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> You could plan the rough change in value over time, and build it into the algorithm, perhaps making gains unlimited at first, then making it very deflationary
by maratd 13y ago
> You could plan the rough change in value over time, and build it into the algorithm, perhaps making gains unlimited at first, then making it very deflationary for several years, and gradually easing gains to something like 0-2% deflation per year.
You want inflation, not deflation. The value of the currency should decrease at a 2% clip per annum.
This would make it into a realistic currency, where people get annual raises in their salary, prices gradually climb making merchants happy, etc.
You need to conform to basic human psychology for wide adoption. And don't worry about the miners, they will mine regardless, even if it's worth less and less each year ... now the speculators? Those will be gone and good riddance.
- rthomas6 13y agoI can see this once it's up and running with a large market cap, but in my opinion you need the deflation in the beginning to attract users. There's much less of an incentive to use the new 'coin if it doesn't appreciate over time.
- saalweachter 13y agoWell, that's the problem. If the digital currency doesn't have any significantly attractive qualities outside its use as a store of value, it's a shitty currency. If you can make a currency that people will use on a day to day basis, voluntarily, despite having 4% inflation (which is a much better target, economically -- the 2% is the weaksauce compromise with the anti-inflationists), then you've created something which has real utility.
- rthomas6 13y agoTo have that, the currency must be widely accepted. To have THAT, you need widespread adoption. But to have widespread adoption, you need a reason outside of its immediate utility for people to voluntarily use the currency. There are existing cryptocurrencies that are pretty close to what you're describing (freicoin), but they are not popular because there's no incentive for adoption. So if you don't have the beginning deflation, you need some other method of bootstrapping.
- johndevor 13y ago> You need to conform to basic human psychology for wide adoption. I don't think inflation is a part of basic human psychology.
- maratd 13y ago> I don't think inflation is a part of basic human psychology. Regardless of your thoughts, it is. Most jobs do not experience constant annual productivity gains, but everyone wants a raise at the end of the year and feels like shit when they don't get it. Nominal inflation allows you to give them a raise without impacting your bottom line. Win/win. Most merchants what to see their prices go up, it signals to them that there is demand for their goods. A steady, slow, increasing demand for their goods makes them feel good. Even if the costs of operating their business are going up at a similar clip, it makes them feel good that they can increase their prices. Having to keep your prices the same or drop them is frustrating, as if you're not making progress. Win/win. A steady, slow pace of inflation is ideal. It allows for short term saving, like for a downpayment on a house, but discourages unhealthy hoarding over long periods of time. Again, win/win. Look, I get it, Economics is an art, etc. but this stuff has been established over a long period of time and it works.
- rthomas6 13y agoCorrect me if I'm wrong, but I'm pretty sure most economists theoretically prefer an inflation rate of 0. However, they see inflation as less bad than deflation, so they err on the side of caution by generating a safety margin of inflation.
- aggronn 13y agohttp://en.wikipedia.org/wiki/Phillips_curve http://en.wikipedia.org/wiki/Phillips_curve this is an old theory and has been refined over time, but its still the basic model taught in economics courses.
- pbreit 13y agoReply to rthomas: Nope. Most economists prefer low but stable inflation around 1-3%.
- fthssht 13y ago2% per annum clip is nonsense dogma. As close to 0 as possible is probably ideal.
- yxhuvud 13y agoIf you can achieve that regardless of how deep a recession becomes, sure.