Exchange price vs. resource price

Autonomi Network Token
41

Sounds very dangerous.

When working this stuff out I would implore you guys to look at the current fiat system for what it is: broken, with an unknown replacement behind the curtain.

SAFEcoin is backed by the worlds computing resources and the ingenuity of it’s Builders and it’s content creators. The current mandated International Monetary System (IMS) is backed by ? Confidence …and the next system ?

Prediction: SAFEcoin will outlast the current monetary paradigm, plan accordingly and don’t let this or the next mandated currency become an anchor for the network.

I understand that you dont have to sell your SAFEcoin for fiat, but when panic occurs in fiat-land, people scramble to liquidate assets for cash.

I would feel more comfortable if Maidsafe engaged with some experts (university?) that really understand how the IMS works and the time bombs that are out there, such as Derivatives and Rehypothecation.

It’s these concerns that make me lean towards one exchange, built on top of SAFE. Baked into the core and democratically run by the inbuilt dev voting system, with PODs competing to keep it awesome.

Martin Armstrong has an ‘AI’ system that predicts bad outcomes in the IMS, by watching Capital flows i.e if a country is planning a coup for example,…the insiders will start moving their money, these changes in capital flow are used as in input to the algorithm and predictions are made. His system actually predicted the fall of the Soviet Union is this way.

Imagine if you had that system, plugged into a native SAFE exchange…you could effectively immunise the SAFEcoin system from the IMS system. Without such a system and exchanges outside your control, the meltdown in the IMS has the effect of ??? in the SAFE system.

Choose wisely and please don’t flame me with 'free market, privacy, anonymity blah blah arguments, if you have an understanding of this stuff, please chip in, tell me I’m delusional :slight_smile:

**Update: Hackers steal 50 Million SAFEcoins from exchange (actually NXT…but you get my drift…do we need these headlines?)

** Update 2 …and this stuff starts to happen, margin trading, derivatives, so called ‘financial instruments’ make bets on you Did Margin Trading Crash the Price of Bitcoin?

42

Sounds like the way to go…I never really got the free model - it becomes too complicated I think.

43

I agree, but can’t it run autonomously? Is it technologically possible to build into the core? If so, this really would solve all problems to my mind…everything flows smoothly from that.

44

Would be a cinch for these Maidsafe guys, their awesome :slight_smile:

I’m not certain, but I believe the token was a decision made later on in the project’s life cycle. They made the decision to launch and so their probably a little pushed for time now anyhow.

45

There are a couple things that I think are clear to me that, if we factor in, might make talk on this topic a little easier.

(1) There is no mechanism by which providing storage directly gives you access to that much storage from the network. Resource is proven-out by Puts and Gets which result in the farming of safecoin. The opportunity to farm safecoin is what your resource buys, not storage directly.

(2) An increase in Network Storage Limit (NSL) will have to be bought from the network, always. Lacking a Proof of Resource token (which would introduce its own massive set of problems to institute) there is no means of leaving the NSL upgrade price to the market of users directly.

(3) I believe it’s been established that NSL increases have to be in perpetuity, not per month/year, etc.

(additional breakdown of points to analyze regarding network regulation)

(4) Resource Price (denominated in safecoin) and Farm Rate (farming difficulty) are the two main variables which can be used by the network to regulate the scarcity/abundance factor of network resource.

(5) Farm Rate and Resource Price are both variables which lever the same resources from opposite sides (though Farm Rate may have to factor into other things like expected creation curve of safecoin over time so that it doesn’t all get created in a couple years or take too long). Farm Rate leverages provision of resources, Resource Price leveraged consumption.

(6) External factors affecting farm rate are such as equipment costs (CPU, storage, RAM, etc.), electricity, bandwidth, personal wish to contribute to the network regardless.

(7) External factors affecting Resource Price are fiat exchange price for safecoin, perceived desirability of SAFE network features (user experience, PR, anonymity, etc.)

This is an extremely sticky problem, I think, because there’s a locus of multiple variables which may need to be controlled, but may not be very controllable.

I don’t have a solution to propose, but I wanted to lay out the above points. I think they’re fairly solid factually. If so, maybe they’ll give us some common ground to step off from.

46

I just want to clear this part up.

I’m against human manipulation for storage pricing. My thoughts were worded incorrectly as some believed I was in favor of this. I was trying to lead into an autonomous solution. My apologies for not stating my position clearly.

I am in favor of trying to stabilize storage cost (in fiat terms) autonomously. There were some good ideas mentioned, one include a SAFE exchange directly on the Network. Another included a polling of multiple exchanges.

Needed Observation
If TestNet3 proves premium storage cost (in fiat terms), remains stable despite Safecoin’s fluctuations, then my concern is refuted. If it shows significant instability, I would push for a remedy.

I know we are on a time table, and I try to avoid bringing up issues that are more hindering than helpful. I’ll leave it up to the Devs to decide if this issue with worth addressing.

