rpietila Altcoin Observer - page 22.

devphp

sr. member

Activity: 336

Merit: 250

Quote from: smoothie on October 01, 2014, 10:19:43 PM

Quote from: devphp on October 01, 2014, 06:45:29 AM

Quote from: rpietila on October 01, 2014, 06:40:05 AM

...awaiting the explanation..

I don't think I can explain, it's a clash of ideologies. In that kind of opposition verbal arguments, which there's been no lack of recently, just don't work. There is a reason they made the "A picture is worth a thousand words" proverb, because sometimes you have to see it to believe.

Why can't you explain?

Basically the price of a commodity tends to gravitate towards its cost to produce. In this case PoS coins are produced with little effort/work. Hence a low price ultimately.

Crypto currencies are not a commodity, PoW or PoS, doesn't matter.
Commodity is something that can be consumed or can be used in manufacture production or you can wear it.
Digital commodity definition doesn't cut it either, it's only good to put Bitcoin and others into a specific tax category. Examples of digital commodity are songs, software. Crypto currencies are not digital commodities, you can't use them for their own properties, you can only use them for what they can buy. Which always brings us to utility value and unique use cases. Price of commodity absolutely can go below its cost to produce, if there has been overproduction (or a lot of cheap production) in the past and little demand at present and expected in the future. Price is always a function of supply and demand. Demand = use cases.

Johnny Mnemonic

hero member

Activity: 795

Merit: 514

Quote from: aminorex on October 01, 2014, 09:51:43 PM

Quote from: Johnny Mnemonic on October 01, 2014, 08:15:51 PM

Quote from: aminorex on October 01, 2014, 06:39:11 PM

If emission scaled linearly with hashing, we would lack an important check on the production of hashing hardware and the consumption of power for that purpose.

How do current crypto emissions keep hardware production in check? I was under the impression the effect was the opposite.

Poorly. But I already regret what I said (and which you quoted) because:

It doesn't matter whether emissions scale or are independent of hash rate, because the economy will be the same, and only the money supply will change.
If we accept the assumption that velocity is independent of the emission/supply ratio, I would have to agree in the main.
(The assumption is questionable, however.)

The result in the linear scaling case seems to be one in which a mining monopoly inflates the float to zero, and hoards the emission (up to the tolerance of the military powers).
The brutal picture this paints seems no better than today's system of debt-serfdom - and not dissimilar in its bipartite power balance.

I agree that the priviledged can hoard emissions and control the network just as easily, but at least it comes at a cost (as opposed to creating endless debt out of thin air). But when comparing the evils, linear scaling still seems to be an improvement over the "traditional" decreasing block reward, as every coin has an equal cost and all mining work has an equal, "fair" value over time. And there wouldn't be a race to upgrade hardware to win blocks before the next halving.

smoothie

legendary

Activity: 2492

Merit: 1473

LEALANA Bitcoin Grim Reaper

Quote from: devphp on October 01, 2014, 06:45:29 AM

Quote from: rpietila on October 01, 2014, 06:40:05 AM

...awaiting the explanation..

I don't think I can explain, it's a clash of ideologies. In that kind of opposition verbal arguments, which there's been no lack of recently, just don't work. There is a reason they made the "A picture is worth a thousand words" proverb, because sometimes you have to see it to believe.

Why can't you explain?

Basically the price of a commodity tends to gravitate towards its cost to produce. In this case PoS coins are produced with little effort/work. Hence a low price ultimately.

aminorex

legendary

Activity: 1596

Merit: 1029

Sine secretum non libertas

Quote from: Johnny Mnemonic on October 01, 2014, 08:15:51 PM

Quote from: aminorex on October 01, 2014, 06:39:11 PM

If emission scaled linearly with hashing, we would lack an important check on the production of hashing hardware and the consumption of power for that purpose.

How do current crypto emissions keep hardware production in check? I was under the impression the effect was the opposite.

Poorly. But I already regret what I said (and which you quoted) because:

It doesn't matter whether emissions scale or are independent of hash rate, because the economy will be the same, and only the money supply will change.
If we accept the assumption that velocity is independent of the emission/supply ratio, I would have to agree in the main.
(The assumption is questionable, however.)

The result in the linear scaling case seems to be one in which a mining monopoly inflates the float to zero, and hoards the emission (up to the tolerance of the military powers).
The brutal picture this paints seems no better than today's system of debt-serfdom - and not dissimilar in its bipartite power balance.

Majormax

legendary

Activity: 2534

Merit: 1129

Quote from: devphp on October 01, 2014, 07:37:48 AM

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

Storing today's excess for future consumption. That is indeed the reason money emerged in human society in the first place. It later became necessary to pay specific demands (Tax or trade etc)

Cryptocoin buyers so far fall into 2 categories : Those who want to store value for future consumption, and those who want to make a quick profit (preferably getting rich) in a shorter time frame.

The purchases of Cryptos with express intent to use for current expenditure are virtually nil. When Cryptos are demanded as payment for necessities , then mainstream adoption will be underway.

