcoins gets sufficiently small, you can buy less with it, because there are fewer acceptors.  This in turn hurts the purchasing power, which means that completely cornering the market is bad for the actor who does it.  This suggests that there's another critical parameter needed for your model.

I did mention the negative feedback, as well as negative feedback on the negative feedback, but yes, you're absolutely right; it's hardly monotonic. And I think my proposed Highlander Constant is not a constant, it's a Highlander Function.

It's only bad for the actor if the actor cares over the timescale of instability, as well. It is an old maxim that the only thing bad for traders is stability.

I'm going to hit a related point in another post.

	Jon




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