I think one of my favorite solutions to the volatility issue is to keep the volatility moderate via automation. One of the ways this can be done is by first of all increasing the cryptocurrency total supply alittle more... for example, you could create 3 million additional bitcoins (making the total supply 24 million) and securely lock them in multiple places within its decentralized system, then algorithmically increase supply when overall demand is high and decrease supply when overall supply is high... You program it to deflate more and inflate less. In the end, the algorithm keeps the coin moderately deflationary. A cryptocurrency can still serve as a good medium of exchange with this method.
*Changes to the rules that govern the algorithm would need to be done by the community in well decentralized and transparent manner.
There're two problems with such systems. 1. How does the system adjust rewards? One way is to ping exchanges for price volatility. Then how does the system choose the exchanges to include? The biggest 5, 10, or 20 by volume? Then x% of exchanges can collude and destroy other exchanges. 2. People can game the reward system. A dynamically adjusted reward system introduces a new variable. Mining can allow gaming because it's associated with real-world production costs. Your gaming is bounded by a physical reality. Gaming block rewards will result in financial manipulation. Let's say you own 10% of the coin supply, nobody comes close to your supply. You can start to manipulate the supply/demand to optimize your price. Your gaming is unbounded. Eventually you can control all supply, and therefore price. I think a fixed rate would work better than those designs. It's not perfectly stable. But that's the tradeoff to maintain decentralization. |
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First, you have to move your thread to the right board and that is the bitcoin discussion. The board does not allow altcoin discussion. I'm trying my luck with Altcoin Discussion. I've developed Bitflate, a crypto with constant inflation. The goal is to fix volatility. I could be wrong about Bitcoin Volatility. But if I'm right, I think Bitflate is the coin that the crypto market needs. https://bitflate.org/ |
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I believe that the volatility will somehow be gone once bitcoin reached the peak and becomes stabilize when it becomes the world's most used alternative digital currency. You can conclude that it is inherent but we haven't seen those points.
Volatility will somehow go away once Bitcoin matures. It's difficult to guess how it would mature. I respect this view. I once believed in it. We can measure volatility. There's data to prove. We'll sync up in 5 years. |
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Lightning Network does not have demand because Bitcoin is not a Medium of Exchange. I don't think it ever will become an MoE. Bitcoin has two use cases: 1. A short-term speculative asset (trading) 2. A long-term store of value (hodling) You'll hear people say that Bitcoin is used for transactions. They probably cite anecdotal experience or pitch a hope. The data does not support this thesis. Bitcoin's price is controlled by short-term news cycles. Traders have the biggest impact on its price. People can't use it for transactions because its price is volatile. I wrote some posts on this: Bitcoin Will Not Be a Medium of Exchange https://bitflate.org/post/2019/11/24/bitcoin-will-not-be-a-medium-of-exchange.htmlBitcoin Volatility https://bitflate.org/post/2020/05/10/bitcoin-volatility.htmlBesides the lack of demand, Lightning Network also have technical design issues. Basically, you can't get both cheap transactions and decentralization. Bitcoin's 2nd layer needs some level of centralization. But these are minor issues. The main problem is not many people use Bitcoin for transactions. |
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It's not naive. Bitcoin is already widespread as a medium of exchange. Just look to the whole trading industry of cryptocurrency. It's the most pair of all the altcoins and that's just another use of bitcoin being a medium of exchange.
You're correct about the volatility and supply limit of bitcoin. But that is also the reason why many of us believes that someday it will be as is, payment medium and a store of value due to scarcity.
When I transact, I always convert BTC to USD. I check how much the transactions cost in terms of real-world money. The question to ask is whether volatility will go away at some point. It's clear to me that the answer is No. 1 million: Too small. Explanation: Volatility will go away when we reach 1B. 1 billion: A little bigger but still small. Explanation: Volatility will go away when we reach 100B. 100 billion: We are here, volatility is still here. Explanation: Volatility will go away when we reach 1T. 1 trillion: Game changer? 10 trillion: Definitely big. Hope: volatility will go away (likely false). 100 trillion: World's money. Hope: volatility will go away (likely false). Volatility is an inherent property of Bitcoin's supply design. It'll be here forever. |
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Original Post: https://bitflate.org/post/2020/05/10/bitcoin-volatility.htmlBitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.Bitcoin price is going up, but it will remain volatileThere is a common belief in the Bitcoin community about how Bitcoin would become a currency. The story says that Bitcoin is currently on its way to become a Store of Value. Once its market capitalization reaches a certain height, Bitcoin’s price would become stable. Then it will transition to a Medium of Exchange. I never buy this story. I think it’s very naive. Yet, many Bitcoin analysts believe in this story. Bitcoin’s limited supply is the cause of its price volatility. It’s an inherent property. Bitcoin may win the price appreciation. But we need to pay attention to its price volatility. This is where many bitcoiners are wrong. Two things are true about Bitcoin’s price: - Its price is going up due to its limited supply.
- Its price is volatile due to its limited supply.
