The term inflation can sound scary, but remember that even the amount of bitcoins is inflated over time (up to a definite limit in the future).
Dogecoin has a linear inflation that goes on forever. That too can sound scary. Dogecoin however has much less inflation than fiat currencies (such as the U.S. dollar and the euro).
The dogecoin inflation actually becomes less and less each year when measured in percentage increase.
If a fiat currency has an inflation of 1% per year, then the money supplies grows exponentially.
If safecoin has a linear inflation of say 1 billion coins per year, then the total supply of safecoins is:
Year 1: 1 billion
Year 2: 2 billion
Year 3: 3 billion
…
Year 99: 99 bilion
So between year 1 and 2 the coin supply doubles (100% inflation). Between year 99 and 100 the coin supply only increases a fraction (around 1% inflation).
Maidsafe should discuss with top economy experts about what kind of inflation safecoin should have to become optimal. Some of the experts need to have knowledge about cryptocurrencies. That’s a new kind of economic model in some ways, such as the inflation of the coin supply must take the rapid growth of the network into account. My own guess is that a linear inflation would be excellent. The coin supply would increase much in the beginning (percentage-wise) precisely when it’s needed (when the network grows fast, actually exponentially).
This isn’t a fact, there can be periods of fast growth which can be followed by slower growth or even periods were people walk away from the network. This is the reason the Safecoin supply will be implemented the way it is, it can adjust to the growth or decrease of the network every second.
Why would you want to have something that can’t adjust to the growth or decrease instead of something that can?
Ethereum has also chosen a flat, linear inflation, with the reasoning that it will become practically zero at some point because the amounts of coins lost over a particular amount of time will match the amount of new coins created. The idea has merit.
This can’t however be implemented in SAFE, because the farming rewards are dynamically matched to supply and demand, not to an inflation target. Abolishing this system would make the SAFE network unstable. A blockchain crypto-currency can easily survive an 80% drop in mining power. An 80% drop in farming for SAFE would however lead to massive data loss.
MaidSafe should keep their promises they made to the IPO participants. They pre-sold over 10% of the coins with the promise of a max of 2^32 coins. If they change that now, I suspect they’d be bombarded with lawsuits.
Ok, to dynamically and automatically adjust the generation rate of safecoins is even better I guess. I will read some of the posts in this thread to see if I can get a grip on how it works.
Indeed it is. But note that concerning inflation/deflation, this algorithm (on it’s own) does exactly the opposite what we’d desire. What we desire is some inflation during periods of growth (increasing SafeCoin value), and deflation during periods of decline (decreasing SafeCoin value).
However, during periods of SafeCoin value decline, the farming algorithm has to increase the farming rewards to keep the farmers from leaving, causing higher inflation, decreasing SafeCoin value even harder. On the other hand, as SafeCoin becomes more valuable, the algorithm can decrease the farming rewards without farmers leaving, causing lower inflation.
This undesirable effect can be countered by adjusting the data upload costs accordingly. When the network has to increase farming rewards due to a decline of SafeCoin value, the data upload cost should be increased at the very least by the same amount, but preferable a bit higher to actually cause deflation. Similarly, when the network decreases farming rewards because SafeCoin value is increasing, the data upload cost should be decreased by a higher amount to cause some inflation (and make SAFE more cost-competitive at the same time).
Note that I’m assuming here that the data upload price is generally inelastic.
You mean the current farming reward algorithm in the SAFE network? Is that there any info about that algorithm available on the Web?
With a flat inflation model the safecoins would simply be distributed evenly over time. The actual value of safecoin is something different. That’s determined by exchange markets. With a constant rate of new safecoins, it will beneficial to start farming early, because when there are fewer farmers then each farmer has a greater probability of “winning the lottery” so to speak. And even if the actual value of safecoin drops radically and suddenly it’s still beneficial to keep on farming because of the first-mover advantage during the first years. Up and down swings in the safecoin price is something that can happen regardless of what inflation model is used for increasing the coin supply.
Ouch. 10% is a huge share. And a max total of about 4 billion coins. Hmm… And the farmers need to be able to keep earning coins forever basically. I found this:
With a flat inflation of 1 billion safecoins per year, the 400 million IPO safecoins can become much more valuable than with a max limit of 4 billion coins. So the IPO participants can benefit from that.
The long-term goal is to make safecoin a good general currency for all kinds of transactions, including buying and selling products and services. This requires that the safecoin value becomes stable when the network has become large. With a limit of 4 billion coins it’s impossible to achieve such stability when the market cap goes to the moon. In other words, a 4 billion limit prevents safecoin from becoming successful as a general currency, and the IPO participants will experience their investment dwindle. A flat inflation rate allows the network to grow along with an increase of the market cap while at the same time keeping the safecoin value stable in terms of buying power.
“It was not that deflation would kill Bitcoin. Rather, it is that deflation will prevent Bitcoin from becoming a unit of account, and that, in turn, will keep it from displacing traditional currencies. … More broadly, a hard supply cap or built-in deflation is not an inherent strength for a would-be money. A money’s strength is in its ability to meet society’s needs. From my perspective, Bitcoin’s built-in deflation means that it does a poorer job than it might at meeting society’s needs.” – Bitcoin's deflation problem
I believe we already figured out that a self adjusting algorithm would be better for the network than your approach because we can’t know what the future will bring?
why is that impossible?
Same here, why? Please take in account that the network won’t grow all the time for the coming tens or hundreds of years.
