Topic: Monero Economy - page 11. (Read 43688 times)

That is true but what is the second 6 months debasement for Monero? I will be happy to mea culpa if it is not that high?

Or more specifically is the nominal block reward declining?


You not buying a coin does not mean a coin will die.

If the currency starts from zero, there has to be a high initial daily inflation to get it going.

If it does not start from zero, it is called "premine" and I don't buy it and it will die.

And investors accept it because they understand distribution is necessary to gain adoption and make it worth something via Metcalf's Law.

Coins that stop distribution die (Bitcoin will either die or be morphed with debasement when the G20 government coordination takes it over via the 1 or 2 pools that control it). Gold with its very low rate of distribution has never been used a currency (without additional debasement), not even in Byzantine.

The reason is very simple and due to the power law distribution of money[1]. Investors don't redistribute to spenders because they only spend a small fraction of their net worth. Thus government must step in and redistribute it. Crypto-currency offers the option of decentralized redistribution (that can't be gamed by the power vacuum of democracy). That is the reason I would prefer to go to 5% than 3%, but the investors here are ignorant. That is why I am teaching now.

Naive investors don't understand that there is a symbiosis between investing and spending, you can't have one without the other. Warren Buffet understands this.

Btw, Monero appears to have a very serious fatal flaw (another reason I didn't bother to develop for it, nor buy it). With the distribution rate being so high, it is impossible to bring it down without causing the miners to leave for another coin[2]. If I designed a currency, never would I make the initial distribution so much higher than the long-term. (do you really believe the core developers are so unselfish as they try to paint themselves, of course not!...why did they set the initial debasement rate so high...to get more coins!)

[1] A. Dragulescu and V. Yakovenko. Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States.

[2] https://bitcointalksearch.org/topic/on-the-longest-chain-rule-and-programmed-self-destruction-of-crypto-currencies-600436

Part of the reason it is working is the fact we all understand the emission rate is currently as high as it EVER will be and drops off in an exponential-like curve.

1.1% per day... works for TODAY.  If it were going to be that forever no one would touch this with a 10 foot pole.

FreeTrade, competing currencies also means if a parameter of your coin is too messed up (e.g. Bitcoin's debasement will decline asymptotically to 0[1]), users could leave for another coin. And there is a research paper that predicts declining debasement is one factor that might cause miners to leave Dogecoin[2].

Rpietila has shown that 5400% annual Debasement (1.1% per DAY) is working to distribute the coin via the normal expected power law distribution of money[3].

Decentralized debasement is the way we efficiently distribute crypto-currency.

Distribution is very important, because Metcalf's Law tells us that usage scales as the square of the number of users. Peter R had even shown that the Bitcoin price is scaling by Metcalf's Law. This is observed fact not just theory.

Dogecoin showed that more liberal distribution works (the community was working very hard to donate and get coins into as many hands as possible). Note there is a research paper that predicts Dogecoin's death due to declining rate of debasement[2].

It is true that most people just spend what ever you give them, e.g. Rpietila often cited the land given to Russians after the fall of Communism then most just sold it and the ownership ended up concentrated again. But this spending process creates the network effects that are the square of the number of spenders. Any one here who understands a little math, understands that something that is scaling by NxN instead N, is scaling (growing) much faster.

I'd prefer to go even higher than 3% to something like 5%, but it seems to turn off myopic investors who don't want to maximize distribution. And the difference between 3% and 5% is only 278% of Metcalf squaring. Whereas the difference between 1% and 3% is 900% network effects growth factor. So seems to me that 3% is the best choice. It also matches the level of population + productivity growth, so if ever it became the dominant currency then it would be well matched for the long-term.

P.S. Using the term 'inflation' where you should be using 'debasement' is an error. Inflation has to do with the price level in the economy, not the money supply and the relationship between the two is complex given by the 4 variables in the Quantity Theory of Money.

[1] Strictly speaking I believe the minimum is 1 Satoshi thus it does concretely reach 0, not asymptotically.

[2] https://bitcointalksearch.org/topic/on-the-longest-chain-rule-and-programmed-self-destruction-of-crypto-currencies-600436

[3] A. Dragulescu and V. Yakovenko. Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States.

P.P.S. Xanis perhaps you need some Xanax and then watch this.

Right sorry I missed a part of the discussion. You guys go so fast.
Yes the inflation is absorbed pretty well until now.

It is also the rule : if you buy it, you agree with the distribution. Therefore, the inflation is right.

Anyway we'll see how it goes but I'm not worrying too much.

We are talking about the present inflation rate, which is about 1.1% per DAY. But it seems to achieve the goals smoothly - ownership is increasing, without the need to coerce the coins from existing holders (which leads to pump, dump and abandon).

Is 1% inflation THAT big ?

Why people are so scared ? 1% seems really small when you look at the current block distribution.

What will be multiplied? The number of holders? If that's the case, the dilution must happen from somewhere --- ahh.. it doesn't - that's why the daily 1% inflation is good, it lets everyone keep their coins and still accommodates new holders!

I would be surprised if there were so many as 100k.  The more I think about it the more I would guess your total is probably good, though I would also guess it will be multiplied shortly if the current trend continues.

Some have murmured against the distribution, but nobody has offered any alternative parameters!

- Should I make a more top-heavy one with a smaller number of holders in the lower rungs? Or less top-heavy?
- Should it be wider so that there are more holders in both extremes and less in the middle? Or the opposite?
- Are there 100,000+ holders that I don't know of? (power law = yes)

The point is to have a currency that is both good for hoarding (investing) - liquid - and beneficial for the network to be secure.

What if we use an formula that connects tx fees and a % inflation with the network diff

If total supply = A

Tx fees = X

Block Reward = Y

Network Diff = Z

so we rule out lost coins with something like 0.7% but txfees ( more with wide use ) gets subtracted from the 0.7% in compount interest style and we also add something to the Network diff equation if/when there is spikes in the network.

Im not a mathematician nor a big enough brain to do the exact formula

But I think it might help in a way to have both the lost coin issues solved aswell as miners being happy to secure the network without causing deflation with the inflation %.

I was thinking about this lately. It is just one of the self adaptation mechanisms of the cryptocurrency network. There are so many layers of such mechanisms and different aspects. It will be quite interesting to see how those develop in practice.

If I understand the main thrust of your economic argument - it is that the inflation of monetary supply must keep pace with growth and economic expansion.

I wonder do you accept that the future (perhaps even the present) consists of multiple competing and complimentary cryptocurrencies?

Thus, as new successful cryptocurrencies are introduced, these are a de-facto expansion of the money supply. The money supply is thus determined by the market's rate of acceptance of new cryptocurrencies.

In short, money supply means something different in a world of multiple competing currencies.