I would like to ask the community an ideological question. If it came down to dividing Safecoin or inflating it, which method do you prefer?
Why, you might ask is division or inflation even necessary? At some point the network is going to reach a tipping point of user to Safecoin ratio. At this point Safecoin will stop being functional and Safecoin will have to be either divided or inflated to maintain its functionality.
(SCPP = Safecoins Per Person)(NUSN = Number of Users on the Safe Network)
Both division and inflation can solve this problem. The choice is an ideological one. Division ensures Safecoin stores and maintains its value. Inflation spreads Safecoin’s value across every newly minted Safecoin. So, which solution do you want to solve this issue?
This is not a question of “ideology” but of rational game/systems design, it pertains to the whole of the monetary system and needs to be addressed before it is implemented.
This isn’t a question of empirical functioning of the market, it has nothing to do with prices and costs, so why would it be premature to discuss this?
What problem needs to be solved? The increments of value are too great to facilitate the smallest amounts required in exchange.
Inflation trivially solves the problem and has essential economic effects, division essentially solves the problem and has trivial economic effects. Where is the dilemma?
Inflation is adding more money to the money supply. How does this solve the problem? It does not. Only the usual (not necessary) effect of inflation, the devaluation of all money in supply, solves the problem, but it solves it incidentally and trivially. (example: I wanted to buy 1gb of space, I couldn’t do it because I only had the 1 safecoin and it was worth 10gb of space, now inflation happened, and I have 1 safecoin that is worth less and can only buy 1gb of space with it.).
Divisiblity solves the problem directly. (example: I wanted to buy 1gb of space, I coudldn’t do it because I only had the 1 safecoin and it was worth 10gb of space, now dvisibility happened, and I pay 0.1 safecoin for 1gb).
Of course it should be solved or at least discussed and shown the general direction because it directly involves value of others, and destroying it isn’t something trivial to them.
If, before implementation and activation, it were desired to increase the supply, it would be acceptable to inflate the total safecoin as long as all holders receive the same percentage of the total that they possess in the unmultiplied form. But this is not really “inflation” it is actually division. This has been discussed in an earlier thread and is not desirable, largely due to confusing people, I think. Not to mention there are more important things to do, like bringing safecoin into existence in the first place.
To inflate by simply increasing the supply, after the fact, would be flat-out theft and completely unacceptable. Inflating the quantity would be stealing value from existing holders. Division would not do that, as @nihilnegativum points out above.
I really see nothing to discuss. Inflating in the since you suggest will always and forever be antithetical to the principles of the SAFE Network.
Both inflation and divisibility are needed. Make it a flat inflation like dogecoin. Bitcoin has a declining inflation and look at the failure of that. Not only has bitcoin failed to cause increases value, it’s definite limit of bitcoin supply makes it an improbable candidate for replacing fiat currencies.
Don’t underestimate the power of fiat currencies. Even if a cryptocurrency remains having a much smaller market cap than the fiat currencies, the inflation model needs to allow a stable value and allow for growth at the same time. One thing that prevents bitcoin from growing is its declining inflation and definite limit of supply. Bitcoin has put itself into a Catch 22 situation: for it to become useful as ordinary money the value needs to become stable, and if bitcoin becomes popular as a general currency its market cap will skyrocket and thereby destroy its possibility for having a stable value.
So to say “all money needs inflation” you need to adopt the old definition of money.
If it is infinitely divisible, the “invisible hand” can adjust the value of money supply so that there is always enough… If it isn’t there are limits to what it can do and how long a currency can be feasible. But to say “All currency needs inflation to be viable” is to assume that currency is what currency has always been.
I’m pretty sure that the main things limiting bitcoin’s expansion are (1) usability–still difficult and uncertain, though improving, (2) being forced to interface with fiat at the exchange level, with all the KYC and AML, (3) the fact that the current system is so much easier and more familiar–related to point 1. There are certainly others, including scalability, but that’s enough for the moment.