Johnny Mnemonic

hero member

Activity: 795

Merit: 514

Quote from: aminorex on October 01, 2014, 06:39:11 PM

If emission scaled linearly with hashing, we would lack an important check on the production of hashing hardware and the consumption of power for that purpose.

How do current crypto emissions keep hardware production in check? I was under the impression the effect was the opposite.

paulsonnumismatics

sr. member

Activity: 265

Merit: 250

Honni Soit Qui Mal i Pense

Inflation is just a tool to adjust the impact of debt in the system. And, as some say, the tax of the poors... ;-)

aminorex

legendary

Activity: 1596

Merit: 1029

Sine secretum non libertas

If emission scaled linearly with hashing, we would lack an important check on the production of hashing hardware and the consumption of power for that purpose.

As far as I can tell, the rationale for imposing exponential inflation always comes down to fear of deferred consumption, and/or enmity for capital formation. Both are intellectual errors which stem from defects of character.

aminorex

legendary

Activity: 1596

Merit: 1029

Sine secretum non libertas

Quote from: nakaone on October 01, 2014, 09:58:06 AM

the production costs of fiat ... are zero or close to zero.

fiat doesn't really exist anymore. examples of fiat would be lincoln's greenbacks and kennedy's treasury notes. (note the outcomes for the executive in each case.)

what does exist is debt. it is not created by fiat. it is enforced by the sword of the state, but it is not fiat.

i contend that the cost of this debt is quite vast. and compounding very rapidly. they are not production costs, but they are consequential costs of its production.

RonPaulBTC

member

Activity: 66

Merit: 10

I think PoW is leading at the moment but Bitcoin will face massive difficulties thanks to PoW in the future, so we'll see.

rdnkjdi

legendary

Activity: 1256

Merit: 1009

In the PoW vs PoS argument I believe the "Energy can only change forms" theory is partially at work.

Majormax

legendary

Activity: 2534

Merit: 1129

Quote from: rpietila on October 01, 2014, 07:48:01 AM

Quote from: devphp on October 01, 2014, 07:37:48 AM

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

Once the expected loss in transaction costs is smaller than the expected loss of the transactional currency being a weaker store of value, people prefer currency exchange to hoarding the transactional currency. Between cryptos, currency exchange cost is very low, so I don't give much chance of success to a coin that is a weak store of value even though it had superlative transactional use.

But higher usage on the other hand makes a coin gain in value also, therefore making it a better store of value.

Is not higher use (velocity) really the only way a currency can gain traction ?

Fundamental demand is always going to outlast speculative demand.

nakaone

hero member

Activity: 742

Merit: 500

maybe to add

the production costs of fiat as well as PoS are zero or close to zero. the production costs of the least sold coin of PoW should be the marginal costs of the least produced unit (at least in theory). this makes PoS to a pyramid scheme in the nearest sense, whereas this does not need to be neccessarily true for PoW. On the other side bytemaster argued that we should not overpay our security to keep the system efficient. the problem with proof of stake is obviously that you cannot allocate intertemporallily efficient.

Este Nuno

legendary

Activity: 826

Merit: 1000

amarha

Quote from: JorgeStolfi on October 01, 2014, 08:34:06 AM

Quote from: rpietila on October 01, 2014, 07:31:59 AM

As well I could have said that the hoarding is the only thing that gives value to anything [ ... ]. If there is no interest in anyone to hoard (save) in your currency, even the marvellous use cases do not give it any value, as it just travels lightning-speed through the use cases, but is not in demand by anyone.

Hm, this is quite a change from the arguments used up to six months ago. Claims like "1 BTC will soon be worth over 100'000 dollars" were entirely based on the prediction that bitcoin would capture some fraction of the e-payments in the world, and the price would have to be that high in order to have that much dollar volume with 21 million coins.

It's beginning to become apparent that it's pretty unlikely that Bitcoin can compete on that level with private entities I think.

There are some bad an inefficient companies out there. Even if Bitcoin makes them step up their service or get over taken by a competitor that does it better it seems like a long shot that Bitcoin is going to become some sort of financial hegemon anytime soon.

Unless there is large scale bank bail-ins. Or some other financial disaster. Then there might be a large flight of capital in to Bitcoin.

But really at this point I'm pretty convinced that the only way crypto has a chance at mainstream adoption is through someone coming up with new, innovative, and easy ways to use it for regular people. Wink

Majormax

legendary

Activity: 2534

Merit: 1129

Quote from: devphp on October 01, 2014, 06:45:29 AM

Quote from: rpietila on October 01, 2014, 06:40:05 AM

...awaiting the explanation..

I don't think I can explain, it's a clash of ideologies. In that kind of opposition verbal arguments, which there's been no lack of recently, just don't work. There is a reason they made the "A picture is worth a thousand words" proverb, because sometimes you have to see it to believe.

I often find that an explanation first requires an understanding of the questioners understanding level, and an interactive argument.

