If the old coin will be worthless or nearly so, then negative feedback and instability issues remain.
In the case of burn, as you indicated in your previous message, the money supply of the old coin is shrinking at the same time the network value is shrinking. Thus old coin price P=T/M where T is the value of the old network and M is the money supply of the old network. As people migrate (burn) you have T and M both approaching zero (but not necessarily at the same or even a constant rate) and P is not well formed and highly unstable as M shrinks. (Even cypherdoc understood this!) By contrast, in the case of a spin-off that obsoletes the old network, you simply have P=T/M where T approaches zero and M is fixed, so this expression is well formed, and P is simply a clear measure of value where the market will naturally absorb speculative fluctuations between old and new, allowing stability and transparency.
How does an equation with two variables become not well formed? And what is the mathematical definition "well formed" in this context? I only know of well-formed as it applies to syntactical errors in a grammar.
If M ever reaches 0, then P doesn't exist because there are no coins on ask.
I fail to see how two variables changing affects the user's interpretation in some catastrophically different way. The user is tracking the percentage of burned coins and the market price, and forming a decision thereof. How is this qualitatively horrific as compared to tracking the price only?
We can reframe your equation to make my point more clear. T = PM. If we hold M constant as you suggest, then the coin network value is still changing via P. If we allow M to vary the coin network value is changing. Whether users sell their coins or burn them, an exodus is going to have the same effect on T. The only difference is whether all the effect must be expressed in P or if it can be expressed in both P and M (and more so in M because of arbitrage on price due to burning).
Citing cypherdoc isn't going to make your argument compelling to me.
And I don't like the idea of doubling the money supply every time you upgrade
This is an illusion. Prior to the spin-off (in fact prior to it even being conceived!) the future coins are embedded the old coins. But after the spin off it is not. You can even imagine a analogy of an metal coin being physically cut in two. Each of old (post) and new represent "half" of old (pre), and you can't make an equivalence between old (post spin-off) for old (pre spin-off), since it is physically a smaller asset. So there is no doubling of money supply, only a reconfiguration, as with taking one ounce gold coins and splitting them each into two half-ounce coins.
A stock split is not an increase in the money supply if the price goes down on both coins equally and all users hold their same distributions on both coins. But since you argue one of the networks may be more valuable to some users, then those who don't act to protect themselves could see a disproportionate decrease in their total wealth. And the protection strategy is not any less complex than burning. They must still decide when to trade one coin for the other.
You are making the error of equating a gross aggregate such as M, with the distribution of the holdings of M. Many economists make this false assumption.
It is a doubling of the money supply in the sense that unless the new coin expands the demand then the demand is split between two networks of total supply that is doubled. If the users had to do nothing to retain equivalent value, then we could say it is a stock split. But due to the units not being fungible, it is not a stock split and rather a complex game theory of debasement that the users have to expend effort on. Forcing users to expend effort is debasement of their value.
With a burn, the supply remains constant. That doesn't reduce the complexity of the decision, but at least it doesn't give the public perception that the coin supply is growing like crazy.
And most importantly it impacts more information, because rather than the lazy action of just HODLing both, users make their move to be in one coin or the other and not straddling the fence. Given a complex decision that has no clear answer, users tend to do nothing. Thus they would likely not sell either coin. However given the decision of losing their chance to convert to the new coin, they will likely do some research and decide whether the new coin has good features that everyone wants and if yes then convert.
So the burning is more informational about what matters, which is user appraisal of value of the upgrade.
because people will continue to spend and use their old version coins, so I think we will find they will retain value and ecosystem. It seems antithetical to a meritocracy to create such doublings of the money supply on the whim of every dev that wants to offer an upgrade.
To the contrary. It is that people may continue to use the old coin without creating an instability that would in turn both (at different times) encourage and discourage switching that makes this more of a (stable) meritocracy than burning. People simply choose how they value the old and new networks. If the value stays with the old, then the developer has not done a very good job of making "upgrades" that other people actually perceive as such!
