Topic: A coin with a floating supply. Is it possible? - page 3. (Read 676 times)

There is a lot of difference in between the paper money and that of the crypto currencies and that we cannot treat them in the same manner. There are number of things which are very much different in case of the bitcoin and other crypto currencies and that even if we wanted to treat digital currencies like the way we treat paper money, we cannot do that. You can expect a coin with floating supply but this will not happen.

just because fiat and printing money works in a certain way it doesn't mean that way is a good way and cryptocurrencies should use that way also.

the first thing that needs to be answered is that "what is wrong with having a fixed supply?" for example bitcoin has 21 million cap. what is the actual problem that you faced or expect to face in the future because of this cap?

what i am trying to do is to figure out what the problem is before moving on to finding a solution for that problem.
for example one of the reasons why the argument about the cap  exists is that some coins may be lost over the years (forgotten private keys, hardware failures, proof of burn,...) to a point where it may lead to a lack of supply. well this is an exception and exceptions can be fixed with a simple one time hardfork while still keeping the supply capped.

The true idea about having a fixed rate is that it provides much more trust over the network participants, as people "can predict" the future  and has the ability to know how many coins are going to be created in advance.
Also, a fixed supply rate means that the economy is not going to have any insider problems, which means that without something like a war, there's not going to be anything that may dramatically hurt the coin's purchase power, hyper-inflation is being totally prevented by fixed supply.

I think that it's impossible to have a floating supply, because if you want to keep the network decentralized you will also need that the network's participants are going to be those who decide about the float rate, and then you are open to much more kinds of attacks( like someone who pretends to be most of the network attacks the network and enters everybody into hyper-inflation mode.

What country's economy would a certain crypto be accommodating to if in case it has a floating supply? For this thing to happen, you need some form of authority controlling the outflow/inflow of money, hence you need a centralized cryptocurrency which bitcoin and other cryptos cannot do. It defeats the purpose of trust-less and decentralized cryptocurrency, as you need to trust a central authority to control the supply if everything goes down the drain.


And again, what 'economy' are we referring to with this thought? The subject is just too vague to even be of real importance or discussion right now.

floating supply: Means that one of the parties controls the price or in other words "centralization".
fixed supply makes bitcoin like gold "limited and finite supply" However, unlike gold, developers can change the total number of bitcoin in what is known as hardfork.
The power point that makes bitcoin break the barrier of limited 21 million units is can be divided into small pieces Satoshi(100,000,000).
In other words, you have 21 million or 2,100,000,000 Satoshi

Well, that was my point too...
Is it possible?

I'm having trouble imagining an algorithm that would somehow know the state of the economy just based on the information he is able to deduct from transactions alone and at the same time not risking of being manipulated.
As long as you can move millions with a few cents this might be close to impossible.

And with LN coming, I guess it will be even harder.

Right now I'm not against the idea as I just don't see it possible to implement.
Once we have a clue how to make this we could discuss the good and the weak points, but till then we're talking about what hotel to book on mars once they build the new colony.

I can explain how it works with fiat money. More specifically, there is a concept called endogenous money supply. It is basically about internal money which is created and, yes, destroyed as well inside an economy itself without any particular protocol in place. When banks lend money, they are effectively creating money. Then, when the debt is repaid, the money gets destroyed. It also gets destroyed if the borrower defaults. In this fashion, there is no need to know whether the economy is in bad or good shape because this is kind of direct effect or consequence of the state of an economy. This is a feature that no crypto can copy and the reason I started this thread.

In essence, I'm asking myself if the same or similar scheme is ever possible with crypto.

It is easy when you want to create money, you just print them you can do the same with coins with the help of  the block reward. But how do you plan on switching from creating coins to destroying coins?

And more important who will decide when to switch from more to less?
You will need somebody to take those decisions, just like with segwit , and if people don't want to follow it each time you change this you're going to have at last ten or so new coins, just like the last time.


And how do you think this will work?
Can you give us an example on how the protocol will know when the economy is bad and when it is good?

I assume it could be said with iron certainty that whenever a group of people grabs the power of printing money, they will eventually try to use it to their advantage at the expense of society at large. But dumb supply of coins not dependent on the state of real economy is not much better, either. The other thing worth mentioning and considering here, if we want a coin with a changeable supply, is making the adjustment of the monetary supply happening on its own with little or no direct human control and intervention. Obviously, such adjustments should be based on and reflect the health of an economy.

          to myself I can not quite imagine a playable way I can solve that problem really efficiently solved in practice .yet I agree that without adjusting the supply of a coin I like that arises in a mostly automatic way it there is a destination on a major road block on the road going to the smooth expansion of an economic .when a cryptocurrency becomes regularly in reality is exchange it.in this respect the bitcoin is the same gold in the 19th century .when the latter had become a hindrance instead a valuable tool for facilitating free exchange of goods .this people have come to mind that the shortcoming of the gold standards all turned to fiat not backed IP anytime as metal here or any specific asset maybe those same situation right now .simply that I would not know a solution. Does not mean that here is the end.

