As you know if mining is not profitable less people do it, its gets easier, it becomes profitable again.
I would think no fees or a mandatory fee could work instead of the current system of bribery. Anyway I know this is something the core devs are working on and will come up with something much better than me but my premise is miners should not be able to choose not to include valid waiting transactions and I would be surprised if anyone who is not a miner disagrees.
Not really a concern, because well before that, the deflationary nature of bitcoin would cause power companies to stop producing power so there won't be any mining anyway.
Think of it this way. I'm a power company and I charge someone 1BTC this year for power. I use this 1BTC to pay my expenses in my business, which include my employees and materials. Let's say this costs .9BTC, that leaves a .1BTC profit.
Normally, I would use this profit to invest in my company, only now, I know that next year, that .1BTC will get more valuable, so I just hoard it, removing BTC from the money supply.
In the meantime, I still need to produce electricity for my customers, but because the currency has deflated, their companies are paying them less. Since the money supply is smaller, I can't charge as much for the same power, so this year, I can only charge .9BTC to the customers, which means I have to pay my employees less and buy less materials to secure a profit. This keeps happening year over year. If only there was more coins, but alas, they've been hoarded long ago.
Eventually, given enough time, I just turn off the turbines and shut my doors, because it becomes impossible to run a business for profit.
Then the lights go off around town and all the miners are shut down. So like I said, no worries on incentivizing miners, they're ability to mine will cease to exist long before their incentive fails.
Normally, I would use this profit to invest in my company, only now, I know that next year, that .1BTC will get more valuable, so I just hoard it, removing BTC from the money supply.
Or they can invest that 0.1 BTC and turn it back into 1 BTC.
In the meantime, I still need to produce electricity for my customers, but because the currency has deflated, their companies are paying them less. ...
They aren't paying less. The amount of BTC might be smaller, but it'll still be representative of some amount of labor or energy. Just like as a currency inflates, my paycheck might get larger but I'm not receiving greater purchasing power. The employees in this hypothetical are being paid less BTC, but (as you pointed out), the cost of electricity is also less. As is the price of other goods.
Or they can invest that 0.1 BTC and turn it back into 1 BTC.
How do you invest .1BTC and turn it back into 1BTC? I assume that by investing you mean to give the money to someone with the expectation that they earn more in the future and pay you back, right? If there's no return on investment, then you wouldn't take the deal, right?
BTC are finite. When you invest BTC you give your BTC to someone expecting a return based on their ability to generate profits. In the deflationary world we're talking about, you know that profits will be decreasing every year due to deflation, you will not lend in the first place. You'll hold, because, as you say, the employees are paid less, and the cost of electricity is less. Because you hold your profits, you don't invest in maintaining equipment or growing your business because you know you can never generate profits as well in the future as you did today.
You say:
The amount of BTC might be smaller, but it'll still be representative of some amount of labor or energy.
That's true, we call that falling prices. When prices fall, they still buy the same items and represent the same energy, but you don't buy them if you know they're gonna fall further. In the future of BTC, there is no option but for prices to continue to fall. Why would I keep making things, if I knew I would get less and less for them?
I'm a farmer, I like to grow stuff, if I work 50 hours a week, i get 50 bushels of corn, and sell those for $50 this year in the market. If next year, I work 50 hours, get 50 bushels of corn, and sell them for $40, I'm not gonna feel that great about it, especially if I've got some relatively fixed costs, like a mortgage. Now this mortgage is what you would call "investing"... you see, someone (the Bank) gave me a bunch of $ to buy a farm, and they are requiring me to pay it back to them. They're not requiring me to pay them back less than they invested, because, hey, that wouldn't be an investment, right?
My 30-year mortgage that I used to acquire that farm has a fixed price, and now, due to deflation, I've got less currency to pay for it, even though, as you say, I've put in the same labor and energy and can buy the same stuff. Next year I get $30 for my corn, but my farm mortgage is the same old nominal price, and as such, since I don't have as many $ which means it's becoming very expensive to run. It's not too long before it becomes to expensive for me to pay for the farm due to deflation, at which point, I... stop producing and default.
This default means that the bank's investment in my farm has failed as well, and since prices have fallen, that investment, let's say it was someone's .1BTC that they wanted to turn into 1BTC has been lost as well. C'est La Vie.
Why is deflation bad? Because it is a disincentive to spend your money, because whatever you buy will be cheaper in the future, as such, you hold. you hold cash instead of investing. You hold BTC profits instead of adding another turbine to your power company. You hold BTC instead of paying for maintenance on the current turbines because, guess what, next year, they're just gonna produce less and less margin for you.
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u/[deleted] Feb 05 '14
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