Exchange price vs. resource price

Yes, it does all seem really complicated - where I was confused was, I thought both resource price and Safecoin price were trying to be melded together somehow. As these are both derived by different means using different sources/inputs, I noticed that this was not feasible- an apple and orange situation. Currently, I’m in agreement to an extent with Janitor, in that Safecoin price does not need any kind of algorithm - the market will decide. The resource price I think, should just be a % lower than the mean/average…whatever, of all other providers - just keep resource price competitive…somehow…lol
To my mind it doesn’t matter whether you are buying resources, sausages or table-lamps with Safecoin - we don’t need any special algorithm to relate Safecoin to sausages do we?
I’m a decorator, so don’t rip into me too much…lol

Thank you and @Al_Kafir for chipping in.

But if this sunk-cost capacity is not priced at the margin but “retroactively” (on the entire “float” of the toilet reserve tank), people will have to constantly re-evaluate their decisions and what may be feasible one day, it may not be 10 days later. And if this repricing happens all the time to the entire user base, that could “cost” a lot in churn and “re-chunking”. Since the bandwidth seems to be free (on SAFEnet) although it’s not, the extra rechunking could put undue stress on to that resource.
For example someone who could “normally” (I know…) store 1TB a month and “serve” 2TB of data because of the extra network churn caused by others may be able to store 800GB and “serve” 1.3TB which means he’d effectively subsidize this imperfection in pricing mechanism.

I think this is a very complex issue that’s not going to be solved in a “good enough” way in 2014.
I see constant “fine tunings” happening as the Devs learn about the network and how people use it and I’m slightly concerned that revenues aren’t distributed to caching and network nodes (I don’t know whether they should be, but it bothers me when something is free - that’s never right and it’s guaranteed to get abused :smile:).

Ok, too technical for me, over my head…I’ll just go and paint something I think…

To me the simple way to think is, the price of safecoin in $ or fiat will be 100% market driven, the farming rate will be dictated by the network. When it needs more space it will offer more safecoin, when it needs less it will reduce capacity (likely never to happen). This is like mining gold or bitcoin to an extent, easy to begin with and getting harder. How hard is being set at rate of network utilisation and reward.

The network needs to reward farmers and this is a good way. Pegging process or similar will be beyond it, but rate of reward is certainly within its remit.

I think there is no solid mechanism for rate of printing money, so one that is linked to a valuable resource seems to work. It did for gold for a while anyway and this time we hope the farmers will be the guardians of the worlds data, until we can get farmers built into everything. So you get a fridge for free, because it has a farmer in it, who knows, we get satellites paid for because they have farmers in them. The could charge for access until a cheaper one exists etc. I wrote about this a while back Machines that own themselves in bitcoin | Metaquestions and here Machines that own themselves in bitcoin part II | Metaquestions There is a long way to go, but the value of true digital wealth transfer as a means of reducing costs and increasing efficiency has not even been touched AFAIK.

Anyway, the market decides the fiat value and the network decides the farming rate. Unless we can come up with a better scheme then this one seems very solid. Unless … You know I am always listening :smiley:

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Thanks for the clarification.

I have a question, though, on the above quote. This does not include one more factor, which we did go over, and I believe you put forward on at least a theoretical level. That is the price setting mechanism for purchase of storage resources from the network when someone wants to raise their cap. Am I not correct that this is also determined by the network, probably as an algorithm paired with the one governing farming rate?

Yes that is right. The farming rate will be determined by the network as a whole. So we should be able to see what it sets and maybe publish that over time. It will tell us if we ask it :slight_smile:

I see it something like (made up numbers for example)

Day safecoin per 500Gb per day
1 1000
100 800
1000 200

So as the network grows the space is cheaper, but if safecoin value goes crazy (it might) then it may look like this

Day safecoin per 500Gb per day
1 1000
100 20
1000 3

OF course it could go the other way if the network needs more space. In that case it will increase farming rate, and take no notice of outside price, it will notice the oversupply if its too generous and reduce it quickly or the other way around. In essence balance of rate will be the networks job, but in doing so it ensures space/cpu/bw etc. are available. The price just means more folk will farm if its valuable and less if not, if it is less attractive the supply of space drops, the network increases rewards etc.