No one will chose not to avail of their ownership of coins in both fucks. Very little market information is impart by giving away for free what is not free. Some might sell their coins in one of the forks trying to drive it away, but the rational game theory is to hold the coins in both networks for appreciation. There is no pressure on either coin's value. Which ever coin grows network value and appreciates faster, is likely to the be one sold first (based on the rational investor selling some on each rake...remember rpietila's teaching about rake).
Another way to see this is to consider that a two-way peg is also a meritocracy in the sense there is no asymmetry that might serve to influence users to structurally prefer one side of the peg or the other. But since you are not proposing a two-way peg then it is clear there must be an asymmetry.
I want users to impart their preference. I don't want to obscure it.
Allowing people to decide when to make their move, is somewhat balanced because they will wait to see what others do, which penalizes the new coin (which is why I suggested offering a slight incentive for coming over early), because they can't come back with a peg (only by exchange value).
The only rational system seems to be the one where investors have to make a choice and express their choice.
Investors express their choice in the spin-off model in the value they decide to attach to each of the new assets (as above, the original version of the "old" coin simply ceases to exist). If you do not allow this (because you want to force users to choose) then you are introducing an irreversible choice which has a value that is non-linear, complex and very likely unstable.
Holding M constant doesn't make the equation linear. That equation doesn't exist in a vacuum. The inputs to price P are non-linear. For one thing the wealth effect is non-linear.
Investors don't think in terms of complex valuations of non-linear systems. It really boils down to do you want them to hold both coins selling the one that appreciates faster (your model) or do you want them to impart their preference sooner (my model).
If you delay (or remove entirely!) imparting that information, you retard the development of the ecosystem. As I said, the difference is analogous to kicking-the-can a.k.a. not marking-to-market.
Otherwise there is no choice, they just avail of all the 10 upgrades at once and endure the lingering uncertainty as it takes a longer to determine which fork has the market support (since voting by burning was not enabled).
Can you actually prove this takes longer? I don't think so. I actually kind of suspect the opposite (but can't prove that either).
Yes based on human psychology. People avoid complex decisions. K.I.S.S. The rationally easiest thing to do in your model is HODL both and sell the one that either appreciates the most or is losing value precipitously. Since most are HODLing both, then information propagation is much delayed and skewed by the manic choice of responding to sell only at extremes.
The alternative is just create a new coin for the upgrade and let anyone trade for it on the decentralized exchange, but then the developers will need to dump these old version coins into the market
This does not retain value for the old coin, thus you lose confidence. Why should I buy your new coin when you just destroyed the value of your old one?
Exactly. That was my point too. It creates discord in the community.
With the spin-off model, value and confidence are retained for existing investors. It is simply an upgrade with no reset of distribution (again assuming it is actually an upgrade!).
You aren't factoring the psychological choice you've put on the user to make. I argue that the default mode in your model is apathy and then action on manic extremes. I argue that my model encourages research and proaction. I prefer the latter as being a more informed, proactive community.
However it does seem there should be some time penalty on delaying to burn.
Now I think you are recognizing that the burn model can actually discourage upgrading and you are trying to "fix" that by creating a time penalty. But, again, you are trying to force an outcome instead of letting people freely choose the "upgrade". If people resist burning that tells you something about your so-called upgrade. You don't need to corral them by creating a time penalty.
I set incentives to encourage informational proaction earlier instead of apathy and kicking-the-can to non-informational, manic, mass stampedes.
You want to encourage the users to do nothing. No research. Kick the can. Delay. Wait for price manias to force their hand.
It is okay that we disagree on this point for now, but I'm reasonably confident that if you think about this some more you will eventually recognize that the embedded option is the source of instability, and that indeed you are attempting to use the instability to force, or at least encourage, investors to upgrade, thus behaving in a way other than meritocracy.
Why do socialists always prefer a little short-term stability at the cost of manic, mass stampedes later.
Do not give away for free what is not free.
Do not pretend fungibility for that which is not fungible.
Hard forks are stressful. There is no way to get around that. Thus upgrades will likely need to be very compelling. And they should be. Otherwise don't bother. Many other things to work on in software.
As much as possible try to design the block chain to accommodate extension and change without a change to protocol.