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Monetary Policies for Crypto Tokens

btczeus 9y ago
So gold value also tends to infinity?
DennisP 9y ago
A common way to incentivize teams is to give them some of the issued tokens, which you hold in escrow and release gradually over time.
craigkilgo 9y ago
So the diagnosis is a problem with external risk free rate of return (caused by inflationary monetary policy) and improper risk premium valuations on the token itself, and the cure is an inflationary monetary policy for the token also? Feels like the exact kind of logic that led to the aversion to the way current central banks operate mentioned by the author early in the piece.
TD-Linux 9y ago
>To date all major tokens have either a fixed amount of tokens right away or eventually (e.g., BTC) or a rate of inflation that asymptotically goes to zero (e.g., ETH). These are both incorrect. BTC has inflation that asymptotically goes to zero. ETH has undefined inflation (the current codebase has constant inflation, but has a "difficulty bomb" that is supposed to force a hard fork that will presumably change the inflation). EDIT: I think I read the OP incorrectly, I think what they meant was that while the rate of coin issuance in ETH is fixed, the inflation as a % goes to zero, and that due to quantization BTC issuance actually hits zero.
- dharma1 9y ago
  Here is the issuance rate plan for ETH from the horse's mouth https://www.reddit.com/r/ethereum/comments/5izcf5/lets_talk_about_the_projected_coin_supply_over/dbc66rd/ https://www.reddit.com/r/ethereum/comments/5izcf5/lets_talk_...
- nemo1618 9y ago
  ETH's long-term inflation behavior is undefined because the dev team has shown their willingness to alter the consensus rules whenever they deem it necessary.
  - woah 9y ago
    Your inferences about the future actions of the developers whose version of software you assume most users and miners will want to run aren't really like a hard and fast rule. It's not possible for the rules of any coin to be set in stone, because people can run whatever software they want. The only reason that Vitalik and the Ethereum devs write the software that most Ethereum users run is because that is the software most Ethereum users want to run. If someone developed a Bitcoin hard fork that most Bitcoin users and miners wanted to run, that would be Bitcoin, whether or not it conformed to any various ideals and philosophies that anyone has about money.
- Terr_ 9y ago
  > BTC has inflation that asymptotically goes to zero. I think you're confusing "inflation" with "issuing currency". Inflation and deflation cannot be determined without a measure or prediction of the broader universe of goods and services that are available.
BenoitEssiambre 9y ago
Yup, intrinsically worthless tokens engineered to have better than market risk adjusted, liquidity adjusted real returns compared to real productive investment will always be unstable and fluctuate wildly as they get more popular. This is a direct result of physical limits of production. As people hoard worthless tokens, their price increases and people hoard them even more instead of investing in real businesses with real production capacity. Eventually production capacity drops which means there is less things to buy with all the tokens. Stockpiled tokens chasing few goods means prices will rise (tokens will lose value) potentially suddenly as people try to get rid of them all at the same time before they're completely worthless. The cycle then repeats. When savings or financial promises are insufficiently tied to future production or to accumulation of real goods, it's always a ponzi scheme.
- just_one_time_ 9y ago
  Your type keep screaming, "Ponzi, ponzi!" I am starting to think it is just because you are too lazy to read about a new tech that you don't understand and wasn't covered in any of your CS courses. Whatever the reason, you have been and are still wrong about currencies. I don't mind, I'm laughing all the way to the bank, 1,000x returns on a $10,000 initial investment a few years ago has released me from the grind. Keep calling it a scheme and people like me will keep calling you uneducated.
- 52-6F-62 9y ago
  I really don't follow the rampant hate for the idea and technology of crypto on HN. Sure it's diluted and abused (eg: Dogecoin, Pepecash), but so is the grand United States of America (where the majority of trolls seem to fester). Like any money, the worship of it breeds all kinds of terrible, but it can support good works as well. If it's a technology with promise, as it appears to be, why reject it? To go a little further, you seem to have the whole idea framed incorrectly. There are base techs, and tokens exists on the networks of those base techs. If a base tech is a currency, then tokens are shares in a business that operates on the respective networks. Through the crypto "realm" these are tradable with the currency of principalities and nations via exchanges. There isn't such a great separation in operation or ideology from what most people consider "real" economics. The remaining problems seem to me to be limited to the technical, and there has rarely been a situation where people cannot overcome the technical. Tell the UN, and the thousands of Syrian refugees being fed because of Ethereum that the technology is a ponzi scheme and ultimately worthless: https://www.wired.de/collection/tech/blockchain-fluechtlinge-gefluechtete-camp-azraq-jodanien-wfp-iris-scan https://www.wired.de/collection/tech/blockchain-fluechtlinge... edit (another link): https://www.wfp.org/news/news-release/wfp-introduces-innovative-iris-scan-technology-provide-food-assistance-syrian-refu https://www.wfp.org/news/news-release/wfp-introduces-innovat...
zby 9y ago
What is that NPV that thay are talking about? When I look at http://www.investopedia.com.. http://www.investopedia.com... (or https://en.wikipedia.org/wiki/Net_present_value https://en.wikipedia.org/wiki/Net_present_value ) I see following formula: NPV = sum { C/(1+r)^t } - C0 - where C is future cash inflow and r is discount rate. If r goes to 0 NPV = sum (C) - C0 - that is far from infinity.

