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One idea would be to create a cryptocurrency where the currency supply increases following a Gompertz function rather than a log function. If you could magicall
by sparkie 8y ago
One idea would be to create a cryptocurrency where the currency supply increases following a Gompertz function rather than a log function. If you could magically guess the right variables so supply approximately followed adoption rate, you'd create a currency where the supply/demand was near enough constant, and the price would hardly change after the market had given it a rate. Lets say you expect demand to double each year for N years, where N is where peak adoption rate occurs, then your function would be 2^y for N years, after which you have a gradual decline in the supply. The earliest adopter who mines for N years would gain at most (assuming equivalent mining power), twice as much as someone who mines during year N only, since each year effectively doubles the entire supply up until N.
The real question is, who would mine for N years when it is basically unprofitable? Since everyone else can have the same mining opportunity and the value is approximately constant. An early adopter would only get up to a 2x advantage over someone joining in year N, but would need to put in N years of mining to get that. Also, if demand does not increase as expected, the currency value will half year on year. Nobody will invest in this kind of currency when there are many others "promising" potential 100x gains by overly rewarding early adopters.
You'd also never actually guess the right rate at which adoption is going to grow, and you'd jinx whatever values you expected by specifying them, because there'd be an attitude of "If I can start mining in year N, and still have essentially the same opportunity as everyone else, I'm not gonna bother investing right now, I'll do it when it's close to the time." As a result, you'd end up with nobody actually participating initially, smart people would invest during peak supply, and everyone else would FOMO as the supply rate is declining, which is effectively the same as happened for Bitcoin.
Of course, the process Bitcoin underwent can't really be repeated. Most altcoins are get rich quick schemes, which utilize the log function of coin supply to pre-mine or whatnot to give the "founders reward," with the expectation that if the currency gains any popularity and has liquid markets, the founders can cash out before anyone realizes their currency is useless.