Is the Safecoin Economy Deflationary and would it be better with Inflation built in?

Hoarding is a technical term, but whatever.

Actually the majority of bitcoins are hoarded by early adopters, i forget the exact % quoted, but i recall it being in the high 80% of mined coins. Those coins were mined a long time ago and have never moved. If satoshis stash alone were to be put into circulation it would send bitcoins price into a nosedive.

However hoarding shouldnt be confused with why the price is where it is, whats keeping that in place in the chinese cartel of miners and exchanges who work together to fix the price.

But a massive influx of coin not controlled by them would certainly change that.

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Ill chip in my 2c on this.

Neither is bad, each has it uses, even a inflationary currency can be hoarded if the inflation is less than the speculated price at a future date.

And a deflationary currency can be spent if there is utility to in doing so.

Ultimately the point of each is the main method of influence in a central bank scheme where an authority can exert control over ever changing conditions in order to encourage stability, and spending/saving.

Since safecoin will not have any such authority, programming such into the code itself as bitcoin has done is most likely going to end in some sort of catastrophe.

While projects such a nubits attempted to create a sort of decentralized central bank scheme to peg the price to the dollar and did so for over a year it recently failed because it could not absorb sell orders of nubits to bitcoin during a bitcoin price spike.

Ultimately when dealing with a decentralized currency the only way to create price stability is to peg it to the cost of creating said currency units by enabling uncontrolled inflation.

Since the cost to produce said unit will require resources whose costs are controlled by real world limitations the price of said unit no matter how much is made will never fall below that amount, as it would be cheaper to buy it than make it, and never above that amount as it would be cheaper then to produce it than buy it.

With bitcoin that price regulation would be electricty + equipment but even if it had allowed uncontrolled inflation the use of hashing power utlimately caused a arms race which resulted in centralization limiting everyones ability to mine.

With safecoin the price would then be the cost of purchasing harddrives as opposed to purchasing safecoin and of course this would be accessible to everyone (no ASIC grade harddrives should come as a result i hope) so centralization would be less likely to occur.

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Very good points.

However, I think there may still be an arms race in terms of (bandwith), which significantly affect vault performance.

People with fiber connections (1Gbps) will be able to host more vaults as well as serve data… bigger, better, faster… than people with dsl connection (1Mbps). This is inevitable because we are trying to replace traditional “server ~ client” architecture.

Even so, currency distribution is far better compared to blockchains. Our reward incentive is very VERY granular.

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Actually the majority of bitcoins are hoarded by early adopters, i forget the exact % quoted, but i recall it being in the high 80% of mined coins.

I think you’re after this graph:
http://media.coindesk.com/uploads/2014/11/bitcoin-distribution-by-age.png

More like 15% have not moved in more than 4 years.

5% is Satoshis, the other 10% is probably lost.

To the contrary, the analysis is saying most Bitcoins are being moved and used, not hoarded.

As a side note, just about every techie early adopter I’ve met that mined bitcoin to play with the software, way way back in the early days when it was worth a few cents threw away their keys.

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Deflation is only a problem for a debt-based monetary system.

Bitcoin has returned people’s focus to an asset-based money, like gold. Safecoin should most definitely be deflationary.

Inflation is a tool used by governments to rob people of their savings. It is a hidden tax.

Deflation encourages savings. Savings is the basis for societal advancement - the “capital” in capitalism.

With inflation people are encouraged to spend now, before the value of their money goes down (meaning, prices go up). It destroys the incentive to save.

It’s nonsense to suggest that with a deflationary currency, people would not spend. Of course they would. But they would spend intelligently, buying what they need, and deferring spending in favour of saving where appropriate.

A deflationary currency is also the path to a freer society, as goods become cheaper over time, debt is reduced. People are encouraged to save, giving them security for the future.

The debt-based monetary system, where all money is issued as debt - with interest - is the cause of all our woes. This debt can never be paid off, but the interest on it is charged to all of us, via taxation.

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It is good to remember that the problem is not inflation or deflation per se, like @feelz said. In a free and decentralized system the main issue is price volatility.
Fixed supply currencies have the price varying wildly even when there are small changes in demand, and the strict constant emission during early stages can also induce more volatility because it happens regardless of changes in demand.

As for Safecoin, the practical use of the coin within the system itself might be very helpful to bring some price stability. But it still doesn’t take in to account the changes in demand (please correct me if I’m wrong).

Another way is to have a decentralized system that adjusts the currency supply according to economic signals, that can happen in an elastic supply platform, thus maintaining price stability. No peg necessary.

Cheers

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I wonder how crypto-currency savings will provide a basis for societal advancement, when crypto-currency savings are often dormant & not active (e.g. stuck in a paper wallet, not lent out), which is not the case with fiat due to the banking system.

Will crypto-currency savings be put to work by placing them in bank-like organisations who offer a return on savings by carrying out investment & lending operations themselves?

Will people put their savings to active use through managing their own crypto-currency based investments (investing in crypto IPOs, buying crypto-bonds etc)?

It’ll be amazing to see how all of this develops, though some innovation in stable crypto-currency would certainly make all of this easier.

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Instead of a traditional bank, crypto-currency savings could be invested in a Decentralized Autonomous Organization (DAO) :smile:

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Yes… I expect there will be a few more unsuccessful attempts before successful models emerge!

