I'm not sure this corporate finance context is useful, but I don't think what you wrote is necessarily true at all. It's true that most corporations issue equity on a regular basis, but the key is that they are getting something in return for those shares:
- when the firm has an offering, they're receiving cash
- when the firm issues equity-based compensation, they're receiving employee services that will presumably generate incremental operating profit
- when the firm issues equity in an acquisition, they're receiving the future cash flows of the acquired entity

So it's not necessarily true that the issuance of those shares dilutes the value of the existing shares. Whether it does or not depends on the relative value of shares issued and value received. (If what you're saying is that earnings/cash flows/etc. are held constant while equity-based compensation varies, then of course more equity issuance will dilute shares, because you've assumed that they're exchanged for 0 value, but I don't think that's a reasonable ceteris paribus.)

I suspect that a more relevant example might be a firm that issues shares of stock as dividends, for literally nothing in return. (See Tootsie Roll, TR, as an example.) There, it's unambiguous that the share issuance dilutes the existing share values. But that's ok (if pointless) for existing shareholders because they're the ones receiving those newly-issued shares, and so each shareholder's total $ value will be the same even as the per-share $ value declines.

How does this relate to bitcoin? Not entirely sure. Perhaps the closest analogy would be to a firm that has 2 classes of share, A and B, and regularly issues stock dividends on its A shares, but not to its B shares. Does each dividend dilute B shareholders? Yes, absolutely. Is the effect baked into current price? Who knows.

Sorry to contribute to the tangent. Bitcoin pessimist fwiw.

I feel like he'd be a great pundit on fox news

spidercrab, my post specifically mentions the stock based compensation award example in "absolute" terms. The 2nd word of what you bolded in my post is "absolute". My post had nothing to do with whether or not this form of equity dilution was actual dilution on a relative basis. Dollar for dollar, all variables constant, it dilutes. Whether or not the value provided to shareholders from this form of dilution is worthwhile is a whole different topic for debate and definitely not worth discussing in this thread.

He's way far out in left field, has no idea what he's talking about.

UHMMMMMMM They really didn't foresee this mining thing at all !!

"The current system where every user is a network node is not the intended configuration for large scale. That would be like every Usenet user runs their own NNTP server. The design supports letting users just be users. The more burden it is to run a node, the fewer nodes there will be. Those few nodes will be big server farms. The rest will be client nodes that only do transactions and don't generate.

Quote from: bytemaster on July 28, 2010, 08:59:42 PM
Besides, 10 minutes is too long to verify that payment is good. It needs to be as fast as swiping a credit card is today.

See the snack machine thread, I outline how a payment processor could verify payments well enough, actually really well (much lower fraud rate than credit cards), in something like 10 seconds or less. If you don't believe me or don't get it, I don't have time to try to convince you, sorry.
http://bitcointalk.org/index.php?top...sg3819#msg3819"

-Satoshi

But the reverse of this is that when miners or holders buy a good/service from most legit merchants with btc, it essentially must be sold to a buyer of btc on the exchange at that moment, since most merchants don't hold btc but opt to have them convert to fiat as an additional component of the transaction.

Actually he seems to be one of the only people talking logically. For some reason people seem to have a hard time grasping that the whole thing was setup in a way that can't sustain long term viability.

Not really the main reason people mine today is the mining reward. As bitcoin gets close to 21 million coins, it will be transaction fees. The transaction fees will never be that high mainly because Gavin has a lot of clout and he hates high transaction fees. However you don't need transaction fees or mining rewards to protect the network imho, people will mine to protect their investments. The supply is limited at 21 million and that is the important point. You can do more off chain transactions to cut down transaction costs. If transaction costs come out to $1 per transaction, the large companies might only submit 1 of every 100 transactions lowering the fee to $.01 and they might charge $0.05 to make a profit. Bitcoin turns into a pseudo proof of stake coin and a ripple coin combined. Satoshi made a mistake he should have pre-mined 21 million coins, but he didn't he gave his to the miners as a gift.

Lol " However you don't need transaction fees or mining rewards to protect the network imho, people will mine to protect their investments"

This is the type of absolutely ******ed logic I'm talking about

Yes, selling bitcoin, or trading it for goods and services, are both ways of expressing a reduced desire to hold bitcoins.

Stocks don't issue shares.

The amount of share buy-backs has surpassed a trillion dollars per year.

Besides IPOs, there's been more companies buying shares than selling them for quite a while.

