Safecoin Divisibility vs Inflation "Ideology"

Here is a start on your journey into learning economics.

Intrinsic Value:
In finance, intrinsic value refers to the value of a company, stock, currency or product determined through fundamental analysis without reference to its market value.

Edit:

Notice this point…

“without reference to its market value.”

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Fiats only value is the debt that backs it and the government’s ability to enforce that debt. Safecoin on the other hand has real value in that it actually provides a real good or service. So if you think about it wich currency is more like monopoly money?

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Ok, that will perhaps make safecoin stable in relation to that. I was thinking of safecoin as stable against fiat currencies, but Maidsafe could have calculated the inflation to make it stable for the SAFE network itself.

What will make Safecoin stable is it’s ability to facilitate transactions of Network services not its ability to trade for fiat. Users will be able to obtain usable amounts of Safecoin with out having to purchase Safecoin with fiat.

Edit: this is the problem with bitcoin now is that it is impossible to obtain usable amounts of bitcoin with out exchanging for fiat or spending large amounts of fiat to purchase expensive mining rigs.

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Bitcoin relies to much on fiat currency. Do we want Safecoin to have that same fate?

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If you think of the economy as circulatory system, and currency as the blood… then it makes sense for new blood creation while the old blood is consumed. Poor circulation is pretty bad, which is why most governments use that excuse for inflation and or taxation.

Inflation tries to solve accessibility. This is very similar to high blood pressure, where the heart pumps harder to get blood pass the bottleneck areas. It forces new currency into the system. But if the bottleneck is still there, the problem is not solved.

Divisibility solves price deflation, but doesn’t solve accessibility. This is like low blood pressure. Overtime, there will be less currency available, making it harder for newer people to earn. Again, this does not solve the bottleneck.

Taxation is a much hated word on this forum. It attempts to clear the bottleneck, with very poor results. It’s like bloodletting, and will probably cause the death of the patient.

So what is the most ideal circulatory/economic system?
Safecoin tries to mimic a better circulatory system with recycling. It also adjusts the pressure using supply/demand incentives. It seems more promising than the current archaic solutions.


Regarding currency price stability and usability… I personally prefer SAFE GB as the alternative. It is already divisible, maintains its own global price valuation, and inflates with increase productivity.

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If safe devs decided to choose inflation route.

I’m going fork the project, and make it deflationary.

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I doubt you have much to worry about.

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I just don’t understand why people in crypto space encouraging inflation, and claims they have knowledge on economics, which clearly they don’t. They never read an economic book.

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Something we haven’t really touched on here is the question: Who is qualified to hold the levers of power which control the money? I consider it very similar to asking who is qualified to be president, or chancleor, or whatever, and have control of the nuclear launch codes? The answer is also the same.

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First of all compare prices today to the 70’s or 80’s. Most things have gone up 5-10x. That’s not very stable.

Recently, with all the “quantitative easing” I’ve been wondering why no inflation. It’s not a good thing that there has been such limited inflation with the money supply being pumped up so much. Andreas Antonopolos gives some great insight in the most recent LTB episode. Let's Talk Bitcoin! #257 Coming Apart at the Seams | Lets Talk Bitcoin

The super rich investment class is getting super richer. The poorer of us are barely able to keep it rolling and unable to save, and the middle class is nearing extinction. That’s what all that inflation is doing. At least inflated prices give signals. As it is, the economy is on anesthetic and doesn’t feel it’s liver being removed.

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I think we need to think about the imagery we are using for safecoin. Is it like gold or some other precious metal with a fixed amount? If so then the cap stays and divisibility is the answer. Or is it like a new resource with an endless supply, say sunlight to be collected or food to be easily grown for example, in which case then inflation would be the answer in that the more you farm, the more safecoin gets distributed and it’s value goes down. Information is infinite however physical resources which back the information (computer parts, energy, time, so forth) are not. For this reason I’d vote for the gold analogy and stick with the caps and lots of infinite division. Get a big hunk of gold and divide it into little tiny coins if need be, even divide it into grains of golden sand if you really need to.

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I think you might be misinterpreting what’s been said. AFAIK, “inflation” talk (especially when compared against divisibility) is more akin to a stock split. One day everyone just holds X times more safecoin.

There was mention of, e.g., 2% yearly inflation but that was really just to explain that SAFEnet is open source and anything can happen. I don’t think that type of inflation has been seriously considered. If it were it would likely be a huge controversy and there would be forks.

In essence I don’t think there’s anything to worry about. To me this argument boils down to how much you like decimal points or not–that’s it.

(edit: you could also consider inflation to be when some of the un-allocated 70-80% of coins are printed, but that’s a separate matter)

Quantitative Easing & the Nightmare It Has Created

While so many people claimed that Quantitative Easing (QE) would produce inflation since it was the creation of money, the truth is very far from this simplistic idea. The theory used by the central banks is seriously flawed and a throwback to ancient times before 1971. There used to be a difference between debt and cash where you could not use debt as cash to borrow on. Then it was less inflationary to borrow than to print, but that changed post-1971. If you want to trade today, you post T-bills as cash. The REPO market has emerged where AAA securities can be borrowed against for the night.

Therefore, buying in bonds to inject cash into the system under the old way of running the monetary system pre-1971 made sense. Today, it is proving to be a fool’s game. Why? This is merely swapping debt for cash; the REAL money supply has not increased when the true definition of the base in money supply is debt + cash. Then you add the leverage from banking.

