I have been here for a few years but I am still not sure I understand how the mechanics of safecoin will work out.
Is this correct? To store on the network you will have to pay safecoin and the price depends on the amount of storage already available. You can also earn safecoin by providing resources to the network. The amount of safecoin earned is therefore also dependent on the available disk space on the network, and the demand for storage. This will balance the demand and provision for the network.
Will the value of safecoin then follow the price of harddrives?
What about trading? Will it be possible to trade safecoin (like maidsafecoin)? Can the demand for safecoins (outside of the network) increase the value of it so nobody will be able to put on the network since safecoin becomes so expensive? Or will the mechanics prevent this from happening?
How will put, farming and trading influence the value of safecoin, and how will they influence each other?
The value of Safecoin will be what the market decides, but what the network pays you for storage should be slightly above the price of hard drive space. I would assume slightly above anyways. There is a lot more to all of this and it’s one of the things people are bringing up the most these days. I remember reading old papers on the economics of Safecoin but it’s been a long time now. I think it would be great to get that information current and upfront but once we near testsafecoin it will all be hashed out and open anyways, so not insanely far off. I do believe there is a good blog from David on metaquestions.me about the economics of Safecoin.
Ok, but if the value gets very high (in dollars), won’t this hinder the usage of the network? The only way for ordinary people to get safecoin to use within the network will then be to farm. But since the demand for safecoin will be very high (due to its high value), there will be a lot of farmers, decreasing the likelyhood of getting safecoin rewards. The value (within the network itself) will be low since there are few putters and a lot of farmers. Then noone will use the network, except for trading safecoin.
Thanks for the explanation, but, unfortunately not. I already know the things you described above (I think ). I am not that eloquent in English, so I have difficulties trying to explain my question. I am not used to think about economics either, so bear with me.
If safecoin gets a very high price on the exchanges, will it not be very expensive to put on the network? Sure, people will farm more, but the network will not know the price on the exchanges. Will the increase in farming adjust the put cost too such a degree that it counters the increase in price on exchanges? (Will the safecoin be divisible enough (at all)?) Oherwise it will be too expensive to upload on the network. Or the other way around. Will farming (and harddrive prices) and a lowered put cost damper safecoin from getting too high of a value on exchanges?
What I am looking for is a model (or just a few scenarios or ideas) for how the network will be affected by exchanges.
As @lubinew says, if there is a high price for SafeCoin then there will likely be a lot of farming competition, so the network will be charging very small fractions of a SafeCoin to upload your data because it will be swimming in spare resources.
When the prices relative to rewards are considered too low by the market farmers will stop bothering, resources will become more scarce and the network will start rewarding more coins to incentivise them. Think of it like the mining difficulty adjustments, except it happens in a more fluid and constant way.
Oh absolutely, the question has only ever been ‘how will divisibility be implemented?’, it was never ‘will SafeCoin be divisible?’. There is no way this network could function at scale if the coin were not divisible. We also already have plenty of workable suggestions from the community (I like neo’s best so far myself). And that’s before David has weighed in with his genius for problem solving.
Yes, but the details are not decided of how and when.
The price of storage does not depend on this though, at least until a Safecoin becomes very expensive. Because the amount of credit/storage can be increased as the value of a Safecoin increases.
Divisibility becomes an issue only when a Safecoin becomes too big a unit for people to want to purchase at a time, or too hard to earn to be worthwhile.
So maybe the question is, how will small farmers remain incentivised when a Safecoin is so valuable that it becomes too hard for them to earn? I don’t know the answer, but perhaps divisibility is a way of handling this. Certainly we need a solution to that question.
I can’t imagine any other workable solutions to that kind of ‘scaling’ issue. We will need a way for the network to award fractions of a SafeCoin for farming. If we can’t do that we’ll either hit a ceiling and/or farming will become heavily centralised.
There is one addition to “the farmer” which also affects the PtD rewards since they use similar algorithm.
Income = Number of provided GETs / Probability of being paid (same as you said)
Probability of being paid = f(Free sources/All sources) * ((2^32 - total_coins_issued)/2^32)
where 2^32 is the total possible coins.
The reason is what you had as the probability of a coin issuance attempt and a coin cannot be issued if the “random” coin address generated already has a coin at that address issued. And the reason for generating a “random” coin address to try is so when the unissued coin gets lower the chance of getting a coin is reduced. This creates a new scarcity of new coin so that there will in normal operation never be a case where all coins are issued as people will always be uploading and spending coin.
This was answered but I might try a slightly different way to say it.
The rewards to the farmer are in $$$ terms f1(farming rate) * price of coin
so as price increases so does the profitability of farming
and we expect more farmers to farm as price increases
more farmers means uploading costs less safecoin
cost in $$$ terms to uploaders is f2(farming rate) * price of coin
As you can see the price of coin affects the farming and uploading rates inversely and essentially cancels out if the algorithms are balanced right. In other words it should be costing the same to upload no matter the price.
Obviously over time if you bought your coin when price is way high and upload when price is way low then it won’t be the same, but if you buy coin and then upload on day xxx then it should cost $$$ wise approximately the same as doing it a month or more later. And there will be differences due to the rate new farmers come online or leave.