47

So what would happen when buying local storage space(hardrives) becomes so cheap ($$ per GB) that it would almost be pointless in charging safecoin for the extra space on the network. (10 years from now). What other ways could safecoin be recycled?

48

I think that was commented on earlier (and elsewhere) - you’d get more space for the same amount of safecoins. There’d still be a price attached to the resource, only that the resource would be cheaper.

Storage will likely never be (completely) free because you need energy to convert it into useful outputs.
If we discover and obtain free energy, then we probably won’t have to work to make a living.

49

The point i was trying to make was that in the future we could make ultra efficient storage devices (crystal data storage, nanotechnology, quantum storage…etc ), more storage than what we would know what to do with. This doesn’t need free energy to have near zero-cost. Maybe not 10 years, but maybe one day i could use something no bigger than my finger nail to store all the worlds information.

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50

Didn’t someone say 640 KB (or whatever the figure was) of RAM ought to be enough for everyone?
I think it’s a similar type of question.
People won’t make more storage than there’s use for, because they couldn’t sell that crap at a profit.
A world in which people buy storage which they don’t need would have to be a totalitarian world because no economically sane person would make products for which there is no demand, or buy them if they can’t put them to economic use.

MaidSafe is partially possible because until now there was no storage virtualization technology for distributed digital storage capacity. So you will buy that 4TB HDD because you need 3TB, but you may also use MaidSafe because you don’t need the remaining 1TB and it’s economically better to do that than to buy 1 * 2 TB and 1 * 1 TB HDD.

Personally I’m more concerned about problems 3-6 months down the road, like whether telcos will start charging for aggregate throughput if/when MaidSafe takes off.

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51

We’re not planning on doing it this way are we? Clearly that won’t work, will it?

The way I see it is that an “exchange” of sorts needs to be built into the network. This exchange cannot involve fiat money for a number of reasons. The in-built exchange would only deal in two things - safecoin and resources.
On entry to network, users are presented with a choice of accessing network via donating resources (various options ie basic user to farmer) or paying with Safecoin. This would seem to lessen any DOS attacks and negate the need for a proof of unique human app too wouldn’t it - as no free users?.Users only have to provide a small amount of resource.
A separate decentralised exchange will deal with crypto to crypto and possibly (much more complicated) involving fiat currencies.
This keeps regulatory and anonymity (due to know your customer rules) worries away from the network.
I don’t think lack of space is likely to become an issue, but to mitigate the risk D Yamanaka’s idea would be a useful addition and give users more choice; however I would say that if it was too difficult or delay things too much, then we’d probably still be ok without.
To be honest I’m not sure if I’m describing mechanisms that already must be in place if people can buy/sell resources. The algorithms used would be almost identical to the farming ones - just using inputs from the in-built exchange.Anyway just thought worth saying what I’m thinking so I can be corrected where I’m going off track.

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52

I’ve been thinking about that as well, that without a bid/ask process for resources it will be difficult (if not impossible) to devise an “autonomous” system. Ultimately by trial-and-error rules of the black box will become known (and we won’t know when they’ve become known) to parties who will then figure out ways to trigger events from which they’ll be able to profit…

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53

Yes, I recognise the issues that can be caused by speculation in the early days, but this may be mitigated in other ways. Maybe we are trying to solve issues algorithmically, when we could look at the problem from a different angle to mitigate the same problems. The issues we may have can be ascribed to potential market volatility - how to mitigate any potential problems for the network is the real issue/question here I believe… I do not currently think this issue can be solved technologically - though we can mitigate by other means. I further think that this is just going to be something we have to live with until markets settle.
Maybe we should be considering worst case scenarios (David Yamanaka’s area - done loads) and how to mitigate the risks. Top of my head would be a community war chest for co-ordinated action, should threats emerge in the early market volatility stage…

54

I just realized that I replied in a separate topic so I’ll just copy the reply here too:

After reading through the Exchange price vs resource price thread I realized that I didn’t really understand completely how the Safecoin issuance is going to work.

I have to say that I really really really don’t like the part where the rate of issuance is decided by the SAFE network through an algorithm that measures network utilization.

Why?

Because farmers are going to have a financial incentive to game the network.

By providing farmers with incentives to flood the network with junk data en masse we are digging a grave for the SAFE network

For me the genius of Satoshi was in the game theory tactics he used to make everybodies incentives align.

Bitcoin uses an algo to adjust the difficulty of mining so that coin issuance is known in advance and so that there is certainty in the amount of Bitcoins arriving at the market. Satoshi had to make that algo because otherwise all bitcoin would be mined in year 2 of bitcoins existence due to more and more processing power joining the network.

SAFE network on the other hand is a different beast. We are using storage as a proof of resource and as such we don’t need an algo to determine the rate of Safecoin issuance we can just hardcode it in the protocol.

It’s the incentives of farmers vs miners that is the key.

Miners have an incentive to offer as much processing power as they can to the Bitcoin network.
Farmers have an incentive to offer as much storage as they can to the SAFE network but in the case that an algorithm determines the rate of issuance they also have an incentive to flood the SAFE network with data so that due to the over-utilization of the network the algorithm decides to offer more Safecoin to the farmers in which case they would receive more Safecoin(Mind you this cannot happen with Bitcoin).

