How does the graph of money supply of PPCoin look like?

[ripper234]

http://bitcoin.stackexchange.com/questions/5232/how-does-the-graph-of-money-supply-of-ppcoin-look-like

[crazy_rabbit]

Like the speedometer of the Starship enterprise as it goes "full stop" to "warp 10".

heh, heh, heh.

[Jutarul]

The money supply graph of bitcoin is misleading. It just shows the ceiling. The available coins is what matters for the economy. And that curve will have a maximum in the near future and go down with time. Bitcoin is deflationary by design, because it does not compensate for money destruction (lost keys) or hoarding (anticipated value appreciation).

PPcoin doesn't have that misconception, because the money supply is CLEARLY unpredictable. However, you could generate ceiling functions for various scenarios and market conditions. Based on my analysis I would be surprised if we hit a 100 million ppcoin celing before 2018.

[Este Nuno]

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                      time

[ripper234]

The money supply graph of bitcoin is misleading. It just shows the ceiling. The available coins is what matters for the economy. And that curve will have a maximum in the near future and go down with time. Bitcoin is deflationary by design, because it does not compensate for money destruction (lost keys) or hoarding (anticipated value appreciation).

PPcoin doesn't have that misconception, because the money supply is CLEARLY unpredictable. However, you could generate ceiling functions for various scenarios and market conditions. Based on my analysis I would be surprised if we hit a 100 million ppcoin celing before 2018.

"Hoarded" coins shouldn't be counted out - the entire market cap is what matter, including saved/invested coins.
There's nothing clear to me in the money supply of PPCOIN - I just don't understand how it works ... that's why I asked the question in the first place.

[cunicula]

The money supply graph of bitcoin is misleading. It just shows the ceiling. The available coins is what matters for the economy. And that curve will have a maximum in the near future and go down with time. Bitcoin is deflationary by design, because it does not compensate for money destruction (lost keys) or hoarding (anticipated value appreciation).

PPcoin doesn't have that misconception, because the money supply is CLEARLY unpredictable. However, you could generate ceiling functions for various scenarios and market conditions. Based on my analysis I would be surprised if we hit a 100 million ppcoin celing before 2018.

"Hoarded" coins shouldn't be counted out - the entire market cap is what matter, including saved/invested coins.
There's nothing clear to me in the money supply of PPCOIN - I just don't understand how it works ... that's why I asked the question in the first place.

The algorithm is not complicated. Coins are minted through PoW blocks which come once every 10 minutes. PoS blocks also mint coins, but their contribution is almost epsilon. 

The number of coins minted per POW block = constant / (difficulty)^0.25

This means that everytime difficulty increases by a factor of 16, the block reward gets cut in half. If difficulty falls, then the block reward increases again.
The assumption is that due to Moore's law, difficulty increases over time, so that minted coins falls. However, since difficulty is also heavily affected by adoption, it is almost impossible to predict what the final supply will look like. The longer it takes for adoption to occur, the larger the supply will be.

The other unique feature is that all txn fees are destroyed, so that the long-run steady state should have coin creation = coin destruction, rather than coin creation = 0 and coin destruction = 0.

PoS blocks increase the money supply by 1% per year. That is tiny. i.e. It takes 70 years for the money supply to double via this process.

[ripper234]

The algorithm is not complicated. Coins are minted through PoW blocks which come once every 10 minutes. PoS blocks also mint coins, but their contribution is almost epsilon. 

The number of coins minted per POW block = constant / (difficulty)^0.25

This means that everytime difficulty increases by a factor of 16, the block reward gets cut in half. If difficulty falls, then the block reward increases again.
The assumption is that due to Moore's law, difficulty increases over time, so that minted coins falls. However, since difficulty is also heavily affected by adoption, it is almost impossible to predict what the final supply will look like. The longer it takes for adoption to occur, the larger the supply will be.

The other unique feature is that all txn fees are destroyed, so that the long-run steady state should have coin creation = coin destruction, rather than coin creation = 0 and coin destruction = 0.

PoS blocks increase the money supply by 1% per year. That is tiny. i.e. It takes 70 years for the money supply to double via this process.

Thanks for explaining.
I personally favor the predictable bitcoin money supply graph ... but let the market speak.

[sangaman]

The odd feedback loop that exists in PPCoin is this:

1. The more coins there are, the less each ppcoin will be worth.

2. The less each ppcoin is worth, the less incentive there is to mine.

3. The less incentive to mine, the fewer mines there will be which lowers the hash rate

4. The lower the hash rate, the lower the difficulty and the higher block reward.

5. The higher the block reward, the more coins there will be.

6. Go back to 1.

However, I figure that when ASICs come out, the hash rate and difficulty of PPCoin will go up and the block reward, and supply of coins, will drop severely.

[cunicula]

The odd feedback loop that exists in PPCoin is this:

1. The more coins there are, the less each ppcoin will be worth.

2. The less each ppcoin is worth, the less incentive there is to mine.

3. The less incentive to mine, the fewer mines there will be which lowers the hash rate

4. The lower the hash rate, the lower the difficulty and the higher block reward.

5. The higher the block reward, the more coins there will be.

6. Go back to 1.

However, I figure that when ASICs come out, the hash rate and difficulty of PPCoin will go up and the block reward, and supply of coins, will drop severely.

The negative feedback loop is kind of a good thing in some respects. The hashrate is more stable than that of other altcoins of similar size.
On the other hand, this negative feedback means that if the currency drops in value, the algorithm's response is to dump more coins on the market. Which is strange to say the least.
However, I don't think these are big problems.

Like you say ASICs (and other technological change) will cause the block reward to fall continuously over time.

[tacotime]

The odd feedback loop that exists in PPCoin is this:

1. The more coins there are, the less each ppcoin will be worth.

2. The less each ppcoin is worth, the less incentive there is to mine.

3. The less incentive to mine, the fewer mines there will be which lowers the hash rate

4. The lower the hash rate, the lower the difficulty and the higher block reward.

5. The higher the block reward, the more coins there will be.

6. Go back to 1.

However, I figure that when ASICs come out, the hash rate and difficulty of PPCoin will go up and the block reward, and supply of coins, will drop severely.

economics

[gurcani]

The "feedback" you talk about depends on the rates at which various things happen. You seem to be making some hidden assumptions about those rates.

Let me give an example of how I think the "feedback" works in practice (obviously my understanding of what I have observed):

Let's say that initially the price is in equilibrium with the difficulty (i.e. profitability=1  -profitability, can be defined as the number of btc equivalent altcoins I can mine for a hash rate that would mine me 1 btcs-).

now #1 happens, the price of ppcoin (in bitcoins of course) drops (say profitability->0.8 ).

But the response is nonlinear, so the effective difficulty drops even faster (people stop mining, both the difficulty drops, and the size of the block increases - here I defined effective difficulty as the difficulty for mining a given fixed number of ppcoins).

So suddenly with the same hashrate I can mine a lot of ppcoins as a miner, and the "price hasn't yet dropped further". So the profitability goes up substantially ( (say profitability->1.6) So I have all the incentive to redirect my rigs to ppcoins instead of litecoins or bitcoins to use this opportunity (note that this process of effective difficulty dropping is very fast with ppcoins, I can't imagine the price responding so fast).

So unless (as you assume) the market response is faster than the change of difficulty (and thus the profitability). The equilibrium would be restored (even with some overshoot).

If you don't believe me watch the hashrate vs. profitability at coinotron, and the price at vircurex for a few weeks for how the profitability respond to price changes and how the miners respond to profitability changes.