I came across a short video clip ( https://twitter.com/johnkvallis/status/1257419107848290304) from Parker Lewis (@parkeralewis) and John Vallis (@johnkvallis). In the clip, Parker Lewis argues that inflation does not have any effect on price stability. The comment implies that Bitcoin would become stable without the need for inflation. Deflation, inflation and volatilityI don’t think Bitcoin’s price volatility will go down. I started the Bitflate experiment to fix this problem. The purpose of this experiment is to prove that inflation has a price stabilizing effect. My point was proven during March 2020 when Bitcoin’s price crashed more than 50%. Bitcoin’s price volatility went up to a level not seen since 2014. Bitflate is still a small experiment. It’s early to declare victory. But I think it’s heading in the right direction. John Vallis still disagrees with me about this topic. I’m sure many bitcoiners disagree with me. John Vallis set a reminder in 5 years. If Bitcoin’s price volatility goes down by then, I will admit that I am wrong. The Bitflate experiment will fold. Until then, let’s enjoy the ride. Bitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange. |
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I think there are two things that are true with Bitcoin's price:
1. Its price is going up due to its limited supply.
2. Its price is volatile due to its limited supply.
This is Bitcoin's design and therefore, its consequential properties. You can view it differently: an uncorrelated asset, a safe haven, a Store of Value. If your time horizon is long (5-10 years), Bitcoin can be all of those. But if your time horizon is short, Bitcoin is none of those.
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I think BCH is taking the wrong path to achieve its goal (digital cash). Its other sin is to commit a hard fork. Bitcoin is working well as the first form of digital money. Its changes should be done through soft forks. Having big blocks will not change Bitcoin's economics. To create a digital cash, I think the key is inflation. I wrote an article on this: We Need Inflationary Cryptocurrency https://bitflate.org/post/2020/04/26/we-need-inflationary-cryptocurrency.htmlDisclosure: I'm the Bitflate developer. I'm long BTC and BFL. |
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OP: https://bitflate.org/post/2020/05/01/how-bitflate-is-different.htmlBitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.When I discuss Bitflate on public forums (Twitter, bitcointalk, Hacker News), people tell me that inflation is an old idea. Teams had tried these experiments. Inflation adds nothing new or novel to cryptocurrency. However, with Bitflate, I want to reintroduce the idea of minimalism. Bitflate is the same kind of money as Bitcoin, with one exception, a 7% supply inflation. It will remain so in the future. We will not commit to further change. Tail emission is not inflationBitcoin has a supply cap of 21 million coins. There are a lot of coins that have no supply cap. Ethereum is currently producing 2 coins per block, possibly forever. Dogecoin’s current reward is 10k coins, possibly forever. These kinds of supply increase are not inflation. They are tail emission rewards that are supposed to incentivize miners. I don’t see the rationale behind this scheme. Constant tail emission will become increasingly smaller relative to circulating supply. At some point, the reward is so small. It just the same as no reward. Dev teams may need to increase the reward if they motivate miners. I don’t think these unstable monetary policies can produce long-term stable money. Dev teams can arbitrarily change the rewards. Bitflate will have a constant 7% inflation, foreverBitflate’s reward schedule starts at 50 coins per block like Bitcoin. The reward will drop until we reach 7% inflation. Then, it’ll increase at 7%, forever. 0: 50 (increase rate: N/A) 1: 25 (increase rate: 50%) 2: 12.5 (increase rate: 16.67%) 3: 6.25 (increase rate: 7.14%) 4: 6.56 (increase rate: 7%) 5: 7.02 (increase rate: 7%) 6: 7.51 (increase rate: 7%) I design a reward system to give more coins to early adopters. This bootstrap mechanism creates incentives to hold Bitflate coins. The constant inflation will stay the same regardless of what will happen. I will not advocate for change in this reward system. If I do at some point, you should not listen to me. Bitflate is minimalisticI’ve followed cryptocurrency for a few years. I conclude that previous experiments with the technology produces little to nothing. These failed experiments are lessons on what we don’t need. Litecoin proved that mining algorithm changes don’t matter. Ethereum proved that sidechains don’t create new use cases. These altcoins were too early. They’re not solving the problem that hinders adoption. I think the lack of adoption is because of volatility. The cause of volatility is limited supply. We need a predictable and constant inflation. I want to come back to the minimal form of cryptocurrency, Bitcoin. We don’t need more technology. Technology improvements are distractions. Bitflate is minimalistic. We only need a change in the monetary policy. The goal is to create another form of money, a Medium of Exchange. A Medium of ExchangePrevious experiments, like tail emission, have not fully committed to the idea of inflation. Dev teams and communities are afraid of price crash. They hold on to the idea of a highly restrictive supply. Why do we need inflation? A constant inflation rate will reduce volatility. Inflation is the missing ingredient in cryptocurrency. It is the key to create a Medium of Exchange. That’s the breakthrough we need for widespread cryptocurrency adoption. Bitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange. |
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Why would people use Bitflate instead of Bitcoin? By having expected inflation, Bitflate would be less volatile.
