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When Bitcoins stop being generated it won't be a problem: prices can gradually be lower. Namecoins, however, have a more-or-less set price, which is the domain register price. If Namecoins stop being generated, but people of course still want to register domains, what happens?

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From what I gather from the Namecoin FAQ, the registration price will be dropping in the future, but I wonder if they will be low enough not to spend the entire supply eventually. –  ThePiachu Jan 4 '12 at 1:36
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That's a very good question. I thought I read somewhere that the block reward doesn't drop with Namecoin, but the FAQ says I'm wrong. I wonder if a no-blockreward-drop scheme would be a better fit for Namecoin. –  ripper234 Jan 4 '12 at 11:15
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In fact, even if there was no drop in block rewards, in practice there is a finite number of domains that we'll be able to register by any given year. I'm not sure this is a great idea... However, this might not be a problem in practice because the actual number of Namecoins / potential number of domain names. –  ripper234 Jan 4 '12 at 11:19
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I too did read somewhere the block reward never stopped nor decreased, and that would have made somewhat sense, solving this problem. I'm quite puzzled they didn't think about it. –  Lohoris Jan 4 '12 at 12:27
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My answer here: bitcoin.stackexchange.com/questions/1396/… was originally based on flawed information and was wrong. At the time, there was very little info in the Namecoin FAQ, so the best I could manage was to go by what I found in the forums. I corrected it on Dec 28th 2011. –  Highly Irregular Jan 16 '12 at 18:41
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2 Answers

up vote 8 down vote accepted

The Namecoin block reward is to be halved every 4 years, similar to Bitcoins. The fee to register a domain in Namecoin is set to decrease by the factor of 2 every two months, and later by a factor of 4.

As the price of registering a domain go down way faster than the block reward, there won't be a shortage of opportunities for registering domains. On the contrary, soon the price of a domain might be so cheap as to make them almost free. As Namecoins are destroyed though, eventually in the far future one might expect to run out of Namecoins, but with the price/reward ratio decreasing so fast, the project can become obsolete by then.

This seems to create a lack of balance of the Namecoin protocol that can be addressed in the future.

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Probably the same thing will happen as with Bitcoin. So far about 3% of the generated coins have been destroyed. By now the price for name operations is fixed at 0.01NMC so the percentage of destroyed coins should decrease for a while. If there is a problem the system could be modified. IMHO the destroyed coins will be completely neglectable for a long time.

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