Everyone is a DAO :wink:

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Yeah, you’re right about only one thing…they would have to spend intelligently because they would have no job. They would have no job because there was no incentive for entreprenuers to take risk, and no jobs meant no tax revenue, and no tax revenue meant anarchy because the gov couldnt protect the crybaby libertarians screaming for assistance. Gimme a break.

There would be no SAFENETWORK if not for people deciding that SAVING was not a good idea and SPENDING/INVESTING/RISKING their money was a good thing. And they needed to HAVE that disposable income and it didnt come from thin air.

Debt is a crucial component to every economy. A simple example is the ripple effect of increasing the money supply by letting people buy cars (loans) to get to work or go on vacation. This benefits and creates employment in the broader auto industry ecosystem - tires, oil changes, accessories, etc and the travel industry, food and beverage workers, supplies, hotel staff, etc . It creates jobs for teachers in Travel/Tourism and teachers in Engineering who work for the auto manufacturers. The loop is endless.

You want to shut it all off? You can sit at home and read your 3 day old newspaper (before you use it for toilet paper) because you will have no internet and no computer because you have no money, no job and you’re “intelligent spending” doesnt allow them.

No, because the 19th Century and up until WW1 had both mild price deflation and sustained economic growth. They had the occasional financial “panic” but overall it was an economic golden age.

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Spending savings is spending wealth from the past. Spending credit is spending wealth from the future. Neither magically creates new wealth.

The benefit of spending what has been earned in the past, is that it is guaranteed to be there. Spending from the future requires the return to be at least as big as what was spent, else you have a problem.

When your entire monetary system is built around spending from the future with no hope of getting an equal return, then you are in a world of bother. People in the future foot the bill, through no fault of their own, nor agreement by contract.

When it comes to inflation vs deflation, neither is ideal. You want money to have a neutral stance, causing you not to invest or divest from it, unless it is prudent to do so. However, to get their, people need to want it, which usually requires a (deflationary) profit motive.

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Really? So how was that “wealth from the past” created?

The same way as wealth is created in the present and the future - by creating/trading goods and services with those who want them.

Equally, if you waste your time creating and trying to trade goods and services which people don’t want, you will lose wealth, as it will not be profitable. You cannot sell when there is no demand.

You either invest what you already have earned from the past or you use credit to invest what you plan to earn in the future. However, the past is certain, where as the future is not.

Credit provides a feeling of increased wealth in the short term, as the economy expands as the credit is extended, but this cannot last - it can only extend so far. The credit boom has just brought forward some spending from the future as a one off windfall and now we are back to square one, but with the drag of repayment hanging over us.

As long as there is access to capital to invest, people will do so. Whether via credit or savings, this can be provided, but the former casts an illusion of wealth which can be deeply corrosive to individuals and societies.

Yes, exactly my point. creating goods costs money and you have none. You need goods to trade goods, and you have no goods to trade because you have not created any because you have no money. Unless your rich uncle gave you some and lets you pretend they’re yours.

Sorry my friend. Your perfect world has never and will never exist. Your ridiculous arguments are based on some kind of novel fantasy.

It is strange how arranging facts causes you to lash out. If you cannot understand how starting small, generating a little profit can be expanded on to generate much more profit from bigger things, I fear you are at a loss.

Many a small business starts this way and expands too. Credit is always an option, but there is absolutely no reason why people should be pushed into it, through inflation. No reason at all.

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A bit lacking on the level of rational argument. Nobody that I see here is arguing on the basis of a “perfect world”, just the real one in which people have preferences and make choices. Ad hominem isn’t convincing.

Firstly, creating goods costs time, effort and resources. Money is just a symbol we exchange to represent these. Money therefore has more stable value when it represents time, effort and resources which have already been created, rather than simply the promise of their future creation.

There is no reason that money cannot be borrowed if you need to create something and don’t already have the time, effort and resources necessary to get going. Individual and episodic debt is useful. Nothing wrong with the use of credit/debt to manipulate resources (including time). The problem is when the money itself is representative of only debt (rather than credit), as the current system is run.

Inflation and deflation are going to happen from time to time even with a value-based currency, depending on the ebb and flow of resources, demand, etc. But with a tie to real effort, time and resources already expended, those fluctuations will correct automatically by market action. It’s the difference between basing your decisions on something that already exists or basing them on the hope that something will exist.

So, a currency based in real, extant resource will tend to deflate as it is more and more broadly accepted. If you’ve got extra, there’s no need to hoard it: you can always loan it out for a fee and make it work for you even more than just counting on the increased value from deflation. You’re going to be more careful to make good loans, though, and the borrower won’t borrow so frivolously as with “hope” money which is more easily created and more easily dismissed from the books.

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As someone noted, deflation of Safecoin would only be an issue if it ran up against divisibility. The deflation of an infinitely divisible digital currency is a non-issue: you just pay for things in smaller units.

With a physical currency such as gold, although it is almost infinitely divisible, in practice no one can or would handle individual, sand-grain-sized pieces of gold, for example. A digital currency has no such problem.

And just as gold used to co-exist as a currency alongside less valued metals, such as silver and copper coins, and was exchangeable for them, which mitigated the impracticality of handling tiny amounts of it, so too I would expect a non-divisible Safecoin to coexist with third-party SAFEnet currencies exchangeable at a virtual kiosk on the network.

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