Thursday, July 30, 2015

bitcoin transaction fees and inherent value

The following I now think is wrong (as I originally did when I read wei dai). The currency should reflect a percent ownership of much larger assets like molecules in the brain representing larger objects in the environment.

The theoretical inherent value of the coin is the capital cost of the network (including 3rd party businesses helping it along), keeping in mind the capital value of computers diminishes rapidly. Wei Dai said something very much like this. Transaction fees and everything else should be directed towards making the network as difficult (expensive) to improve upon as possible, which includes making it as efficient as possible with whatever you can, like Merkle trees. Transaction fees should at least cover network-sustainability costs, and then even more to improve sustained and useful capital costs (like a substitute for mining) as long as it is the most price-competitive method that can garner adoption which will add to transaction volume and therefore transaction fees and capital investment. If you can charge $1 a transaction and still have 100 transactions, then it can support a larger infrastructure than 9,000 transactions at $0.01 cost each. So you adjust the formula for transaction and storage costs (demurrage) that can send the most sustainable capital investment to the infrastructure. You'll notice this is following all the normal rules of any evolving entity like people, companies, and governments: get the most money the market will support to expand yourself as much as possible for the benefit of the marketplace. If you do it ONLY for yourself then you are a cancer or virus. The coders then become the government, deciding how to implement regulations (code) to benefit the marketplace as much as possible, taxing it via transaction fees and demurrage.

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