On Mon, Jul 11, 2022 at 12:32:47PM +1000, Anthony Towns wrote:
> This isn't necessarily true: if the losses are due to a common cause,
> then they'll be heavily correlated rather than independent; for example
> losses could be caused by a bug in a popular wallet/exchange software
> that sends funds to invalid addresses, or by a war or natural disaster
> that damages key storage hardware. They're also not independent over
> time -- people improve their key storage habits over time; eg switching
> to less buggy wallets/exchanges, validating addresses before using them,
> using distributed multisig to prevent a localised disaster from being
> catastrophic.

People clearly continue to make downright irrational decisions about coin
security, doing things putting their entire crypto savings at risk for claimed
5% returns.

Even if people were rational, the coin loss rate would clearly reach a floor
because as the probability of coin loss goes down, bothering to spend extra
effort to decrease that already small chance is pointless. You mentioning black
swan events actually strengthens my point: at low coin loss rates the true loss
rate is dominated by black swan events. So it's pointless to go to extra effort
to prevent them.

Finally, you're forgetting that coin loss also includes *intentional* losses
from proof-of-sacrifice protocols. There are a number of examples on Bitcoin.
Again, they put a floor on how much coin loss could diminish.

> loss rate. If that's the case, then the rate at which funds are lost will
> vary chaotically, leading to "inflationary" periods in between events,
> and comparatively strong deflationary shocks when these events occur.

Give me an example of an *actual* inflation rate you expect to see, given a
disaster of a given magnitude.

If you actually do the numbers on this, you'll realize it takes absolutely
catastrophic black swan events that make WW2 look like a minor conflict to make
even insignificant inflation rate changes due to changes in lost coins.

-- 
https://petertodd.org 'peter'[:-1]@petertodd.org