6 ms·

Many of these APYs are being measured in the token staked, not in the "value" of that token as might be expressed in (say) dollars. The payment is then made via

by saurik 4y ago

Many of these APYs are being measured in the token staked, not in the "value" of that token as might be expressed in (say) dollars. The payment is then made via inflation, which devalues everyone's tokens to give the people who staled more token. (Yes: this means that the value of your money might go down even if you legitimately have 20% more of it; the market for the token at that point is a separate--yet related--issue.)

tppiotrowski 4y ago
Right. Some people in crypto will be baffled that eternal inflation is a built-in feature of some cryptocurrencies since one of the motivators of Bitcoin was to stop inflation caused by the fed printing money at will.
- dboreham 4y ago
  It's actually deflation. Everyone calls it inflation though presumably because in the beginning someone didn't understand economics terms.
  - saurik 4y ago
    Bitcoin, FWIW, currently (it will slow down and eventually supposedly stop) prints money every block to pay for mining. It does this to fund a public good, which is network security, under the assumption that people who store large amounts of money would be willing to pay more to protect that money than people who store small amounts of money, and in the early years (which we apparently are still a part of) it is considered that fees for transfers aren't where most of the payment could be derived. (Personally, it isn't clear to me that the network makes sense to be paid for entirely by fees. Ironically, AFAIK on Ethereum the percentage of the block reward paid for by fees is much higher than Bitcoin and their minted block reward will continue on forever.) This, to me, seems definitely like "inflation", caused by an increase in the money supply by a shared governance structure. It certainly isn't "deflation". Bitcoin does describe it not as printing money but as unlocking money that was already set aside, but what matters today (as opposed to whenever the rewards stop in the future... I don't remember off-hand when that will be) is the circulating money supply, not the theoretically existing / allocated supply (which is why if you lose money forever it is the same as destroying it; and which can also be seen because, if the US Fed merely had pre-printed giant fat stacks of cash that they've been dipping into for all these years, you wouldn't know the difference between that and it printing bills).
    - JumpCrisscross 4y ago
      > seems definitely like "inflation", caused by an increase in the money supply by a shared governance structure It's a money-supply increase. Depending on whether one Bitcoin buys more or fewer goods, it's inflating or deflating. (Currently, deflating, since Bitcoin is going up relative to the dollar and goods are priced in dollars.)
      - saurik 4y ago
        OK, you "win" (I think), though at that point I feel like the term isn't going to mean anything useful anymore as applied to a commodity... like, on a moment to moment basis we don't describe the US dollar as inflating and deflating despite it constantly having small adjustments with respect to its value: we track the large-scale movements specifically caused by economic policy that changes the circulating money supply (whether by the Fed or by individual banks or even by things like relative wages).
        JumpCrisscross 4y ago
        > the term isn't going to mean anything useful anymore as applied to a commodity Which term? Inflation? It's meaningless for a commodity but meaningful for a currency.
        seanhunter 4y ago
        Yes. As (I tihnk it was you) said in a sibling comment, supply expansion/contraction has a very significant meaning for a commodity though and that's really what happens with crypto. It's a bit frustrating to me the way in which the crypto community reuses various "tradfi" concepts but with slightly incorrect terminology etc.
      - panarky 4y ago
        What's really curious is that Bitcoin's advocates claim it's the ultimate inflation hedge, "sound money" that will hold its value while "fiat money" is debased. Then at the exact moment "fiat money" has a spike of inflation at 8% to 10%, the value of the "sound money" inflation hedge plummets 70%. Now, at the exact instant it appears "fiat money" inflation is moderating, suddenly the "sound money" jumps up 35% from its lows. Why on Earth would an inflation hedge decline dramatically when inflation shows up, and then increase when the inflation rate declines?
  - tppiotrowski 4y ago
    I was referring to something like ATOM. BTC has a limited supply so it won't inflate past a certain period, but ATOMs inflate each year and if you're not staking them, you are effectively becoming poorer year to year.
    - ejanus 4y ago
      But even with staking you are getting poorer in today's market.
proto-n 4y ago
Well, ethereum has been slightly deflationary since the merge. Though it doesn't offer 20% either
xur17 4y ago
This has the fun side effect of being very tax inefficient. That said, ETH is one of the few tokens that is both deflationary AND pays a staking yield [0]. [0] https://ultrasound.money/ https://ultrasound.money/
- throw101010 4y ago
  Ultrasound money cannot be money with a monetary policy on moving sands that can change because Vitalik and his buddies decided it was a fun experiment. Ethereum has demonstrated that its monetary policy wasn't "sound" and that it could be changed way too easily with EIP-1559, and will change again. This meme went so far that people now think it's more than just a stupid meme.
  - RestlessMind 4y ago
    > could be changed way too easily with EIP-1559 Lol you are aware of EIP-1559 and still claim that it happened "too easily".
  - TimJRobinson 4y ago
    All those changes took years to make happen and hundreds of people debated them. All of them have made Ethereum more secure, easier to use, and deflationary.
    - lmm 4y ago
      > All those changes took years to make happen and hundreds of people debated them. Sure. But if you want a money system whose policy is based on, well, politics, we already have plenty of very good implementations of those. > All of them have made Ethereum more secure, easier to use, and deflationary. It's too young to say if it's actually deflationary or not. I'm betting on not, because once there is more value leaving the crypto ecosystem than entering it, no force on Earth can stop that from lowering crypto values.
      - TimJRobinson 4y ago
TimJRobinson 4y ago
The double whammy is you also get taxed on that yield so for chains that are paying yield with inflation you're actually losing money by staking. They really do need to be transparent about what the actual yields are (return - inflation). AFAIK Ethereum is the only chain that gives a positive return after taxes because it's deflationary.
5350-uiop-1130 4y ago
"we're paying you not to sell, whilst our $millions of tokens are on a vesting schedule" (VC's/Dev Team)
- dmak 4y ago
  This is one of the more valid criticisms of staking.