Currencies with floating supplies may be described as trust based systems contrasted by algorithmically determined supply which is more trustless in design. Variance between the two paradigms could accurately define context separating both schools of thought. Trustless designs could represent evolutionary progress over trust based systems given how blockchains trustless abstract has seemingly made many past trust based methods of conducting finance archaic and obsolete. On a basic analysis the less moving parts something has the less likely it is to break. Trustless designs fundamentally containing less moving parts could give it intrinsic advantages over past models of currency supply.

One common argument utilized in an attempt to justify floating supply is it "satisfies the needs of an economy". At the moment both the united states and european union might be characterized as being overburdened by debt and looming deficits. On a global scale, the politics being played and policies being pushed might also be described as attempts by governments to tax, spend and print their way out of debt. If indeed currencies with variable supply serve the needs of economies, how does a transition happen whereby currencies variable supply can be leveraged to bring about more positive change?

Many negatives experienced by nations are empowered by currencies with variable supply. Owning a printing machine often gives politicians and the public the false premise that if things go bad they can simply print-their-way out of trouble. The trust factor of the system is exploited. Eliminating the trust factor as crypto currencies with finite supply do, could represent a more stable and balanced economic and financial paradigm.

There isn't much evidence of currencies with floating/infinite/variable supply which represent the original, printed-without-limit-out-of-thin-air criticism, do much to serve the economy in this day and age. And it is possible that currencies with fixed supply are more robust and reliable over the long term as there is less trust built into the design to soften the consistency factor.

You might want to have a look at BitBay. While the total supply is fixed, there is this concept of freezing a portion of the supply. This essentially makes the supply in circulation variable. The objective of this is to maintain the value of the coin, peg it to the dollar.

I don't see the reason why it should necessarily be centralized. For example, when banks create money via credit, they do it in a pretty decentralized way. In simple terms, they don't ask a central bank whether they should lend money to a certain borrower. Also, what do you mean being "used for certain purposes"? I refer to a coin which would be used as money, a universal means of payment.


Unless you talk about abusing the printing power, I don't see any major problems with it either. Care to expand more on these other problems you refer to?


When an economy expands it needs more money, otherwise there will be deflation, which is a bad thing for this expansion. Crypto with a fixed supply will be a major pain in the ass under these circumstances. To tell the truth, it will be a pain in the ass under any circumstances but a frozen economy.

I don't necessarily agree that abuse is the only flaw in the current financial system, but I'll comment under the assumption that it is.

Why can't it be based on deterministic algorithm? Let's consider the Bitcoin network for a second: it records the flow of coins within its system, every single transaction that has taken or is taking place, the balance of each address, etc. If, somehow, it had access to more variables that let it determine the overall health of the (internal) economy and let it estimate how much coins need to be released into the system to keep it in optimum condition, among other factors, wouldn't that be the closest we could come to a flawless system? It is, after all, never arbitrary, and if we assume that it's smart enough to do always come up with the correct numbers, then human intervention should be completely unnecessary.

The challenge, of course, is developing such a system, or if it's even possible. If bias is a problem though, then algorithms would be one of, if not the only way, we could eliminate that factor completely.

Floatimg supplies and decentralization might not neccessarily go hand in hand very well. There will be no control over the issuance of the coin. Who is going to regulate the amount of float? When there is a limit, a program or a scedule or a path can be thought of on how long would it take to manifest all of the available coins. But when it has no limits, ut gets difficult and actuall vague in planning amd execution.

Also, it kind of loses the value in the long run. Today we value dollor or any local existant  money because we know that its not unlimited. A country cannot just go on printing money, as many may think.
Now if it was the opposite, we wouldnt care of investing it, spending it properly or any of that stuff. Why?, because we have unlimited supply of it so whats the purpose of saving or valuing it.

Same would be for a floating cryptocurrency. It will just come and make noises and then become vague. A cap is in a way essential to maintain the value in the market and to stop unwanted inflation.

It's definitely possible to do, but the tricky part is trying to find a way to do it in a decentralised fashion.  Increasing the circulating supply should be simple enough, but decreasing it again would likely be problematic.

You could define an algorithm based on your preferred variable.  If you needed the supply to increase in line with the number of transactions, for example, you don't need a centralised authority to do that.  It's just a matter of figuring out what variables to use that can't be easily altered by human interference.   

However, if you were thinking more along the lines of fiat where someone in power makes a sudden unilateral decision to alter the supply, then you're looking at a centralised and closed-source coin.  You'll likely have difficulty finding an audience for such a project here, though.

How about we change the point of view, we're using cryptocurrency in this case is bitcoin as an alternative asset and not as alternative to flat. Because of the high price bitcoin has gone, it can also be compared with gold and other investment assets rather than used as basic flat currency, i'm not going to use 0,001 btc to buy a cup of coffee since the calculation and the fluctuation of bitcoin isn't stable enough to be used as retail currency. Consider USDT as an alternative to flat however i don't think it would become a boom such as bitcoin. 

i think so. like the government in my country planned to create own digital currency, if it happens then floating supply also happen anyway, because i think the system is like fiat currency

Why not? it is very possible, I personally think if any government create a cryptocurrency, it will be one with a floating supply like fiat money. Otherwise its value always rises as demand eventually rises

I believe that a stable coin with a gradual increase in its offer could have some use. But the difficulty would be to have this option controlled by a mathematical model, rather than being controlled by individuals, groups or governments.