Testing the relationship between constant block reward and decreasing block reward

[minexpert]

All POW coins except Bitcoin have decreasing block rewards($) for the past 5 years. I am starting a research to understand the relationship between constant block reward, decreasing block reward. I will update the data on the 21st of every 3 month.

Since Grin currently has the lowest block reward, I’ll take Grin as the x value. I will show the block rewards received by other coins over the value x.

The data for the first 4.5 years shows that the constant block reward creates weaker cryptocurrencies than the others because the value of the block rewards has decreased more relative to the others. That’s why, for the past week, I’ve been pointing out the wrong start. Now, time to test future.

If Grin’s block rewards approach or exceed others meaningfully, we will get a positive conclusion about the fixed block reward.

July 20, 2023

• Grin: x

• Dash: 14x

• Xmr: 23x

• Zec: 38x

• Btc:8163x

[vegycslol]

I think such researches are useful, but they need to be performed in the right way. Each of the selected coins has a different adoption today. To perform a fair research the coins would need to have the same starting points - marketcap, community sizes, same amount of miners, asic development and number of asics in production, same marketing etc. Also the experiment would need to be ran for at least 50 years imo.

[minexpert]

@vegycslol

same starting points

No. If decreasing block reward is the problem, the block rewards($) of these cryptocurrencies should decrease over time. Opposite way, Grin should increase over time. Therefore, we don’t need the same starting point.

[vegycslol]

I think you’re ignoring too many factors. How long do you intend to run this research for?

[Anynomous]

The purpose of a block reward is both to secure and to distribute. In the previous discussions I think it became clear enough why a linear emission is fair for current and future generations to have the same amount of grin being emitted they can buy, see this thread:

Blockchain Wealth Inequality

For any Proof-of-Work blockchain with a well defined emission, we can consider the following quantity: Define GWG (Generational Wealth Gap) as the supply allocated to the first 20 years divided by the supply allocated to the next 20 years. To stress that it’s a factor we write it with an x (pronounced “times”). Bitcoin’s emission halves every 4 years, so it halves 5 times per generation and we find Bitcoin GWG = 32x Monero’s emission at launch has a block reward of ((MAX:u64) - supply) * 2^-…

So let’s focus on the aspect of security for this research.

I think there is one major omission in this research, you only look at the absolute security of security. IMO it makes more sense to look at relative security
Relative security would be:
dollar_value_mined_coin / dollar_value_market_cap
In which case grin outperforms all coins after their first halving. I mean if there is little to be gained by an attack due to low value of a coin, proportionally, less security is needed assuming an attacker would be in it for the money only. An alternative method of calculating would be:
daily_volume_value /daily_emission_value
Also using this alternative way of calculating Grins relative security would outperform these other coins after their first halving.

Other factors that should not be ignored IMO are ASIC versus GPU and CPU minability. CPU and GPU mining provide much more opportunity for an attack since the attacker does not need to invest in hardware specific for a coin.

[minexpert]

If details would be needed, I would add.
For some coins, different developments would occur and values can change. However, in the overall picture, the difference in block rewards in the long run will show a meaningful result in this research.
Here’s the logic. The money given to the block rewards indicates interest in the project. If people reduce interest in decreasing block rewards, the issuance $ will decrease. However if the constant block reward can do the opposite, the issuance $ will increase. After a long time, the course of this painting will show who will die and who will stay. So the starting point is unimportant, what matter is where it it end.

I will continue this test until one of these coins dies.

[Neo]

@minexpert

It’s cool that you’re doing some analysis, but as pointed out, there’s lots of variables to consider.

In this example, you’re essentially attributing 100% of a coins issuance value on it’s monetary policy and not weighting in other determining factors.

A coin’s monetary policy might be attributed to anything from 1-100% of it’s issuance value and this can’t be determined by just comparing % changes across a handful of coins. It’s probably closely to 1% than 100% but this is something you would need to analyze( come up with more metrics) and determine before you could model the real impact of constant block rewards vs decreasing block towards.

[minexpert]

@Neo

It’s cool that you’re doing some analysis, but as pointed out, there’s lots of variables to consider.

When you grasp my idea, you will understand that it is not necessary. Now I explain in more detail.

All coins were created with limited supply. Later, some changed their monetary policy. All the system has always been designed to make the first investors rich. Early investors are now incredibly wealthy.

The investment will be risky for them, as not all of the later entrants will be as highly wealthy as they used to be. They are already incredibly high, the 2-3-4-5x profit you will earn is equivalent to the 500-600x profit of the first investor. Therefore, they will prefer to quit over time rather than take more risks in these projects.

Here is a thinkful thing. Specifically, the price of Bitcoin, whose inflation will soon drop to 0.8%, is at $30,000, but is it worth risking just to make 2-3x times the money. Right now the early investor is up 1000 times. IMO, they will not risk it and they will sell it. So, if savvy investors no longer invest in them, the value of the block rewards should go down because the people to give money will decrease. For example, I don’t buy anymore ltc, xmr, dash, bitcoin. If I buy now, I will contribute more to early investors with a high risk.

However, Grin has very long inflation and unlimited supply. It can’t not make early investors very rich. If it can’t make too many rich, early investors and later investors stay in the system longer. This long stay may increases the number of users of the system and therefore the amount of money given to block rewards day by day. So, in the long run, if the block rewards of other cryptocurrencies drop in dollar terms, Grin increase, this theory could become a reality in practice.

To test this, other factors are not needed. We are interested in technology, but one day the creators of that technology will be very rich and leave, or they will not have the old motivations. Therefore, for these cryptocurrencies to survive, monetary policies would have to be designed for the long term. However none of them were designed that way.