Feedback-ID: i525146e8:Fastmail
Date: Mon, 11 Jul 2022 12:59:53 -0400
From: Peter Todd <pete@petertodd.org>
To: Anthony Towns <aj@erisian.com.au>
Message-ID: <YsxXCQihhSrYuIfS@petertodd.org>
References: <Ysl4t9K8lfxRSsNM@petertodd.org>
 <20220711023247.GA21856@erisian.com.au>
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In-Reply-To: <20220711023247.GA21856@erisian.com.au>
Cc: Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] Surprisingly, Tail Emission Is Not Inflationary
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On Mon, Jul 11, 2022 at 12:32:47PM +1000, Anthony Towns wrote:
> This isn't necessarily true: if the losses are due to a common cause,
> then they'll be heavily correlated rather than independent; for example
> losses could be caused by a bug in a popular wallet/exchange software
> that sends funds to invalid addresses, or by a war or natural disaster
> that damages key storage hardware. They're also not independent over
> time -- people improve their key storage habits over time; eg switching
> to less buggy wallets/exchanges, validating addresses before using them,
> using distributed multisig to prevent a localised disaster from being
> catastrophic.

People clearly continue to make downright irrational decisions about coin
security, doing things putting their entire crypto savings at risk for clai=
med
5% returns.

Even if people were rational, the coin loss rate would clearly reach a floor
because as the probability of coin loss goes down, bothering to spend extra
effort to decrease that already small chance is pointless. You mentioning b=
lack
swan events actually strengthens my point: at low coin loss rates the true =
loss
rate is dominated by black swan events. So it's pointless to go to extra ef=
fort
to prevent them.

Finally, you're forgetting that coin loss also includes *intentional* losses
=66rom proof-of-sacrifice protocols. There are a number of examples on Bitc=
oin.
Again, they put a floor on how much coin loss could diminish.

> loss rate. If that's the case, then the rate at which funds are lost will
> vary chaotically, leading to "inflationary" periods in between events,
> and comparatively strong deflationary shocks when these events occur.

Give me an example of an *actual* inflation rate you expect to see, given a
disaster of a given magnitude.

If you actually do the numbers on this, you'll realize it takes absolutely
catastrophic black swan events that make WW2 look like a minor conflict to =
make
even insignificant inflation rate changes due to changes in lost coins.

--=20
https://petertodd.org 'peter'[:-1]@petertodd.org

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