Total circulation will be 21,000,000 coins. It'll be distributed to network nodes when they make blocks, with the amount cut in half every 4 years. first 4 years: 10,500,000 coins next 4 years: 5,250,000 coins next 4 years: 2,625,000 coins next 4 years: 1,312,500 coins etc... When that runs out, the system can support transaction fees if needed. It's based on open market competition, and there will probably always be nodes willing to process transactions for free.

The design supports a tremendous variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc. If Bitcoin catches on in a big way, these are things we'll want to explore in the future, but they all had to be designed at the beginning to make sure they would be possible later.

To Sepp's question, indeed there is nobody to act as central bank or federal reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because I don't know a way for software to know the real world value of things.

The proof-of-work chain is the solution to the synchronisation problem, and to knowing what the globally shared view is without having to trust anyone.

By making some adjustments to the database settings, I was able to make the initial block download about 5 times faster. It downloads in about 30 minutes. The database default had it writing each block to disk synchronously, which is not necessary. I changed the settings to let it cache the changes in memory and write them out in a batch. Blocks are still written transactionally, so either the complete change occurs or none of it does, in either case the data is left in a valid state. I only enabled this change during the initial block download. When you come within 2000 blocks of the latest block, these changes turn off and it slows down to the old way.

The fact that new coins are produced means the money supply increases by a planned amount, but this does not necessarily result in inflation. If the supply of money increases at the same rate that the number of people using it increases, prices remain stable. If it does not increase as fast as demand, there will be deflation and early holders of money will see its value increase. Coins have to get initially distributed somehow, and a constant rate seems like the best formula.

I anticipate there will never be more than 100K nodes, probably less. It will reach an equilibrium where it's not worth it for more nodes to join in. The rest will be lightweight clients, which could be millions.

Difficulty just increased by 4 times, so now your cost is US$0.02/BTC.

Proof-of-work has the nice property that it can be relayed through untrusted middlemen. We don't have to worry about a chain of custody of communication. It doesn't matter who tells you a longest chain, the proof-of-work speaks for itself.

The network is robust in its unstructured simplicity. Nodes work all at once with little coordination. They do not need to be identified, since messages are not routed to any particular place and only need to be delivered on a best effort basis. Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof of what happened while they were gone. They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism.

As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: - boring grey in colour - not a good conductor of electricity - not particularly strong, but not ductile or easily malleable either - not useful for any practical or ornamental purpose and one special, magical property: - can be transported over a communications channel If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it. Maybe it could get an initial value circularly as you've suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some) Maybe collectors, any random reason could spark it. I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value. But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something. (I'm using the word scarce here to only mean limited potential supply)

I'll try and hurry up and release the sourcecode as soon as possible to serve as a reference to help clear up all these implementation questions.

I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party.

When a node receives a block, it checks the signatures of every transaction in it against previous transactions in blocks. Blocks can only contain transactions that depend on valid transactions in previous blocks or the same block. Transaction C could depend on transaction B in the same block and B depends on transaction A in an earlier block.

We have proposed a system for electronic transactions without relying on trust. We started with the usual framework of coins made from digital signatures, which provides strong control of ownership, but is incomplete without a way to prevent double-spending. To solve this, we proposed a peer-to-peer network using proof-of-work to record a public history of transactions that quickly becomes computationally impractical for an attacker to change if honest nodes control a majority of CPU power.

The proof-of-work chain is the solution to the synchronisation problem, and to knowing what the globally shared view is without having to trust anyone.

In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.

It should be noted that fan-out, where a transaction depends on several transactions, and those transactions depend on many more, is not a problem here. There is never the need to extract a complete standalone copy of a transaction's history.

The threshold can easily be changed in the future. We can decide to increase it when the time comes. It's a good idea to keep it lower as a circuit breaker and increase it as needed. If we hit the threshold now, it would almost certainly be some kind of flood and not actual use. Keeping the threshold lower would help limit the amount of wasted disk space in that event.

To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they're generated too fast, the difficulty increases.