Hope that is what you asked :slight_smile:

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Ultimately, there is only ever a single spot rate, at a given time, even at a gold exchange. Mines don’t get to set the price of dug up gold, prior to it going to the market.

Ofc, this doesn’t stop futures markets selling contracts at a fixed rate over a period. Perhaps such a secondary market will spring up to reduce the risk of farmers? I suspect if there is money to be made doing this, someone will provide such services.

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Thanks, David, but no, that 's not what I asked.

I’m looking at the mechanism for the network setting the price (in safecoin) by which one can increase access to resources (storage space) by purchasing it from the network–i.e., raising your storage cap by paying safecoin to the network, which safecoin would be recycled to be farmed again.

We discussed it previously under “Price discovery for purchase for network resources”. You definitely laid out that the network can and will be able to determine the cost per unit cap increase, and use this as a tool (along with farm rate, I’m sure) to keep the network resources balanced.

Did I misunderstand? I hope not, because I just posted a thread “Vault vs user account – an over view of user experience” which relied in part on that understanding. If you read that, you’ll see clearly what I’m talking about as separate from farm rate.

(Man, I hate to distract you from coding, so if need be ignore us here as we knock this stuff around.)

Yes this is what I mean when I say the network will increase and decrease the amount of safecoin for farming. I think this is where I keep misunderstanding I call it quantity of safecoin and you are calling it proce of service in safecoin.

So on the farmer side that is OK, on the client side I see it as the network will charge for access at a rate. This rate can be set by us, but my preference is we use the global farming rate instead. So if farmers get paid X safecoin per unit of storage (which is forever) then a user pays X for that unit (forever). This rate will be a network rate though and base don the farming rate around a user, it should be strikingly close to the actual network average if you stopped all vaults and counted them.

So yes you are right and I was explaining farming rates again :-0

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No worries on that front I tend to look here between builds :smiley:

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I think I get it!! And I see why you felt you were answering but I didn’t get it.That makes it rather elegantly simple, actually.

It will be interesting to see how these details present themselves on the user interface end.

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Here’s my thoughts of the current pay structure planned.

Overutilization = Greater than 75% of available Network space is used.
Underutilization = Less than 75% of available Network space is used.

Network Utilization Model: Determines how much Safecoin is awarded to the farmer, AND charged to the user when raising their storage cap, also known as the NSL (Network Storage Limit).

  • If the Network has overutilization, the farm rate increases Safecoin reward to farmers.
  • If the Network has underutilization, the farm rate decreases Safecoin reward to farmers.
  • If a user raises their storage cap during overutilization, the Safecoin cost will be higher.
  • If a user raises their storage cap during underutilization, the Safecoin costs will be lower.

Pro: I think this model effectively manages farmer incentive to provide available storage space as demand requires it.

Con: I think this model is weak on fiat cost comparison to other storage competition.

I ran a spread sheet of this model and my analysis showed, if the fiat price of Safecoin goes up, so does the cost of buying “extra” storage. For a farmer this is not an issue since they will be earning Safecoin. For a non-farmer, their choice is to buy Safecoin on an exchange and then pay with Safecoin to the SAFE Network. Poor non-farming users will be left with making multiple accounts to take advantage of the free NSL. This is the eventual result I see happening.

Everyone is welcome to disagree with my preliminary analysis. I’m just offering my point of view for what it’s worth…


Alternative Solutions?

When dealing with Safecoin and the SAFE Network alone, the equation is fairly balanced. Adding the fiat value brings instability. If the goal is to get Safecoin distributed until 4.3 billion into circulation, then it is already being accomplished. It has been repeatedly stated the fiat value will not be linked to the cost of buying premium storage. If this is true, then why use an apple to pay for an orange?