The advantage I see in safecoin is that it will be in a great position to bypass the need to interface fiat to a large degree, and go straight into use as a means of exchanging value between individuals, because it will start appearing everywhere in exchange for (non-trivial but not extreme) value presented by regular people. Also, facilities of the SAFE Network will allow more p2p exchanges of fiat, so that regulatory bottleneck will be further broken down, even for Bitcoin.
This will be especially important in areas where the fiat system is more collapsed and oppressive, like Greece currently. Other areas will be like Greece soon, I fear. As fiat fails and gets more oppressive, if safecoin is there, it will be used to facilitate exchanges directly between people. Bitcoin can’t do that because there’s no way to get it into the system.
As to the “need” for inflation: that’s a central planning concept. Even at it’s least pernicious it’s an evil. Think of the 19th century. Hube forward progress in industry, etc., and the way companies financed expansion was to accumulate capital and then invest. This was possible because they (and anybody) could hold onto their money and it would increase in value while they held it.
Central banks really got their footholds around the turn of the 20th century and started moving it all towards an inflationary, debt driven model. Can’t really accumulate capital when it gets less valuable if you hold it. Got to put it in a bank so that they can charge others more interest than they’re paying you, so you can get an return that supersedes inflation. It’s like living on Red Bull and Snickers bars: high energy action, but you pay the price in the long run.
 your concern over the power of fiat is misplaced. Those systems are extremely precarious and we need to have other means in place which are rational, rather than mimicing the insanity.
The reality of the situation is that fiat currencies today are totally dominating in terms of market cap. Fiat currencies have exponential inflation! That’s pretty horrible, yet it’s a fact. If a cryptocurrency, like bitcoin, has the opposite inflation model it will be unable to budge the fiat currencies in terms of practical usability. Mimicking the exponential inflation model of fiat currencies will probably also fail, since that will dilute the coin supply too much and make the value of the cryptocurrency decline. A balanced inflation rate is needed that allows the cryptocurrency to reach a reasonably stable value (compared to fiat currencies) and allow it to grow at the same time.
If the supply is HUGE 2,100,000,000,000,000 for example, why do we need to make more. Cannot it just slowly increase in value so that instead of paying 1800000 units for a Mocha, a few decades later we are paying 180000? Doesn’t that have the same effect as issuing more currency? Why or why not?
Despite the massive inflation of the supply of fiat currencies, they have remained remarkably stable in terms of buying power. Sure a Big Mac today costs much more than say 10 years ago, yet it’s a fairly stable situation. If a cup of coffee at Starbucks would cost 100 safecoins one year and 10 safecoins the next year, then that’s simply too inconvenient compared to the more stable fiat currencies. Imagine if you had to pay 1,000 safecoins for a product and the next month the same product costs 100 safecoins.
I suspect fiat currencies (At least the few good ones) are stable because they are used. If Bitcoin or SAFEcoin etc are used they will not be highly volitile like they are now. (Mostly just move on speculation)
But the reason we need more money is because if you where using 1900 dollars and the average person still earned 900 dollar per year. a lot of things should cost less than a cent, and the currency wouldn’t be able to handle that. If the 1900 dollar that the features of crypto, and you could spend a millionth of a cent, it wouldn’t have needed to inflate.
You could flip the script with that logic onto fiat as well. With fiat inflation something that cost $100 today could cost $1000 next month. Inflation does not directly cause stability, it is market forces that cause stability.
Once again, you need a basic knowledge of economics to understand.
Yes, fiat currencies suck a bit. The main problem however is that fiat currencies dominate today. So an inflation model that will cause the cryptocurrency to deviate too much from the fiat currencies will only be useful for speculative investments, not for general use as a currency.
Only if the total market value remains constant. The idea with the SAFE network is that it will grow a lot in the beginning because of a network effect. This means that the total value of the SAFE network will increase a lot. And if the generation new of safecoins is too slow, then the value of safecoin will start to deviate too much compared to the fiat currencies.
For fiat currencies, the total market value is fairly stable because the total growth of the economy in terms of GDP has basically flattened out. The SAFE network is very different. The network will start very small and then it could start growing exponentially for several years.