My only comment is that it should be called escheatment, not demurrage ;)

It's relation to demurrage is only that it might be desirable to garbage
collect decayed bit-dust. We looked at it early-on in the Freicoin
development, but rejected it as a possibility due to reasons others have
mentioned, even though we were starting from a hard-fork position.


On Mon, Dec 3, 2012 at 3:19 AM, Michael Gronager <gronager@ceptacle.com>wrote:

> (Also posted on the forum:
> https://bitcointalk.org/index.php?topic=128900.0)
>
> The amount of "dust" in the block chain is getting large and it is growing
> all the time. Currently 11% of unspent tx outputs (UTXO) are of 1Satoshi
> (0.00000001BTC), 32% is less than 0.0001BTC and 60% is less than 0.001BTC.
> (Thanks to Jan for digging out these numbers!)
>
> This means that a huge part of the block chain is used for essentially
> nothing - e.g. the sum of the 11% is worth roughly 2 US cents !
>
> The main source for these 1 Satoshi payouts is Sahtoshi Dice. And nothing
> wrong with that, however, we should work on ensuring that too many too
> small payments will not kill the size of the blockchain in the end -
> further, they are essentially too small to be included in other transaction
> as the added fee will often make it more expensive to remove them. Hence,
> there is no incentive to get rid of them.
>
> I have an idea for a possible mitigation of this problem - introduction of
> demurrage - not as in it normal meaning as a percentage over time (see:
> http://en.wikipedia.org/wiki/Demurrage_(currency) btw, this has also been
> tried in freicoin), but as a mean to recycle pennies over time. The
> proposal is simple - UTXOs age out if not re-transacted - the smaller the
> coin the faster the aging:
> 1-99 Satoshi: lives for 210 blocks
> 100-9999 Satoshi: lives for 2100 blocks
> 10000-999999 Satoshi: lives for 21000 blocks
> 1000000-99999999 Satoshi: lives for 210000 blocks
>
> Only amounts above 1BTC lives forever - (or we could even impose aging on
> those too..)
>
> The aged coins are simply included in the block mining reward, creating
> another incentive for miners. Further, if we include all coins in this
> recycle scheme coins will never be lost forever.
>
> This scheme will impose some lifetimes also on e.g. colored coins (hence
> you need to use a certain amount to borrow space on the blockchain for the
> time needed, or simply transact them).
>
> If you like this I would be happy to write it into a BIP.
>
> Thoughts ?
>
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