Probably a dumb question, but for what purpose do devs set up a predetermined coin limit (18m) ? Wouldn't that just cause people to hoard instead of use it as an actual currency?
Correct, which is why people need to make up their minds whether they're investing in a currency or a store of value.
In a large economy, the only way to keep prices stable as the size of the economy expands is to expand the money supply as well. This can be done in 2 ways:
1. a central bank can issue more currency
2. the market can issue more "currency" by way of derivatives such as credit capital etc (i.e. denominated in the monetary base but backed by new debt instead of blockchain tokens - see example below)
So by virtue of point 2, a fixed supply monetary base could still work as a currency denomination, but then your not using the blockchain as a "payment system".
This is something that has to be broken apart and thought about a whole lot more than it has I think - not just in Dash but right across cryptocurrency. You are right that the main function of cryptos will probably be "hoarding" (otherwise known as investing in a monetary asset for the purposes of preserving/gaining value) because the limited supply kind of guarantees its value against non-limited supply currencies as long as adoption is reasonably stable.
Of course, it's important for money to be mobile, since liquidity is a big factor in its performance as a store of value. So "spending" in that sense is applicable and must be easy to access/use. But I see that as being distinct from a "payment system" which is generally currency agnostic and simply facilitates trades such as POS, eCommerce etc.
Lots of different aspects to decouple from each other and well beyond the scope of one post.
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Not a lot of people realise that
2 already happens right now. Exchanges extend the effective money supply by "adding" credit money to the monetary base on the blockchain. That credit money is backed by the exchange's contract with you when you make a deposit, denominated in the blockchain denomination concerned and all subsequent trades are then carried out off-chain at instant speeds.
In my opinion, if cryptos ever see major retail adoption, this will be the model they'll use. Blockchains will not be used as payment systems because a payment system needs to be currency agnostic, massively scaleable, instant, reversible...i.e. all the things that blockchains "aren't"
Now we're getting deep into the fact that we're on such new territory.
currency agnostic
massively scaleable
instant
reversible
Now I'm going to "try" to think like Hayek and I'm thinking Dash, a blockchain network and how I see it being used as a currency AND a store of value. And I'm sure I'm going to get this wrong, but it's so important that we get an idea of how this would work.
I don't think that a currency has to be agnostic, unless you mean that you have to be able to convert values from one currency to another - which is doable these days with computers and multi exchange rates instantly accessible. I see currencies not being agnostic but very much in competition with each other for particular uses. And this is why Dash can indeed be cash:
Massively scaleable. Dash is massively scaleable. The Dash Masternode Network can virtually hold, in theory, an infinite amount of data, but before that happens, I'm certain that blockchain trimming will become very doable. Still, the number of transactions is also limitless.
Instant = yes that's Dash.
Reversible. Why? I mean, most transactions at the... say grocery level, the merchant simply takes care of their customers because that's part of their service and if customers feel badly treated, the merchant won't have any customers after a while. Anything larger, you can do a smart contract where funds are released when both parties are satisfied. Dash plans on an arbitration contract option for times when there is a dispute. I think that covers every normal transaction.
Finally, the elephant in the room: Deflation and loans.
Although Bitcoin and Dash are both inflationary until many years into the future (for all practical terms) they still act deflationary as their popularity increases and more and more people buy it. So why use it, sell it, lend it?
People let things go, like money, because they have needs. They need to eat, to drive, to have shelter. You have to spend funds for these things. In a deflationary currency, (which never existed before), the prices will constantly go down. That's weird. But is it doable?
Maybe it is, the hardest part is getting the currency (Dash) into the hands of many people in the world. This is the worst of the deflation. Eventually, things will settle down. Dash won't be the only currency in the world, of course, and if it doesn't remain popular due to it's features, could lose value (same as inflation)
The economy looks pretty weird in this sense. As the economy grows (things are produced) the value of Dash grows and deflation is the cycle. The difference is, the deflation brings the most value, the most gains to the people that are actually producing, instead of those who are printing (the fiat money)
Maybe Dash won't be used to issue loans, maybe the deflation becomes so small that Dash can some day, but there undoubtedly WILL be a currency that can handle loans, they might even be backed by Bitcoin or Dash (such as bitshares was/is trying to do) This leaves the door open to all kinds of new products.
To me, the beauty of the system is that large holders will have to sell to live off their coins, or at minimum, when those coins are inherited, the "horde" will be split among family members, then broken again the next generation, and slowly, the huge amount of coins will slowly disperse to future generations. It naturally breaks the top of that pyramid until you have more of a mound. Not redistribution of wealth so much as equal access to wealth.
I don't know though, I wish we had some real economists / philosophers, like Hayek was, around this space to help guide us. Because this really is a socio/political time bomb that's ticking and will change the world. We need to understand it NOW in order to set up new rules (how does the government tax when there is no control?) We need/want at least SOME government. There are so many implications for the future, and it's not really being thought out, at least not on a scale we need it to be! Not yet.
blows my mind... LOL, sorry, I rambled again
