Fear of accusations shouldn't determine what we do though. In my opinion if there is inflation it must be for some specific purpose other than to avoid bad publicity.
If the argument you're making is that less people would want to use it as a currency if it's deflationary, this is a valid argument. I think different people will be attracted to deflationary currencies and that deflationary currencies may actually have many positive benefits.
One positive benefit that I postulate is a reduction in crime. A lot of crime is out of desperation or out of competition. Violence over turf happens among drug dealers often because in inflationary currencies the idea of saving doesn't make sense. You're punished for saving in an inflationary currency and I postulate that this encourages the thug capitalist mentality where short term profits rule.
If you want to promote long term thinking, long term investment, saving, and reduce violent crime I believe one way of approaching the problem is to offer a deflationary currency to allow people to think not just about day to day profit but the next year, the next decade, and not to spend all their money down so fast.
I use the street criminal as the individual in this metaphor because in American society the street criminal is the purest capitalist. Inflationary currencies encourage crime because why would anyone want to make and spend money slowly, or save money, when they can spend it as soon as they earn it and never save a penny? As a result of not saving this keeps the street criminal as an individual in a state of always being on a tread mill, or always struggling to stay afloat, and as a result it promotes a kind of ruthless competitiveness.
Let's take it out of the street level, how about it's stock investors? If you have a stock which dilutes over time then it requires that people keep buying it. The faster the rate of dilution the more people will have to find money to keep investing to maintain their position. This is like trying to keep up with the Joneses. https://en.wikipedia.org/wiki/Keeping_up_with_the_Joneses
and in my opinion is a problem which would not exist if people were encouraged to think about long term investments.
Protoshares has it's problems because it over relies on prediction markets. The developer seems to believe that prediction markets will solve all of societies ills. But a lot of changes have been made to the design since the time when Cunicula called it a ponzi scheme. I don't think it's a ponzi scheme at this time, but if people wanted to make a case for it being a ponzi scheme or pyramid scheme the truth is you could make the same case against Bitcoin.
1. Bitcoin itself is not decentralized. It's actually controlled by a mining cartel. This mining cartel controls the hashing power of the network. For this mining cartel because they make the chips we use to mine with, if Bitcoin will to inflate forever they would not mind because they are closer to the generation of new coins and stand to benefit from inflation. It is this same attitude in my opinion which leads people to believe inflation for the dollar is helpful, it helps only the people who are close to the creation of new dollars because the initial distribution goes to those people.
Kinda-sorta. I would argue inflation basically helps anyone who has money invested in things which do not consistently devalue (equity, precious metal) while destroying the wealth of those who do not. But there exists a host of problems for any deflationary currency that Bitcoin doesn't solve as well, and doesn't even attempt to solve.
As a result of the centralization of both Bitcoin and the fiat currencies as well we could say they are both pyramid schemes which benefit (certain people) most the people who control the production capability behind the currency generation of the network. At this point Bitshares is looking like it will be more decentralized than Bitcoin just as Bitcoin is more decentralized than the USD, because they switched away from mining and moved into a transaction based proof of stake which allows for them to both minimize inflation while increasing decentralization. I will say this has not been proven in practice so it's entirely theoretical, we have to wait and see.
Tx based proof of stake has similar issues to those for Peercoin, in my opinion, so I'm not overly hopeful. Even my proposed system has some issues, though, but I think it's an improvement.
2. We have to in my opinion measure or quantify the level of decentralization and as a principle agree that greater levels of decentralization is better. This should apply to Bitshares, Bitcoin, Netcoin, we want to have some way that generation of new coins or shares is decentralized. Netcoin is in a position where it can easily be more decentralized than Bitcoin provided that it's hard enough to mine, but if it cannot resist centralization around it's mining then whatever that inflation rate is, whether it be 1% or 4%, it will ultimately be a tax on anyone who saves in Netcoin. So if that 1% tax or 4% tax to miners goes to securing the network or paying miners I would say that sort of inflation has a purpose but if mining becomes centralized then that 1% to 4% tax goes to the same few people who basically will use their influence to maintain high inflation rates forever because they now have a coin faucet which pays them at the expense of everyone else in the network.
