I’m not worried that the price won’t go up over time, just I’d prefer it went up more rather than less
So, if the network grew rapidly in a given time and in that time the token supply increased 5x, the price is likely to be very much lower than if the supply had remained the same while the growth occurred.
But I have already included this dilution in the number of tokens, choosing a Price growth potential - 1/10 of the Users growth potential… So indeed the price can rise along with monetary inflation if people use the network
Unlike most other crypto, including BTC, the Safe Network has an additional variable making this a very difficult situation to analyze. And that is what the network algorithm sets as the upload cost in SNT per GB. That has a real-work translation to cost in $ per GB that will then put pressure on SNT up or down aside from the speculative investment in SNT that is more driven by the number of SNT in circulation and what market cap the investment community assigns to the network in total. Getting the farming algorithm right is as important or more so than deciding on how and when to release the full quantity of SNT.
EDIT: I would add, though, that the electricity cost that factors into mining is a potential feedback into the BTC price albeit in a less direct way than would be the farming algorithm for SNT.
Of course the price can rise with monetary inflation if people use the network, as long as the growth in users / market is greater than the growth in the token supply. But with a given number of people using the network / market size, the token price would be higher if the token supply were lower.
I guess the supply/price balance is about decentralisation. At launch investors have a certain relatively centralised if you like, proportion of the supply. Increasing the supply reduces this relative to farmers, who acquire supply over a shorter timescale.
How that in turn affects price is hard to say, but it could affect the rate of adoption in various ways, and perhaps the attractiveness and success of the network for example.
I think this makes the most sense to me as a valid reason for the supply dilution; to ensure early investors / holders don’t hog a big quantity of the token supply over time, and those who contribute to the ongoing health of the network eventually get the biggest share.
Other than that, I don’t think the dilution will incentivise the provision of more resources, as the price will simply adjust to the supply (e.g. with a given level of demand, increasing the token supply will reduce the market price of SNT and therefore increase the price for storage denominated in SNT until it reflects the marginal cost of farmers providing storage to the network).
I agree it’s hard / impossible to say exactly how this dilution will affect the price, as we don’t know how many farmed coins will be readily sold on the market vs being saved vs being re-used, but I think it’s certain that at any given level of demand, if the supply of SNT is increased, the price of SNT will be lower than if the supply remained stable.
These economics and price action may well affect the adoption rate in various ways depending on the dynamics, and not always in good ways.
For early network growth, it’s important that farmers want to provide resources. I wonder if the best incentive for farmers to join the network in the early stages would be the expectation that their earnings will rise in value as the network grows. Knowing their SNT will be diluted proportionately to network growth may reduce the incentive to add more resources vs having no dilution.
I expect farmers would rather earn 1 SNT that won’t be diluted vs 1.7 SNT that will be diluted by up to 10x as the network grows, especially if they see great price action in line with network growth.
I’m assuming farmers’ behaviour will link storage cost to the actual cost of providing resources to the network.
E.g, if the network offers rewards that are below the cost of resources to farmers, the farmers won’t add more resources, and if the network offers rewards above the cost of resources to farmers, the farmers will add more resources.
What is a time of need for farmers? At what point & for what reason might farmers stop being willing to provide resources at around the marginal cost of that storage?
If demand for the network was dropping, demand for the token would already be dropping, so pumping out more tokens in that situation wouldn’t help farmers, it would simply further erode the value of SNT and incentivise further selling / getting out of farming.
If you’re not saving any tokens but selling them all as you receive them, you won’t care about future value, but your behaviour (along with many like you) will be ensuring that the token price drops if the supply increases ahead of demand.
If you are interested in saving for the long term, you’d prefer the supply grew more slowly vs faster because your tokens will be less diluted in the future, so are likely to be more valuable.
If your cost per node were £10 pw, and received 100 tokens with a market price of 9p per token, you may want to stop your node. If, however, you had a reasonable expectation that if the network doubles in size, your token will be worth 18p (or, a lot more than 10p), you may add resources regardless.
The stronger the likely token value growth, the better incentive for farmers to add resources, and vice versa. Increasing token supply will reduce the likely token value growth over time.
If there isn’t much storage available, the storecost goes up, so the farming reward goes up. No dilution necessary.
If I’ve understood it correctly, as it stands in RFC 0075, the reserve is not there for any special circumstance, but simply doubles the farming reward vs the storecost at all times until the reserve is used up. So, it won’t do anything differently when there is not much storage available, it just constantly increases the supply of SNT.