  1. I recommend eliminating premium pricing from the equation.

  2. I believe (vault ranking + available_space) can replace premium storage. The maid manager does not need to check how much data is actually PUT in the vault because we already know if the vault is behaving based on the vault rank.

Q&A

What if I don’t want to run a vault? You still have the free NSL amount. To be determined.

What if I don’t want to run a vault but need a large amount of storage? You can always pay a third party to run a vault on your behalf. You will have to trust that third party as you would any other business service.

Keep in mind, you can do it yourself, unlike other storage services where you must log into their server. The point of this alternative solution is to remove the fiat value from the Network equation. Therefore, storage will remain cheap, and affordable, regardless of how expensive Safecoin becomes.

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You have been pretty solid on this one David. Perhaps a consensus from the community would be good. Maybe a poll. We can work the details and if there are issues with the results then show the math in the algorithm. I think that does no harm and what are we if not a community? I feel this is not technically better either way, so it may be that the great minds that people have here should state their case and we will act on that for the benefit of the network. I think many are on the fence so this may push it out in the open again.

Its almost time to get those algorithms in place and we can still measure via the maid managers data put up (we will ignore deletes though as it adds immense over head, the archive units will take care of stale data, another story :slight_smile: ) on the network, so the time is probably right to bring this up again.

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Agreed,

I have no wish to undermine anyone who likes the current plan. And without good maths to confirm or refute, we are left with guessing. TestNet3 will be exciting for sure, not just on vaults but on the whole ecosystem as it lives.

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May I suggest a slight (180 degree) change in terminology?
The state of overcapacity means there’s too much capacity.
I think it makes more sense to swap the terms.

Although I would prefer Overutilization and Underutilization.

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I believe so too.
Incidentally until yesterday I thought that MaidSafe tokens buy you storage over a preset period of time, but it seems it’s forever. Oooh, my head is hurting again… I’ll need to drink more than usual tonight to forget some of what I learned this week!

This value (whatever it be in the end) should match claims/scenarios about the network resilience and it seem that they roughly do (1 out of 4 chunks can go missing, so <75% could mean loss of 1 of 4 chunk copies which I guess is where you want to start rewarding farmers to work more in order not to have some chunks drop to just 2 copies)?

This ok unless we can improve it significantly - at least it is easy to understand IMO :-). Some will be able to buy Safecoin in advance to “stabilise” the price they are paying, others will have the option of farming. It maybe is hard on the few who don’t understand this, or don’t have the means to do so. But not system will be “fair” to everyone.

Alternative Solutions?

When dealing with Safecoin and the SAFE Network alone, the equation
is fairly balanced. Adding the fiat value brings instability. If the
goal is to get Safecoin distributed until 4.3 billion into circulation,
then it is already being accomplished. It has been repeatedly stated the
fiat value will not be linked to the cost of buying premium storage. If
this is true, then why use an apple to pay for an orange?

I recommend eliminating premium pricing from the equation.I believe (vault ranking + available_space) can replace premium
storage. The maid manager does not need to check how much data is
actually PUT in the vault because we already know if the vault is
behaving based on the vault rank.

I don’t understand what this means. @dyamanaka please can you explain!

I am suggesting we require storage to gain storage, instead of Safecoin to buy extra storage. Let an apple pay for an apple. If you want 100Gb of storage, then provide 100Gb of storage. It’s just like original POR (Proof of Resource), minus token transferability.

We aren’t using POR tokens due to the burden of micro management, which slows down the Network. I believe we can solve that issue, and recommended some ways to improve/fix the POR system. I also like the Network Utilization Model. Each has good merits. I want to take the best features from both.

Network Utilization Model + POR Model

  • If the Network has overutilization, the farm rate increases Safecoin reward to farmers.
  • If the Network has underutilization, the farm rate decreases Safecoin reward to farmers.
  • If the User wants access to more storage, they will have to provide it to the Network.

