Without the introduction of any assumptions, the Equation of Exchange is a tautology ( http://en.wikipedia.org/wiki/Tautology_%28logic%29 ) like it is stated in http://en.wikipedia.org/wiki/Equation_of_exchange . Equations always need to be fulfilled - that's why they are called equations!  On the left, (M=Total quantity of bitcoins in exchange) x (V=Total number of times the quantity of bitcoin in exchange is exchanged in a certain time period) should equal the right, (Q=Total quantity of goods/services/other exchanged for bitcoin in exchange in a certain time period) x (P = Value relationship between M and Q, giving rise to a rate of exchange, inflation/deflation in the rate of exchange)

Is it equitable to have a system where you reward some arbitrarily issuer during deflationary periods with more bitcoins, and inversely punish subsequently all bitcoin holders by debasing their existing holding during inflationary periods?  Will you be able to withdraw bitcoins during an inflationary period to keep your M constant in your system? Are you only going to ask the arbitrary issuing parties from the deflationary period to return their bitcoins when an inflationary period arrives, or are you going to give to some in a deflationary period and take from all in an inflationary period? When goods/services/other offered for exchange with bitcoins decreases (inflationary bitcoin system) - all the holders of bitcoins will have to bear the brunt of the decrease in the value relationship (rate of exchange = P = Value relationship between bitcoin and goods/services/other available for exchange with bitcoin).  The holder of bitcoin makes the decision whether he would offer more bitcoin available for exchange, thus influencing M (M = bitcoins available for exchange).  Thus holders of bitcoins should be rewarded/punished as more or less goods/services/other are offered for exchange with bitcoins available for exchange.  Bitcoin already adjusts the Equation of Exchange dynamically - and does not reward some arbitrary issuer under deflationary circumstances - and punish all bitcoin holders under inflationary circumstances.  Coin generators are incentivised by network difficulty changes in combination with their reward (for securing the network) based on P (value relationship of bitcoin to other) to increase/decrease their share of supply to the network difficulty - bringing balance in network difficulty based on the Equation of Exchange's balanced P.  Every coin generator has another profitable decision point on this, depending on his cost/profit/future expectation structure.  Your system is doomed for failure - as it will reward a non-holding issuer (imagine that in the sense of company shares, I'm a holder of shares but someone else dilutes my value by issuing more shares not to us holders - but to himself!!) during deflationary periods and punish existing holders during inflationary periods (imagine that in the sense of company shares, now that the shares are less valued - the other person who is issuing shares in deflationary periods are not un-issuing shares now that we have an inflationary period and all holders of shares now get devalued shares!!)  Deflation/Inflation is necessary as a measurement of how much bitcoin is valued.  If you feel uncomfortable with deflation/inflation (of bitcoin, shares, pigs, gold, etc.), don't be a holder of them - if you still want to use them in trade - trade for them and minimize your risk by minimizing your exposure risk period by exchanging on the fly.  Ultimately the holder of bitcoin is taking the risk, and should be rewarded or punished by uptake or flight of exchangeable goods/services/other from the bitcoin system.

If you do not want to invest in Bitcoin by being a Bitcoin holder and having the subsequently reward/risk on your investment (free market capitalism),

but still want to use it as a medium of exchange and reduce your exposure to its reward/risk (deflation/inflation) - there is a simple solution - exchange it immediately after you received it in exchange, back to your medium of choice (on the fly, programmatically if you prefer).

With regards to hoarding - as long as people have needs and only other people can fulfill in that need and they have some medium of exchange, wouldn't they use that medium of exchange to fulfill in that need?  Isn't nearly 5x more bitcoin exchanged than gold due to its ease of exchange?

With regards to early adopters - wouldn't people adopting now, again be viewed as early adopters in a year as well?  If you valued something when no one else did, didn't you satisfied the equation of exchange at your time of adoption?  Again aren't you exposed to possible reward/risk (deflation/inflation) from your point of adoption?

Hopefully and then you will realize you can not calculate the demand for money because nobody is able to access the needed information.

Btw, you can keep trying to explain how you can calculate the demand for money. Its entertaining.

One simple solution would be to set a minimum of 0 created bitcoins per solved block and accepting light inflation, if the bitcoin economy is shrinking. As i don't expect the bitcoin economy to shrink very often, this might be feasible.

Another solution would be, to take some fraction of the transaction fees, that are awarded to the successful miner and remove it from the system. The miner would still get a positive return on a solved block.

In my understanding, the goods in the equation of exchange can be anything that anyone is willing to sell for bitcoins.

Ok, i see how manipulations can be made to this system. For this to be possible though, one has to have a huge number of BTC and must be willing to manipulate the system for more inflation. I don't see how these two requirements can go together.

Alexk:

In essence what you want to do is to transfer the risk/reward of holding bitcoins from the bitcoin holder to the bitcoin generator.  Which is not fair - if you dilute bitcoins, by issuing more, you are punishing bitcoin holders and rewarding the bitcoin generators you are issuing it to.  If the goods/services/other in offered in exchange for bitcoins diminish and the rate of exchange with it - from whom are you gonna retract bitcoins to enable a stable rate of exchange?  Are you only going to retract it proportionally now from all the bitcoin generators who might not even be bitcoin holders at that stage - or are you then going to punish the bitcoin holders and retract it proportionally from them - which would not be equitable because you did not issue more to them when the inverse scenario hold true?

Under the bitcoin's generation system, a bitcoin generator are rewarded by the bitcoin expansion which is quite substantial at present, and which will diminish over time, and minimum transaction fees on a massive amount of transfers will become a replacement for rewarding bitcoin generation network securing.

I would rather know by bitcoins exchange value what my bitcoin's share in the total number of bitcoins value are than having to do an additional calculation by calculating my number of bitcoins divided by your now changing number of bitcoins and multiplying that by the exchange value to know what my bitcoin's share in the total number of bitcoins values are.

If more goods/services/other are added for exchange with bitcoin, bitcoin's value go up.
If less goods/services/other are added for exchange with bitcoin, bitcoin's value will go down.

And actually you need to account for the bitcoin expansion already issued to bitcoin generators as well.

So if more goods/services/other are added, for exchange with bitcoin, than bitcoins are issued to bitcoin generators, bitcoin's value go up.
So if less goods/services/other are added, for exchange with bitcoin, than bitcoins are issued to bitcoin generators, bitcoin's value go down.

OMG, this thread is still going...

I'm starting to think this is a deliberate action to weaken the faith of some people (read: n00bz) in Bitcoin.
Since CIA already admitted its interest in Bitcoin, this is a likely scenario.

Of course, it is not going to be successful. Market verifies everything. People can discuss all the time and even write essays, but the market will verify their claims.

LOL. So they've broken ECDSA (or at least secp256k1) and SHA-256? No, I don't think so, this isn't a made for TV movie.

They don't need to break anything. If I understood the crypto design correctly, they only need to have their computers working collectively to produce an identical but longer proof-of-work which honest nodes would then endorse. I'm almost certain they started producing it much earlier than now so they'd be ready to launch it once there's a political decision. They'll also probably blame it on Iran, Anonymous, or the imaginary Al-Qaeda for the lulz.

Ah, so freezing the transaction confirmations, thus preventing anyone from spending their money isn't such a big deal huh? I see you're not as smart as your post-count.

And I support the idea of creating a bigmouthie forum for Hero Members who're mindlessly trying to increase their post count even by babbling fruitless nonsense.