That's the point, yeah. The problem with Bitcoin is that once you get to the fees level of inflation (inflation = 0), you run into the problem that no one wants to conduct on-chain txs because it's poorly incentivized. So, ultimately, for the system to continue functioning, you need to enact some inflation. I chose exponentially increasing inflation, like fiat, but at considerable slower rates of inflation per year than are standard. The reserve banking system (when/if it gets off the ground) is then intended to be a more dynamic system that is more responsive to world economic rates of inflation as determined by public oracle consensus.
3. I believe deflation has more social benefits than inflation. I haven't seen anyone make a cause for the social benefits of inflation. Inflation is always promoted as if it's some kind of necessary evil. It's usually spun up by economists that if the currency does not inflate then people will hoard (save) too much money and the economy will grind to a halt. This hoarding in my opinion only happens if a currency is too centralized. If it's decentralized in the initial distribution then since no one is going to become a trillionaire there is no massive wealth disparity argument. Instead you could end up with lots of millionaires who saved for years, but the social impact of that isn't the same as the social impact of a few people becoming trillionaires. So it seems to me that over centralization is what makes inflation or deflation bad. If anyone can mine and earn a reasonable amount of coins or shares then there is no real complaint with deflation.
My gut feeling is that neither inflation nor deflation solve what is a considerable social and philosophical problem: that people will more money end up usually having the means to obtain more money, regardless of the financial system they are working under.
Having slow exponential inflation also insures investment into mining technologies in the future, as the hardware will continually be useful. However, with Bitcoin, eventually when inflation = 0, hardware investment will probably fall apart as far as I can tell.
4. Proof of Work seems to be the main problem behind all of this. We need a better Proof of Work which rewards work which is actually valuable to society, or we will have to move away from Proof of Work in the current form. I don't think Bitshares has completely solved it with going to Proof of Stake and I don't think Proof of Work as it is now is very good either. Proof of Work right now generates an effort with minimal to no social utility, all of that computing power essentially goes to waste, we have to make Proof of Work both economically and socially useful. We have to also make sure it's as decentralized as possible and by decentralized I mean resistant on the social network level as well so that it resists the formation of mining or other kinds of cartels to try to control the hashing power.
Some of my ideas on how we might be able to do it, the idea of the mining lottery is a good metaphor and perhaps is a direction if we keep mining. This would make mining a bit less predictable for the miner in a good way because it would decentralize the power dynamics in such a way that any random person could hit the jackpot while mining. It would also create some disassociation between hashing power and the reward by adding an element of uncertainty.
It should also be that we can create some disassociation between how much money a person spends and how much power the person gets. Money alone should not be the deciding factor in Proof of X. I think in the case of Bitshares money is the deciding factor but that is because they are treating it as a decentralized autonomous corporation so it has to be focused around profit. I think you can easily create a DAC which focuses on profit but do the crowd funding donation in such a way that money isn't the only way to mine or send value. For example perhaps you can donate computing power, money, or anything to the network to earn credits/shares.
I don't have the solution I'm just presenting some directions to explore and trying to encourage a high level debate on strategy.
Well, having something like this functional (useful PoW) is one of the the holy grails of cryptocurrencies, but doing it in a way that is decentralized seems unlikely at the current time. You can kind of hack it on (e.g. RippleLabs), but you need to rely on centralization of some kind to make this work. SCIPs
can give some kind of voodoo black moon magic approach to this where you can verify that you'd done some kind of very complex work very quickly and easily so long as you disseminate a massive (gigabytes or terabytes) consensus parameter set. These are a relatively new technology though, and I want to see how ZeroCash fares with them (they'll be the first currency to use them, for the sake of anonymizing cash flow).