You are assuming that more people will use Bitflate as a medium of exchange. Inflation/Deflation means nothing if there is no demand. It's price will remain volatile if there are only few people who would trade it. Yes, it is an assumption. Bitflate is an experiment. Why don't people use Bitcoin as a Medium of Exchange? Since Bitcoin's introduction, we spent 10 years making technology improvement. But there's nothing to show. I think the answer is inflation. If Bitflate gains traction, its price is still volatile because of constant emission. Short-term, it would behave like a speculative currency. But this happens with fiat. People trade forex. I think long-term, it would be less volatile than fixed supply cryptocurrency. Bitcoin: Short-term, it is a speculative asset. Long-term, it is a store of value. Bitflate: Short-term, it is a speculative currency. Long-term, it is a medium of exchange. |
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We have a lot of inflationary crypto and why do we need more inflationary crypto? That doesn't make sense and i can tell you one inflationary crypto and pivx is including on this category. if bitflate already exist in the market and that's enough but you are actually shilling for bitflate, right?
I have not seen a cryptocurrency with a percentage point of inflation. I see constant emission to support mining (Dogecoin, Ethereum). I look at the pivx supply. Its supply increase is dependent on transaction volume. It is capped at 6 coins per block. This is the same model as Dogecoin and Ethereum. Bitflate's primary feature is 7% inflation. Inflation discourages hodl behavior. It can reduce volatility. Bitcoin works well as money. We should use the same technology. The only thing we need to change is its economics. It doesn't need other features like Proof of Stake or master node. They are distractions. One of the main fundamental ideas of Bitcoin is just a limited issue of coins and, as a result, the lack of inflation. You offer essentially the same principle of inflation in your cryptocurrency as in fiat money. What is the point of this, if it is the same as ordinary fiat money in non-cash form?
The point is it's decentralized and inflates at 7%. Most fiat inflates more than 7% and eventually dies. A cryptocurrency with 7% inflation can hold value better than many fiat. Nobody can change the rule. The game is fair. Why would people use Bitflate instead of Bitcoin? By having expected inflation, Bitflate would be less volatile. |
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Original Post: https://bitflate.org/post/2020/04/26/we-need-inflationary-cryptocurrency.htmlBitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.A Deflationary CrisisThe world discovered the Coronavirus in January 2020. It’s been four months. We are learning more and more about the danger of this new virus. We now agree that this virus is not just a flu. It’s novel and dangerous. It paralyzes the world economy. Crypto sphere has pitched limited supply and Austrian economics as cures to inflation and the money printing disease. The Coronavirus seems to be the perfect crisis to prove the use case of cryptocurrecy. However, the opposite may be happening. This crisis is cutting deep into the world economy. It has exposed flaws and incompetencies. Government policies are ineffective in the short-term. Money printing and stimulus have not relieved the problems. They even cause political discontent. We’re seeing oil and commodity price crash. There are reports of farmers dumping milk and eggs because consumptions have gone down. When demand drops and supply remains the same, prices have to drop to encourage people to spend. Commodity prices will drop. Companies will make less money. Then, wages will drop. This is a vicious price decrease cycle. We are heading into a deflationary crisis. InflationBitcoin may see price appreciation in this crisis. It’s a digital and possibly uncorrelated asset. It’s not affected by the problems that we experience in the physical world. It’s an escape pod. However, Bitcoin remains a speculative asset in the short-term. It’s not going to relieve the problems that we face daily. The Coronavirus crisis has shown that inflation is not always bad. Bitcoin’s shrinking reward and extremely limited supply make it very volatile. It’s not suitable to be a Medium of Exchange. Crypto builders overlook this property. They think technology improvements like sidechain and programmability will drive cryptocurrency adoption. Since the Bitcoin’s introduction, we’ve seen a lot of proposals for technology improvements. None of them has made cryptocurrency easier to use and drive adoption outside speculation. We need to abandon dogma and embrace economic changes in cryptocurrency. We need to reject Austrian economics as the only viable principle. If you study the Great Depression closely, you will see that deflation is a vicious threat. It can prolong economic hardship. Inflation has its role. If governments can distribute stimulus fairly, they can drive economic activities. The US government under Franklin D. Roosevelt overcame this challenge. It’s time for us to devise solutions for this crisis. We need a cryptocurrency that goes beyond a speculative asset and a Store of Value. We need a cryptocurrency that people can use as a Medium of Exchange. Inflationary cryptocurrencyBitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange. I design a reward system to give more coins to early adopters. The idea is to encourage people to hold on to their coins and create some restriction of supply. This bootstrap mechanism creates incentives to hold Bitflate coins. The reward system is as follows: 0: 50 (supply: ~10 million) 1: 25 (supply: ~15 million) 2: 12.5 (supply: ~18 million) 3: 6.25 (end of halving) 4: 6.56 (start of inflation 7%) 5: 7.02 6: 7.51 7: 8.04 8: 8.60 9: 9.20 10: 9.85 (supply: ~31 million) For the first 3 halvings, Biflate follows the same reward schedule as Bitcoin. But it will switch to inflation after 3 halvings. Even with inflation, it will take 10 years for supply to reach 31 million coins. Bitflate adheres crypto principles. It differs on economics and is designed to be a Medium of Exchange. It offers the same freedom as Bitcoin. The game is fair. Bitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange. |
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