“Last year, the value of Bitcoins more than doubled, from $5 to $13. In other words, assuming Subway accepted Bitcoins (Lord help us), you could have purchased one of the restaurant’s $5 foot-long sandwiches with the value of one Bitcoin unit. By the end of the year, you could have purchased a little bit more than two-and-a-half sandwiches, even though the actual price was the same.This year, the insanity of Bitcoins is obvious for all to see. Within a few months, the value of Bitcoins soared to a high of $147, an eleven-fold increase. Now that poor Subway restaurant will be turning almost 30 sandwiches for the same number of Bitcoins, with the dollar value of the meal not having budged. In other words, the Bitcoin economy is experiencing massive deflation in the value of assets.” – The Logic Problems That Will Eventually Pop the Bitcoin Bubble | Vanity Fair
Let’s assume that the SAFE network will grow exponentially during the first 10 years. By then the flat inflation will be less percentage-wise than during the first years of the network. So when the growth of the network slows down, the inflation is less each year compared to the total supply of safecoins.
Safecoin isn’t created to buy sandwiches, it’s developed in a way that it supports the network in the best way it can (by self-adjustment). I still don’t get what you’re trying to proof or say with the subway argument. (you do know it’s possible to use 0.1, 0.01 bitcoin and so on?)
This are just assumptions which we can’t know so I can’t give discuss with you on this. What I do know is that Maidsafe has developed an algorithm which is self adjusting like I explained.
Maybe others want to continue discussing these part with you but I don’t think we can come an agreement if you prefer your model over one that does whatever is best for the network on a certain given moment.
Inflation is theft. Building inflation model in crypto-currency is better than fiat, but it still encourages people to spend, rather than save. It encourages people to get rid of the currency, rather than save it.
This is a common misconception, usually spread by traditional economists with little idea of how bitcoin works. To choose one clear explanation of the many out there you can google:
Bitcoin, however, does not have this [deflation] problem because unlike the physical
currencies of most countries, bitcoins are infinitely divisible. Even
if only one bitcoin remained, it would be sufficient to run a
substantial economy on, based on the ability to use tiny fractions of it
like the Satoshi.
If even the Satoshi were to become too highly valued/unavailable for
commerce, the Bitcoin protocol could be updated to allow even smaller
denominations. So the usability of bitcoins is safe from the effects of
deflation.
Any talk of cryptocurrency inflation must also take divisibility into account - it is fundamental. The reason it is not usually I suspect is because most economists have never encountered the near-infinite divisibility concept and do not know how to model it.
Now Safecoin on the other hand is a big wildcard - From the specs seen so far it will not be divisible like Bitcoin is (as some may note I have harped on about here and elsewhere in an effort to get some clarification on). This one issue could make or break Safecoin as a general use unit of account Vs being only a safe network-use only resource allocation token - IPO investors might revolt over the latter outcome but unless divisibility is addressed in an intuitive manner I really do not see how it will make the unit of account grade.
P.S. The stackoverflow link I posted also addresses some of the other points you are making, for example on the subway sandwich:
Rick Falkvinge also raises another excellent point regarding deflationary economies.
If, as economists expect, people would decline to buy something today as
opposed to next year for half price, then it should be the case that no
one ever buys computers, right? But in fact, the computer industry
thrives despite this continued trend of “whatever something costs today,
it will cost a fraction of that within a few years”.
The IPO participants want a huge return on their investments in safecoin because of the high risk. Safecoin becoming merely another altcoin is hardly exciting enough.
Yes, it’s difficult to make accurate predictions for a new invention like the SAFE network. My assumption is that it will be difficult to make safecoin a useful general currency with a definite supply limit.
Yes, I cherry picked those articles I admit. And after having read some more articles I noticed that the experts disagree a lot about whether bitcoin can become a useful general currency or not. What is certain however is that so far bitcoin has failed to become a widely used currency. Very few shops and restaurants for example accept bitcoins.
I really hope this is not chosen by the development team as a solution or at least some serious and extensive usability tests are performed with non technical people as the test subjects before they lock it in. Going this route breaks usability of the “coin”, a fundamental requirement of any unit of account. Instead of one type of Safe"coin" you suddenly have two or three different types which are loosely tradeable for each other in some sort of secondary exhange market, but not equivalent to. Markets will begin to price them differently based on their utility in everday use much like large denomination minted coins do not trade at their face values. It appears to be a complicated solution to what looks like a simple problem: Naturally divisible safecoins , 1 structured data similar in concept to a satoshi unit. Would love to see or read some explaination from a developer on why the complicated solution is even being considered…
Safecoin isn’t created to buy sandwiches, it’s developed in a way that
it supports the network in the best way it can (by self-adjustment). I
still don’t get what you’re trying to proof or say with the subway
argument. (you do know it’s possible to use 0.1, 0.01 bitcoin and so
on?)
Actually yeah it is. Based on what I collected so far, safecoin could do millions of transactions per seconds. We just need to test it. If this is true, then it would beat bitcoin blockchain technology by far. This is suitable for all purpose of life, I’m not even joking here. Mom Pops shop, brick and mortar, industries, transportation, assets, investing, games, gambling, medicine, contracts(law).
Safecoin becoming merely another altcoin is hardly exciting enough.
Ok troll, go somewhere else then. This is nowhere near to any of products that exist today. Saying safecoin is just another “altcoin”, means you failed to conceived how safecoin functions.
The 10 minute confirmation wait (if your lucky) automatically excludes large potions of the the economy like chewing gum and sandiches. If Safecoin is near instantaneous it could be a big advantage over bitcoin (assuming the divibility issue is addressed in a way normal non-technical people can understand!).