So gold value also tends to infinity?

A common way to incentivize teams is to give them some of the issued tokens, which you hold in escrow and release gradually over time.

craigkilgo 9y ago

So the diagnosis is a problem with external risk free rate of return (caused by inflationary monetary policy) and improper risk premium valuations on the token itself, and the cure is an inflationary monetary policy for the token also? Feels like the exact kind of logic that led to the aversion to the way current central banks operate mentioned by the author early in the piece.

TD-Linux 9y ago

>To date all major tokens have either a fixed amount of tokens right away or eventually (e.g., BTC) or a rate of inflation that asymptotically goes to zero (e.g., ETH). These are both incorrect. BTC has inflation that asymptotically goes to zero. ETH has undefined inflation (the current codebase has constant inflation, but has a "difficulty bomb" that is supposed to force a hard fork that will presumably change the inflation). EDIT: I think I read the OP incorrectly, I think what they meant was that while the rate of coin issuance in ETH is fixed, the inflation as a % goes to zero, and that due to quantization BTC issuance actually hits zero.

dharma1 9y ago
Here is the issuance rate plan for ETH from the horse's mouth https://www.reddit.com/r/ethereum/comments/5izcf5/lets_talk_about_the_projected_coin_supply_over/dbc66rd/ https://www.reddit.com/r/ethereum/comments/5izcf5/lets_talk_...
nemo1618 9y ago
ETH's long-term inflation behavior is undefined because the dev team has shown their willingness to alter the consensus rules whenever they deem it necessary.
- woah 9y ago
  Your inferences about the future actions of the developers whose version of software you assume most users and miners will want to run aren't really like a hard and fast rule. It's not possible for the rules of any coin to be set in stone, because people can run whatever software they want. The only reason that Vitalik and the Ethereum devs write the software that most Ethereum users run is because that is the software most Ethereum users want to run. If someone developed a Bitcoin hard fork that most Bitcoin users and miners wanted to run, that would be Bitcoin, whether or not it conformed to any various ideals and philosophies that anyone has about money.
Terr_ 9y ago
> BTC has inflation that asymptotically goes to zero. I think you're confusing "inflation" with "issuing currency". Inflation and deflation cannot be determined without a measure or prediction of the broader universe of goods and services that are available.

BenoitEssiambre 9y ago

Yup, intrinsically worthless tokens engineered to have better than market risk adjusted, liquidity adjusted real returns compared to real productive investment will always be unstable and fluctuate wildly as they get more popular. This is a direct result of physical limits of production. As people hoard worthless tokens, their price increases and people hoard them even more instead of investing in real businesses with real production capacity. Eventually production capacity drops which means there is less things to buy with all the tokens. Stockpiled tokens chasing few goods means prices will rise (tokens will lose value) potentially suddenly as people try to get rid of them all at the same time before they're completely worthless. The cycle then repeats. When savings or financial promises are insufficiently tied to future production or to accumulation of real goods, it's always a ponzi scheme.

just_one_time_ 9y ago
Your type keep screaming, "Ponzi, ponzi!" I am starting to think it is just because you are too lazy to read about a new tech that you don't understand and wasn't covered in any of your CS courses. Whatever the reason, you have been and are still wrong about currencies. I don't mind, I'm laughing all the way to the bank, 1,000x returns on a $10,000 initial investment a few years ago has released me from the grind. Keep calling it a scheme and people like me will keep calling you uneducated.
52-6F-62 9y ago
I really don't follow the rampant hate for the idea and technology of crypto on HN. Sure it's diluted and abused (eg: Dogecoin, Pepecash), but so is the grand United States of America (where the majority of trolls seem to fester). Like any money, the worship of it breeds all kinds of terrible, but it can support good works as well. If it's a technology with promise, as it appears to be, why reject it? To go a little further, you seem to have the whole idea framed incorrectly. There are base techs, and tokens exists on the networks of those base techs. If a base tech is a currency, then tokens are shares in a business that operates on the respective networks. Through the crypto "realm" these are tradable with the currency of principalities and nations via exchanges. There isn't such a great separation in operation or ideology from what most people consider "real" economics. The remaining problems seem to me to be limited to the technical, and there has rarely been a situation where people cannot overcome the technical. Tell the UN, and the thousands of Syrian refugees being fed because of Ethereum that the technology is a ponzi scheme and ultimately worthless: https://www.wired.de/collection/tech/blockchain-fluechtlinge-gefluechtete-camp-azraq-jodanien-wfp-iris-scan https://www.wired.de/collection/tech/blockchain-fluechtlinge... edit (another link): https://www.wfp.org/news/news-release/wfp-introduces-innovative-iris-scan-technology-provide-food-assistance-syrian-refu https://www.wfp.org/news/news-release/wfp-introduces-innovat...

zby 9y ago

What is that NPV that thay are talking about? When I look at http://www.investopedia.com.. http://www.investopedia.com... (or https://en.wikipedia.org/wiki/Net_present_value https://en.wikipedia.org/wiki/Net_present_value ) I see following formula: NPV = sum { C/(1+r)^t } - C0 - where C is future cash inflow and r is discount rate. If r goes to 0 NPV = sum (C) - C0 - that is far from infinity.