This whole thread is full of drivel starting with you and Toothsoother. When you guys start the conversation points at "bitcoin is a ponzi" or "bitcoin will get replaced because of slow transaction times" you set the bar very low.

Transaction fees will vary depending on mining costs and will always be slightly higher than said costs. It's funny that it unfolds right in front of your eyes but you guys are to busy debating things you're not educated about to even see it. Toothsoother saying "the creators didn't foresee Asics" not realizing Asics are free markets and more's law at work to introduce exponentially more efficient cost effective mining.

But hey I guess because the cost per transaction is X today that it will remain X in 5 years.

Mining is all relative. I remember back when asics first came out and the network started to grow and everyone was talking about how fast the network was growing. The network would increase like 25% every 2 weeks. If the network can increase by 25% every 2 weeks it means it was actually super small!

These new chips came out that blew away the gpu's and the hasrate went up a ton, but in all reality, the network actually shrunk even when the hashrate went up say 1000%

If a chip came out tomorrow that could match the hashrate of the entire network and 5 of them were put up to run.. will the network have increased 5 fold or would it actually be smaller? If people start to gain access to those chips, the network just shrunk a ton even though hashrate would skyrocket.

So in the end.. chips may have "exponentially more efficient cost effective mining" then the previous chip. But when everyone has that chip everything becomes the same again. So essentially tens/hundreds of millions are spent on chips just to get back to where you started!

Think about it if the next gen chip came out that was called a GODSIC that ran at 5000x an asic at half the power. What would happen then?

Relative to what exactly ?

Let me put it in simpler terms; Transaction processing costs have been falling exponentially and will continue to fall in the future.

see: http://en.wikipedia.org/wiki/Moore%27s_law

Relative to what the current available power is. It may be more efficient then the last chip, but it's not more efficient then it's current competition. The old chips are wiped out and now the new chips operate against each other, just like the old chips did against each other. So a bunch of money is spent to accomplish nothing really.

But the difference here is that when someone buys something with USD it is balanced by the seller/merchants desire to trade for and thus become a holder of USD. With btc both buyer and the seller are essentially dumping the btc to complete the transaction. At least as it stands now.

you guys should take a break from falling for toothsoother's low-level troll arguments that have long been disproved and get on this instead:

http://www.dailydot.com/crime/ross-u...-karpales-fbi/

never a dull day in bitcoin. if this is true and karpeles really is dpr, it would explain a lot.

Is this even real? Holy Christ.

The minimum on toothsayer is that he's a critical thinker. So ill give him credit for that.

This is just an awful mix of ill-informed statements and plain lies.

You're confusing the difference between pool mining and hashrate. Yes, in your contrived example they are not mutually exclusive but you have no point. The sheer volume of hashrate today makes it far more difficult to supplant the majority 100% of mining than at any point in the past. So however you define the network surely isn't what it actually means.

If you go to the alt coins list, about 1/2 of those coins would fold if their creators did not mine the coins. Those coins might only have a marketcap of $10,000. Anybody holding over $1 million worth of bitcoin will put in a miner just to make the network more secure, not to gain any profit off of it. But to protect their existing $1 million. A small transaction fee will only make it more desireable to protect. Proof of Stake with small reward could work. That is why most proof of stake coins are stinko, the large owners already have enough.

I just want to add two things (I have no opinion on anyhthing that you wrote)


Bitcoin is divisible to the 8th decimal. Thats .00000001 so keep that in mind when you discuss supply

Second, consider what happens to how miners are rewarded if/when the network processes 10-1000x transactions than today.

I sell things for USD, and when I do, I don't become a holder of USD. Within a week or two that money is spent repurchasing inventory, paying salaries including my own, and paying operating expenses. I dump the USD almost as soon as I get it to complete the transaction.

I think you missed the point.

I'll try again. The seller accepts the bitcoin because he sees a bid on an exchange, and knows he can get that much for it. The buyer's bitcoin winds up filling that bid, and that's all. The intermediate stuff is irrelevant. There are not two parties dumping btc here.

Good stuff. One point he makes is that the common practice of using an exchange as a wallet makes the exchanges more vulnerable to hacking, by requiring them to keep more funds in hot wallets.

Such simplistic thinking, of course I would expect nothing else from you.
LTC also is complete junk and the only "advantage" it had, being able to be mined with GPUs, got shattered. LTC is dead and far from the bottom.