Could there be hyperinflation in Bitcoin?

Question

Currently the creation of new coins is fixed at a certain rate which halves every few years and will at some point in the future drop to zero. As I understand it, this is by consensus, i.e. all the nodes in the network agree on this protocol.

Suppose at some point in the future the Bitcoin community were to decide that the currency's deflationary bias wasn't such a good thing for the economy and that it would be better to start expanding the monetary base at a higher rate. What would it take for such a policy to take effect? Specifically, what percentage of the nodes in the network would have to vote in favor of the new expansionary policy?

And if indeed the network could vote itself into an expansionary policy, is it then also conceivable that it might vote itself into a hyperinflation, where the rate of expansion gets out of hand?

In short, what does it take to change the rate of expansion of the Bitcoin monetary base, and how easy or difficult is it to achieve as compared with the stroke of a central banker's pen?

PS: I can see a future where the top miners who own most of the computing power decide amongst themselves that they deserve more than their share of bitcoins after all and so they decide to institute the change, and I'm curious to know how the network would handle such an event.

Answer 1

Not everybody needs to agree (that would probably never happen!) for there to be a change in the protocol (which would be needed to cause inflation), but it's not based on just a majority of hashpower either.

It's really a vast majority of users that need to agree; if just 51% of users decided to change the protocol, it's entirely possible that it would cause a massive loss in confidence in both resulting chains. Retailers and every other service would need to choose which to accept (or accept both), and try to understand the difference, and communicate that on to users.

I think most of us know its a bad idea to go down that path with Bitcoin while it's not yet been fully accepted as mainstream. A smoother option would probably be to create an alternative cryptocurrency with a new name, rather than trying to split the Bitcoin user base into two parts.

Answer 2

As I understand it, this is by consensus, i.e. all the nodes in the network agree on this protocol.

No. The network doesn't vote to change itself. Read this: What can an attacker with 51% of hash power do?
Arguably, you could try to get a change to the bitcoin client implemented through astroturfing.

Here's how you'd increase monetary inflation.

1. Find this code:

   int64 static GetBlockValue(int nHeight, int64 nFees)
   {
       int64 nSubsidy = 50 * COIN;
   
       // Subsidy is cut in half every 210000 blocks, which will occur approximately every 4 years
       nSubsidy >>= (nHeight / 210000);
   
       return nSubsidy + nFees;
   }
   

2. Change 50 to, I dunno, 100.

3. Convince everybody else to do the same thing. Not just a majority - everybody.

Answer 3

despite the fact that there are some possible kind of 51% attack for miners and despite the fact that miners really love increase bitcoin creation rate and make profit; you should know they cannot change the basic rules of blockchain like changing block generation protocol and rules.

anything related to block protocol must be accepted by full nodes (~20 thousands of live full nodes) who are mostly influenced by bitcoin core school of though (a group of independent wise developers). they wont accept such a change because they are more like bitcoin owners rather than miners; so they would be against inflation by proof of game theory.

what miners can do for that? nothing, as we saw in SegWit2x activation debate, although most mining cartels was in favor of SegWit2x they couldnt run it because Bitcoin Core Developer team rejected the proposal. that was a simple example of changing block protocol (its size); which could not take the ride by just miners supports.