The storage cost above is not affected by the fiat value of Safecoin. If Safecoin rises to $1 or $1000 the fiat cost to gain storage remains stable. Compare that to this situation below.

Right now, 1 Safecoin is about $0.02. Let’s say the Network starts charging 1SC ($0.02) per Gb per month. We are comparable to other storage services. Then Safecoin rises to $1.00, the Network is now charging $1.00 per Gb per month.

We could adjust Safecoin’s cost for storage, and factor in fiat value. This requires human intervention. Basically, we have to decide how much storage costs in fiat terms. If this can be done autonomously, I would be very interested to see it.

As @dirvine said, we are a community. My skill set is to analyze business models and look where things can be improved and where things are weak. I have no favor either way. My goal is to make it work. Always open to other ideas.


Non Farm Users needing more Storage

There will be demand for storage beyond the free amount from people who do not or cannot run a vault.

How do we service this need? I believe third party services can fill this gap. Hypothetically, a person would create a SAFE account and Vault but allocate the storage space from a storage pool. @vtnerd might even have some ideas on how to make it possible. :wink:

The idea is for the User to pay fiat to the storage host, while the vault credits Safecoin to the User. This would work well for hosts who do not care to make Safecoin yet have abundant storage and want fiat. Or they can make up any other terms they desire.

The above idea is just one way to allow the market to service those specific users. If the SAFE Network autonomously keeps storage cost (in fiat terms) competitive, I would opt for it instead of a third party.

Thanks @dyamanaka. As David Irvine promised my head is hurting (not just from this, I’m fighting with actual computers too :-)) but this is confusing.

I still haven’t fully grasped your alternative. But first I want to be clear about the system I though was in place so I’ll summarise that, and see if I can find the fault or make it work! This:

  • we have users who create demand and pay with Safecoin, or with storage if they also farm
  • we have farmers who supply storage, and receive Safecoin in return
  • we have exchanges that allow Safecoin/fiat exchange

Each sees the world from their perspective, but all are part of a closed feedback loop. I think I can see the issue you are trying to solve, but let’s see if I have that first. Then I might be able to understand your alternative. I’m going to work through to understand why you think someone needs to set the fiat price. Here’s a description of the original scheme as I understand it (please correct me!):

Network Utilisation Controls Farming Rate

Let’s start in balance. Users are paying UR (user rate) Safecoin per GB and farmers are being rewarded at FR (farming rate). Fiat price of Safecoin is $X, but let’s ignore X to start with.

If demand for storage rises, network utilisation rises, and the network increases FR. This increases supply and network utilisation at some point falls back. And vice versa. Ignoring X the system self regulates fine, I believe.

When X rises, users see the price of storage rise, and farmers are rewarded more highly (as both see the value in fiat terms). A user who farms is insulated from this provided their farming is sufficient to balance their use - this encourages users to farm, which helps the network grow and stay in balance. However, not all users are farmers, so when X rises, some users find it expensive and demand falls. Equally some farmers find it attractive and supply rises. As a result network utilisation falls. The network reduces FR, provision of storage pays less well. This is dangerous because if left unchecked, users might be lost in large numbers very quickly, and would be reluctant to return because of the pain they suffered in having to find another home for their data. We could lose people forever over this.

I notice that the more users who are farming to pay for their use, the impact of this change will be reduced, but that as X * UR (the SAFE fiat price of storage) gets more and more out of step with the real price/cost of storage, this begins to reduce the number of users who are also farmers (as users leave for cheaper storage and farmers join to earn more - and vice versa if X falls). Which is bad - we want to encourage users to also be farmers because it is more efficient use of resources (hardware and energy) as well as being more decentralised.

The Storage Pricing Problem (X * UR)

As described, we have a feedback mechanism between fiat prices and network utilisation, but I can see that a problem arises because we end up with an overpriced network if the price of Safecoin rises compared to the actual storage costs. And this I think is what you are trying to fix?

