we are actually really talking about the old Chaumian central stuff. That was because a) it was there b) it was patent free (we have to think a bit about the US). I had a read of your paper on the weekend – thanks a lot for doing that work. Interesting read.
What I did not understand about your system – how would you use it for a currency of any sort? Everybody can create a coin as they like, as far as I understood, so therefore there is no trusted supply of tokens / coins.
Or the other way around: if you don’t trust the double spending database, because its a central instance, you surely couldn’t trust a central issuer to issue and redeem. How would a currency work otherwise? Would you use it for a mutual credit system in which the transactions are shown online?
I have two questions, Satoshi.
the first one ties in with Joerg’s doubts about the trusted supply of tokens/coins.
As far as I understand, there will be a limit of the total amount of tokens that can be created, and a changing gradient of difficulty in making the tokens, where the elaboration gets more and more difficult with time. Is that correct?
It is important that there be a limit in the amount of tokens/coins. But it is also important that this limit be adjustable to take account of how many people adopt the system. If the number of users changes with time, it will also be necessary to change the total amount of coins.
Is there a formula to decide on what should be the total amount of tokens, and if so, what is the formula?
If there is no formula, who gets to make that decision and based on what criteria will it be made?
I will keep my second question for later. One thing at a time…
It is a global distributed database, with additions to the database by consent of the majority, based on a set of rules they follow:
– Whenever someone finds proof-of-work to generate a block, they get some new coins
– The proof-of-work difficulty is adjusted every two weeks to target an average of 6 blocks per hour (for the whole network)
– The coins given per block is cut in half every 4 years
You could say coins are issued by the majority. They are issued in a limited, predetermined amount.
As an example, if there are 1000 nodes, and 6 get coins each hour, it would likely take a week before you get anything.
To Sepp’s question, indeed there is nobody to act as central bank or federal reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because I don’t know a way for software to know the real world value of things. If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that.
In this sense, it’s more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.
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