Rather than to inflate, let's find a real solution

[FibaX]

So this is not the ordinary "SET A MARKET CAP" thread. I want to give my view on the situation and build my arguments to prove a fair point.

So yesterday the decision fell to leave the current market cap as it is. This will inflate Dogecoin with Ð5,300,000,000 coin annually and is said to be good for attracting miners and keep the volume of dogecoin in circulation constant.

As everyone knows, in order to keep the miners mining and ensuring a safe hash rate, it has to be attractive. Let's say there are 2 types of miners, those who care about the coin and those that are in for profit. Nothing is wrong with the both. I rather have the first one in the network and i'm sure there are a lot, but the second one is welcome as well.

The first ones are there for making a little profit, even going break even is okay for them. The miners that want profit will not mine Dogecoin, even if the block reward Ð10,000. There always will be coins that will be much more profitable than Doge will be when 100,000,000,000 coins are mined.

Let's try to make a dedicated mining group who are there for the interest of Doge and let's get them some profit that they are rewarded for their efforts. How? The original plan of cryptocurrency is that the users pay for using the network. This is only as logical as paying for a service.

Now let's look at what the planned inflation means for Dogecoin. It is originally created to compensate for coin loss. How much is this coin loss? We can only make an estimate and that estimate is to be determined. I would say a 0.5% annually coin loss rate is realistic. That means 0.5% of the total coins are taken out of circulation and should be added back into it the economy.

With the current plan this means that the total coin volume will inflate for 80 years. After this period the inflation will dive under 0.5%, effectively deflating Dogecoin. I do not think this is the path that Dogecoin should follow.

Holding a constant volume of dogecoin in the economy, is what Dogecoin wants. A supply volume that is stabilized with the lost coin is the closest we can come to a natural supply without deflating the coin.

I found a graph in topic #23 which i updated to the real curve dogecoin is going to make with the current plan.

So in order to keep the circulation volume constant a formula has to be, the following section is just a quick sum of how it's supposed to be in my opinion.
To keep the volume in circulation constant the following formula comes in place:

100.000.000.000 + ( Total coin volume * Loss percentage)

Per block:

 ( Total coin volume * Loss percentage) / Amount of blocks mined annually

With a loss percentage of 0.5% the block reward will be in the first year just below Ð1000.

Now let's get back to keeping it attractive to miners. The Ð1000 should be a bottom ground for the miners and the rest should be supplied via transaction fee. Now I'm not in favour of forcing people to pay transaction fee, but it would fancy the community to think about the miners.

We always are very generous but seem to forget to add transaction fees. The average amount of transactions per block is just above 80 transactions and the average amount of fee per block is around Ð14. This means that the average amount per transaction is Ð0,175 and that translates to $0.00022 per transaction. The total amount of Doge payed to the miners per day is about Ð20,000 ($25.11).

To put this into perspective:
A bitcoin block will contain an average of 600 transactions per block and these transactions pay on average 0.1 BTC per block(totals to around $11.400 a day). Dogecoin has a 10 times faster block time, so 1 block in bitcointime equals 10 blocks in dogecoin. Those 10 blocks in dogecoin will contain 800 transactions totalling Ð140 in transaction fees.

Ð140 (0.00022120 BTC) compared to 0.1 BTC, that's a 500 factor difference and shows that paying for the transaction fees does not really have the attention of the community.

So how much transactions fees should be payed? This depends on the total amount transactions, not on the price of Doge.

And here come in ASIC miners. ASIC miners are perfect for low cost and high efficiency mining. The currently in development Fibonacci ASIC miner hashes out 1MH/s at 3.5W.
So let's assume that a fixed transaction fee of 1 cent is implemented and the total number of transactions stays the same.

80 * 1440 * $0.01 = $1152

That's $1152 going straight to the miners each day as a reward for their hashing power.

So how much hashing power could this produce? Let's first take the best situation, miners mining for break even. A fibonacci Asic miner uses 3.5W, this equates to 0.084 kWh per day. A kWh costs 20 eurocent in my country and that's one of the highest rates in the world.

0.084 * €0.20 * 1.35 (conversion rate USD/EUR) = $0.02268 per day
$1152/$0.02268 = 50.8 GH/s

Now this is based upon miners breaking even on the costs and even not the hardware costs implemented. But this quick calculation shows what 1 cent transaction can change. I think it's only normal to pay for the hashing service they provide.

My opinion is that Doge should neither have inflation or deflation. It should stay natural and the price must be determined by supply and demand. However with a currency it could not be deflationary, that would decrease the amount of coins in circulation and ultimately drive itself in to the ground. An inflationary currency is not attractive to people. The current plan for Dogecoin is not viable. Trying to keep the currency attractive by inflating it is also not viable.

Bringing the community more in touch with the miners is what we need. People need to realize that the hashing power is not free and it's a service that needs to be payed for. I still have the feeling the current approach is in the form of what the banks use; there is demand for money, so let's create extra. It's an easy solution that does not fix the problem.

[fract4l]

Your solution is not workable. There is no way to know what the loss percentage is each year.

The math you should be looking at is how much DOGE reward miners need per block to be more profitable then litecoin, and will the block reward have to be for that to continue going forward? Your suggestion to lower it to 1000 DOGE and still keep miners from going back to litecoin in no way realistic.

[ghost]

you should be mining to protect the network because you have a stake in it
-- because you believe in it and because you use it and hold much coins
for spending and sharing ... not for a simple miner profit equasion

On Tue, Feb 4, 2014 at 2:04 AM, fract4l notifications@github.com wrote:

Your solution is not workable. There is no way to know what the loss
percentage is each year.

The math you should be looking at is how much miners need now per block to
be more profitable then litecoin, and will the block reward have to be for
that to continue going forward? Your suggestion to lower it to 1000 DOGE
and still keep miners from going back to litecoin in no way realistic.

Reply to this email directly or view it on GitHubhttps://github.com//issues/204#issuecomment-34035527
.

[ummjackson]

Without a crystal ball, it's impossible to know where any cryptocurrency is headed in the future with certainty. As this discussion isn't directly related to the development of the software, let's close this. Please use discussion platforms such as Reddit for this purpose.