So we need a way for X * UR and X * FR to be kept in balance with $R per GB (the real cost of storage) yes?

A Solution?

Is this something the network can do? Well I’ve described how I think X affects the network. The real world cost of storage R reduces slowly over time, but with very occasional spikes and troughs (e.g. due to supply to demand imbalances in the market).

So we need the network to cope with: a) finding a level according to a steady R, b) tracking R as if falls gradually over time, c) tracking R through spikes (famine) and possibly troughs (gluts). And coping with potentially wild fluctuations in the fiat price of Safecoin, X.

The parameters that need adjusting are UR (the user rate for storage) and FR, adjusted proportionately up or down to cope with rapid changes in X and R, while more slowly tending towards values that ensure a healthy level of network utilisation. I think if we knew X (Safecoin fiat price) we could build this in, but we’d need to take care not to create instabilities - not my area so I could be talking total bollocks about the algorithms here. Ignoring that possibility :-)…

I can see us obtaining X by polling exchanges and feeding this quickly into adjustments in UR and FR.

I also think that could be done without human intervention, once there are enough exchanges to base it on. It creates a centralisation risk in that the exchanges could collude, or people with sufficient Safecoin could collude, but I’m not sure this represents significant risk to the network itself, because as soon as the fiat price corrects (manipulation can’t be sustained) the network also reverts quickly so I don’t immediately see a benefit to such an attack.

As I said, I’m not confident that this would be a stable system, but at first sight it seems to work and may be achievable.

How To Calculate Safecoin FIAT Price: X
Nodes will need a role which polls exchanges. Exchanges would be nominated by - not sure how to keep humans out here - to appear in a distributed database (on SAFE). The database would provide a decentralised ranking of exchange price accuracy (based on agreement across a trustable subset of the database). The trustable Safecoin price would be obtained periodically using the prices provided by the top ranked exchanges, having pruned not just low ranked exchanges, but any exchange with a prices in the top or bottom P percent of the total price range (or other methods which limit scope for price manipulation). I guess we start with USD or a weighting based on USD, EUR, YUAN. Others will know how to do this part best.

Exchange Price Interface
An exchange entered in the database will deliver pricing information by writing to the database using a SAFE API in exchange for Safecoin. Exchange reward would be based on relative rank, achieved based on least deviation from X over time.

I’m not sure how we stop people spamming the database with exchanges that just copy prices from an exchange API. Perhaps this is where human intervention will be needed! Or where we get to try out voting :-). A lot easier than maintaining the price itself though :-). A problem to solve, but otherwise, how’s that?

Now I need to have another read of your explanation @dyamanaka and see if I get it yet! I need a break first though :slight_smile:

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I think this may cause PR problems and “not as advertised” claims from investors. The purpose of the coin was to buy resources and this is where the initial value is considered to be. The market for people who don’t have space but want it, will be lost really – that is unless they use third parties - of which there was no mention…may be wrong though

Do we not more basically need to know the price in Safecoin? I agree with the 1st 2 points of the network utilisation, but not the 3rd. To my mind its an apples and oranges situation (I know I keep saying it and you just said it too).
Can I just confirm that it is the main priority that we have no human intervention and that this is done algorithmically and also that a POR token is definitely not being implemented? If so, then it seems that the only useful pieces of data to input into any algorithm would be things that are fairly predictable, rather than highly volatile market data (at least until a time in the future when markets become more stable).
As I’ve said before, the only predictable things seem to be that storage costs will decrease over time and furthermore that this is at a predictable rate.
Is it not possible to just reduce storage costs over time by reducing them by a predictable percentage each mth or however long?
Could this at a later date be changed to allow the Network to derive it’s inputs from a decentralised exchange (once markets have settled.) Would this (if feasible) further entail having a decentralised exchange in place or linked to the network prior to launch? We would only have to link to Safecoin price, - the fiat price, btc etc price would take care of itself.