So what does this new reality mean? Under QE, the central banks are the bidders supporting the market in the same stupid manner as attempting to peg a currency. The ECB under Draghai has lost its mind. They keep increasing the percentage of bonds they buy in hopes of creating inflation, but nothing is working. The bonds will not crash without a free market, but instead, they could become extinct. In order for a crash to materialize, there has to be a free market where the private sector bids. But what happens when the private sector has no interest? Oops! Extinction.

This time, with taxes rising, there is a contracting global economy and we are in serious trouble. The central banks have bought in the debt rather than declaring they will support the market. This means that they will not have a market to reverse the position and sell the debt they bought in. This means that a sovereign default wipes out central banks as well. Hence, the long-end of the market is being systematically rendered extinct.

We may see the bonds crash in price to the extent that people are not interested. However, the central banks will have to buy in more and more debt. This raises the risk of “conversione forzosa”, whereby even if you bought 30-day government paper, they simply decree that they will not repay that obligation for 10 years. They can simply convert short-term to long-term. We are more likely to see this type of action before any real reform.

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When talking about this it would be very beneficial to specify exactly what you mean by the terms used. Inflation (as addition to the money supply) is not needed for use, this is obvious. Some people seem to think inflation would have beneficial ‘growth’ effects, this is false even if we suppose that it does in fact have beneficial effects in fiat economies. Inflation is a form of value redistribution, and can be used to help or destroy economies, however not in crypto economies.

The supposed beneficial effects of inflation is lowering the capital threshold for market participation and lowering opportunity costs of market participation. Yes, of course inflation in fiat economies forces people to participate in markets more, but the problem is that while this can be used to accelerate economies, inflation alone is not sufficient for it. What is required is the slowness of economies, if the effect was fast and the prices/wages would adjust immediately, there would be no effects just a different number, crypto economies are much faster in general and this specific relation between wages of miners and new money supply is immediate. Another function required is the consideration of the relation between the state of economy and new money being issued, but the network can’t have that kind of flexibility. Even in fiat economies the lowering of costs is produced either by exporting them to the level of economy as a whole, as national debt, and at the expense of the population that pays at least a triple price (decrease of their stored value, decrease of their buying power, increase of taxation to pay of debts)…

Bitcoin’s slow adoption has nothing to do with the lack of inflation, it still has too much (new money supply decreases the price that in turn create a higher capital threshold for miners, and only the big miner can profit… Basically the whole story about inflation/deflation should be about profit not token distribution to make sense.

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It would be easier on the devs and the users to implement divisibility.

Divisibility can always be worked into the way that the network works, however raising the total number of Safecoins (however it’s done) changes the core of the network itself; 4.3 billion - a figure that most likely will be hard-coded into the network.

Unfortunately for SAFE GB, it doesn’t solve the problem of currency circulation outside of network storage. There may still be the case where the value of Safecoins are too great to enable micropayments feasibly that isn’t related to storage. In that case one of the two options needs to be implemented, divisibility IMO.

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You could increase the space for Safecoins to 64 bit ints like Bitcoin does and still maintain the 4 billion SafeCoin limit just by placing the decimal point appropriately.

I’m not 100% certain about this, but I believe that one Safecoin is a singular piece of Structured Data, and as such cannot itself be split up like Bitcoin (as it is designed at the moment). There will certainly be some complex engineering involved to enable the divisibility of Safecoins, but I believe it is more feasible to follow that route than to change the core premise of the network (see @dyamanaka’s post on recycling and supply/demand incentives).

If safe dev decides to increase to 64 bit, then it will be 2.1 quadrillion coins. But, that still won’t solve the micropayment like smacz stated. micro payments works wonder if there is a decimal in place. Even more so, safecoin cannot be divided since it is a data entity. How does one split up datastructure?

I dived into rust documenation. It states that it could borrow data from that insistence, and manipulate it. However, it cannot be borrowed again. It has to return into the rightful owner. It cannot be destroyed unless it returns to rightful owner. It cannot transfer to another owner, until it returns to the rightful owner.

So it is theoretically possible to transform safecoin into divisibility coins. 1sc into 99999999 altcoins. Altcoin could be used for specific things. But all of the coins must return so that 1sc can transfer to new owner.

OT: This mean safecoin itself is not just a coin. It is fuel to create co-operatives organizations. @Seneca explained this very well to me in bitlaw part 1 and part 2 thread.

If safecoin cannot be divided then we need another coin for micro payments. And it means more work for transaction manager.

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Not really complex engineering, simply define 1 Safecoin is equal to X “datastructure objects”. Choosing the X to maintain 4 billion Safecoin if that is desired. Now your Safecoin is divisible, this is how Bitcoin approaches it. The reason this method is not first choice by the designers is because you then have to transfer X structured data objects for every Safecoin, and this may be too burdomsome for the network.

Dyamanaka’s solution is very innovative and may work well. My main concern is usability as it is decent departure from how most currency functions and that may make or break Safecoin for normal non technical people. Also we may possibly be just trading the burdensome transaction problem for a more complex exchange-as-a-division mechanism, but there is a lot more about that over on the Safecoin Divisibility and Rabbits VS Turtles threads.