But if the rate of issuance is hard coded in the protocol the incentives of farmers to fake network overutilization doesn’t exist.

This isn’t the only reason why I think that the best course of action is to predetermine the rate of issuance, there is also the price stability aspect.
In the case that Safecoin issuance is dependent on an algorithm the number of Safecoins on the market will not be certain and markets really hate uncertainty which means that the price of Safecoin will vary even more than the price of Bitcoin(because Bitcoin’s rate of issuance is predetermined even though the algo decides the difficulty).

It also gives an unfair advantage to traders that understand how the algorithm works and effectively that means that ordinary users will pay a tax to traders that know when to buy and when to sell Safecoins (this is going to happen even if the rate of issuance is predetermined but to much lesser extent than if an algo does).

I hope I’m making any sense?

55

I just read an article about Bitfinex’s safeguards it has in place to avoid “flash crashes” and the like. It may be worth someone asking them what things they have in place?

Bitfinex argued that, despite some claims in the community, it does have such safeguards in place to help stop such harmful actions on its market, and that its platform actually prevented a more extreme flash crash in this instance.

Bitfinex said:

“All systems performed nominally and according to design. We were very pleased to see that our hard efforts in improving our risk management technology and process yielded an orderly result.”

56

Remember that just storing a bunch of stuff on the network doesn’t gain an individual farmer anything. The stored data is spread out in tiny pieces all over the world, among lots of nodes. The individual farmer profits from first having data stored on his node by others, then stewarding that data well until it’s needed, and then serving it up on demand. That’s when a farmer has the opportunity to get rewarded–responding to others’ needs for storage.

If a whole lot of farmers stored mass of junk, it might skew the utilization percentage and result in an increased farming rate, but that would take very broad collusion among an awful lot of people, for only marginal gain. But then that data would still have to be accessed by other unknown users for the individual farmer to profit at all, regardless of the farm rate.

I think the farm rate is a pretty blunt tool, anyway. It’ll help shape trends, perhaps, but it’s not a policing tool.

I think farming is designed as being worthwhile for a lot of reasons, but getting rich is not one of them. The idea is to give all participants some reward, and get LOTS of participants. Bitcoin mining sort of started out that way, but because of the proof of work model, brute force wins the race and gets the big rewards, incentivizing centralization. Farming generates much more granular rewards based on useful functions spread across the entire network, and are basically impossible to centralize–that’s the whole point.

57

No, I don’t think we are intentionally planning this to happen. It wouldn’t make sense to start over charging/undercharging customers when Safecoin suddenly rises/falls in fiat value.

If I were a malicious company needing SAFE storage, I would send out negative PR to tank the fiat value of Safecoin, then buy a ton of cheap SAFE storage. This is a worst case scenario, but one that seems likely.

I have some ideas on smoothing out the fiat value of Safecoin using an EMA. But I still think requiring users to provide their own storage is the easiest way to deal with this issue.

Again it, it’s up to the Devs to decide if this issue is a threat.

58

If the Fiat price of Safecoin falls the net effect would be that you would likely need more Safecoin to buy the same amount of resources. (If we have the in-built resource exchange). Resources would also become more expensive paying in Safecoin. However, you would be able to buy more Safecoin for your Fiat on a decentralised exchange. To my mind the Fiat price would remain unchanged – the only thing affected is Safecoin price. What you are describing is the potential market volatility, which is something we may just have to accept and find other innovative ideas to protect against market crashes etc – hence maybe look at what bitfinex have in place.

59

I’m not sure about this one. @dirvine has I think been converging on this idea, and I don’t think he would say that if he didn’t either have a mechanism worked out, or be pretty sure it was feasible.

This is a valid concern, but does it stand up? For a farmer to impact the rate of Safecoin they personally earn, their vault would need to have a significant amount of data both added (requiring a significant proportion of the entire network capacity to be filled with junk), and they would need this data to be accessed. Caching makes spam access ineffective. So essentially this only earns more Safecoin if a hell of a lot of farmers a) flood the network, and b) access the data they have stored in some random fashion that doesn’t get short-cut by caching.

So, is it possible a large number of farmers would do this? Firstly the increase in farm rate would be small. Secondly, it is not going to increase the value of Safecoin - and to benefit, those farmers are going to have to have a way to convert Safecoin to something else, which is going work pretty poorly if they’re all at it! Also, after not very long they collapse the system, destroying the value of their earnings.

So for several reason I don’t think farmers, even really greedy ones, have an incentive to do this. Even if some think it is a good idea, they’d have to convince an awful lot of others to join them, and I don’t think its possible to convince that many with such a risky long shot strategy.

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60

Yes, we may have to just accept it. The Network Utilization Model does adjust to the fluctuations overtime. I would rather get the Network launched than delay it, trying to prevent hypothetical events. As @nicklambert once told me, we will have to brave the waves!

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