The shortest bullet point that I could give in favour of PoS is this :

An initial period of inflation provides the driver for adoption of Digital Currency : cheap coins to play with, low risk: high velocity of money to build an economy..... PoW provides that.

That was Satoshi's original premise,worked for Bitcoin, and still working.

Bitcoin has a long lead on competitors . PoS is a kind of shortcut to PoW (but better to have both in the same coin). Creates 'free' coins on the fly, making regular coins available for new buyers , many of whom see the stake as if it were 'interest' , and the apparent ROI is the incentive to invest.

The ideal PoS % , taper, and balance, is in the process of being found.

JorgeStolfi

hero member

Activity: 910

Merit: 1003

Quote from: rpietila on October 01, 2014, 07:31:59 AM

As well I could have said that the hoarding is the only thing that gives value to anything [ ... ]. If there is no interest in anyone to hoard (save) in your currency, even the marvellous use cases do not give it any value, as it just travels lightning-speed through the use cases, but is not in demand by anyone.

Hm, this is quite a change from the arguments used up to six months ago. Claims like "1 BTC will soon be worth over 100'000 dollars" were entirely based on the prediction that bitcoin would capture some fraction of the e-payments in the world, and the price would have to be that high in order to have that much dollar volume with 21 million coins.

devphp

sr. member

Activity: 336

Merit: 250

Quote from: rpietila on October 01, 2014, 07:48:01 AM

Quote from: devphp on October 01, 2014, 07:37:48 AM

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

Once the expected loss in transaction costs is smaller than the expected loss of the transactional currency being a weaker store of value, people prefer currency exchange to hoarding the transactional currency. Between cryptos, currency exchange cost is very low, so I don't give much chance of success to a coin that is a weak store of value even though it had superlative transactional use.

But higher usage on the other hand makes a coin gain in value also, therefore making it a better store of value.

I see you have a somewhat balanced view on what you call transactional currencies, which is good compared to those who don't bother to check or think about advantages and disadvantages. I have one question though. When you say people exchange from transactional currencies to another, which supposedly is a better store of value, do you mean crypto, Bitcoin? If you mean crypto, how do you consider it a good store of value with hundreds of percentage points in yearly fluctuations? It makes it no better than a transactional currency. I think it's too premature to call any crypto a good store of value, as there is no history of stability supporting this theory. And once we have no good store of value among cryptos, we're back to transactional currencies.

rpietila

donator

Activity: 1722

Merit: 1036

Quote from: devphp on October 01, 2014, 07:37:48 AM

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

Once the expected loss in transaction costs is smaller than the expected loss of the transactional currency being a weaker store of value, people prefer currency exchange to hoarding the transactional currency. Between cryptos, currency exchange cost is very low, so I don't give much chance of success to a coin that is a weak store of value even though it had superlative transactional use.

But higher usage on the other hand makes a coin gain in value also, therefore making it a better store of value.

devphp

sr. member

Activity: 336

Merit: 250

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

rpietila

donator

Activity: 1722

Merit: 1036

Quote from: devphp on October 01, 2014, 07:20:45 AM

Quote from: rpietila on October 01, 2014, 07:02:36 AM

Nah just pick your favorite POS and try to articulate. I don't mind pictures either. Without any way to convince that you are doing something great, the chances that anyone will buy it with significant value are slim.

Well, here is one way to articulate it.

The only real driver of demand for a currency not backed by unique tangible properties (all cryptos fall under that category, PoW and PoS) is when something unique can be purchased for that currency and that currency only. That is the key to success. Why is USD in such great demand? Because you need it to buy oil, no modern economy can operate without oil. Create unique use cases that others don't have and you're ahead of others, but not for long if you stop creating those unique use cases. Algorithms, inflation rates, proof-of-xxx models are not significant. What really matters is what you can use it for. If you think of unique use cases for various cryptos, you may come to interesting conclusions. But you need to try to use various cryptos (PoW, PoS) to be able to appreciate their pros and cons and envisage their potential.

I won't pick one PoS, you know which PoS is ahead of others at this point. This can change, but the concept of PoS is here to stay as long as the concept of crypto currencies in general survives.

Of course I understand that you are hard pressed with time, but that answer seems very focused on one aspect of the economy. As well I could have said that the hoarding is the only thing that gives value to anything (absent debt money of course which is very insidious, since the unfulfillable requirement to pay back (= debt slavery) gives them their value). If there is no interest in anyone to hoard (save) in your currency, even the marvellous use cases do not give it any value, as it just travels lightning-speed through the use cases, but is not in demand by anyone.

Therefore I posit that transactional uses are important, but mainly as a marketing and community building tool. Without increase of hoarding, the currency does not gain any value. (That is a different discussion whether currency should even have any value at all - I am looking at this from the opposite viewpoint, I first select my unit of account and hoard it, and then try to use it as a transactional medium as much as practical as well. This has been the way money emerged and evolved over millennia, and attempts to change it are synthetic and futile.)

Topic: rpietila Altcoin Observer - page 22. (Read 387455 times)