by saurik 4y ago

tppiotrowski 4y ago

Right. Some people in crypto will be baffled that eternal inflation is a built-in feature of some cryptocurrencies since one of the motivators of Bitcoin was to stop inflation caused by the fed printing money at will.

dboreham 4y ago
It's actually deflation. Everyone calls it inflation though presumably because in the beginning someone didn't understand economics terms.
- saurik 4y ago
  Bitcoin, FWIW, currently (it will slow down and eventually supposedly stop) prints money every block to pay for mining. It does this to fund a public good, which is network security, under the assumption that people who store large amounts of money would be willing to pay more to protect that money than people who store small amounts of money, and in the early years (which we apparently are still a part of) it is considered that fees for transfers aren't where most of the payment could be derived. (Personally, it isn't clear to me that the network makes sense to be paid for entirely by fees. Ironically, AFAIK on Ethereum the percentage of the block reward paid for by fees is much higher than Bitcoin and their minted block reward will continue on forever.) This, to me, seems definitely like "inflation", caused by an increase in the money supply by a shared governance structure. It certainly isn't "deflation". Bitcoin does describe it not as printing money but as unlocking money that was already set aside, but what matters today (as opposed to whenever the rewards stop in the future... I don't remember off-hand when that will be) is the circulating money supply, not the theoretically existing / allocated supply (which is why if you lose money forever it is the same as destroying it; and which can also be seen because, if the US Fed merely had pre-printed giant fat stacks of cash that they've been dipping into for all these years, you wouldn't know the difference between that and it printing bills).
  - JumpCrisscross 4y ago
    > seems definitely like "inflation", caused by an increase in the money supply by a shared governance structure It's a money-supply increase. Depending on whether one Bitcoin buys more or fewer goods, it's inflating or deflating. (Currently, deflating, since Bitcoin is going up relative to the dollar and goods are priced in dollars.)
    - saurik 4y ago
      OK, you "win" (I think), though at that point I feel like the term isn't going to mean anything useful anymore as applied to a commodity... like, on a moment to moment basis we don't describe the US dollar as inflating and deflating despite it constantly having small adjustments with respect to its value: we track the large-scale movements specifically caused by economic policy that changes the circulating money supply (whether by the Fed or by individual banks or even by things like relative wages).
      - JumpCrisscross 4y ago
        > the term isn't going to mean anything useful anymore as applied to a commodity Which term? Inflation? It's meaningless for a commodity but meaningful for a currency.
        seanhunter 4y ago
        Yes. As (I tihnk it was you) said in a sibling comment, supply expansion/contraction has a very significant meaning for a commodity though and that's really what happens with crypto. It's a bit frustrating to me the way in which the crypto community reuses various "tradfi" concepts but with slightly incorrect terminology etc.
    - panarky 4y ago
      What's really curious is that Bitcoin's advocates claim it's the ultimate inflation hedge, "sound money" that will hold its value while "fiat money" is debased. Then at the exact moment "fiat money" has a spike of inflation at 8% to 10%, the value of the "sound money" inflation hedge plummets 70%. Now, at the exact instant it appears "fiat money" inflation is moderating, suddenly the "sound money" jumps up 35% from its lows. Why on Earth would an inflation hedge decline dramatically when inflation shows up, and then increase when the inflation rate declines?
- tppiotrowski 4y ago
  I was referring to something like ATOM. BTC has a limited supply so it won't inflate past a certain period, but ATOMs inflate each year and if you're not staking them, you are effectively becoming poorer year to year.
  - ejanus 4y ago
    But even with staking you are getting poorer in today's market.

proto-n 4y ago

Well, ethereum has been slightly deflationary since the merge. Though it doesn't offer 20% either

xur17 4y ago

This has the fun side effect of being very tax inefficient. That said, ETH is one of the few tokens that is both deflationary AND pays a staking yield [0]. [0] https://ultrasound.money/ https://ultrasound.money/

throw101010 4y ago
Ultrasound money cannot be money with a monetary policy on moving sands that can change because Vitalik and his buddies decided it was a fun experiment. Ethereum has demonstrated that its monetary policy wasn't "sound" and that it could be changed way too easily with EIP-1559, and will change again. This meme went so far that people now think it's more than just a stupid meme.
- RestlessMind 4y ago
  > could be changed way too easily with EIP-1559 Lol you are aware of EIP-1559 and still claim that it happened "too easily".
- TimJRobinson 4y ago
  All those changes took years to make happen and hundreds of people debated them. All of them have made Ethereum more secure, easier to use, and deflationary.
  - lmm 4y ago
    > All those changes took years to make happen and hundreds of people debated them. Sure. But if you want a money system whose policy is based on, well, politics, we already have plenty of very good implementations of those. > All of them have made Ethereum more secure, easier to use, and deflationary. It's too young to say if it's actually deflationary or not. I'm betting on not, because once there is more value leaving the crypto ecosystem than entering it, no force on Earth can stop that from lowering crypto values.
    - TimJRobinson 4y ago

TimJRobinson 4y ago

The double whammy is you also get taxed on that yield so for chains that are paying yield with inflation you're actually losing money by staking. They really do need to be transparent about what the actual yields are (return - inflation). AFAIK Ethereum is the only chain that gives a positive return after taxes because it's deflationary.

5350-uiop-1130 4y ago

"we're paying you not to sell, whilst our $millions of tokens are on a vesting schedule" (VC's/Dev Team)

dmak 4y ago
This is one of the more valid criticisms of staking.