A coin with a floating supply. Is it possible?

[BillCoin]

The true idea about having a fixed rate is that it provides much more trust over the network participants, as people "can predict" the future  and has the ability to know how many coins are going to be created in advance.
Also, a fixed supply rate means that the economy is not going to have any insider problems, which means that without something like a war, there's not going to be anything that may dramatically hurt the coin's purchase power, hyper-inflation is being totally prevented by fixed supply.

I think that it's impossible to have a floating supply, because if you want to keep the network decentralized you will also need that the network's participants are going to be those who decide about the float rate, and then you are open to much more kinds of attacks( like someone who pretends to be most of the network attacks the network and enters everybody into hyper-inflation mode.

[1715099996]

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[BrewMaster]

just because fiat and printing money works in a certain way it doesn't mean that way is a good way and cryptocurrencies should use that way also.

the first thing that needs to be answered is that "what is wrong with having a fixed supply?" for example bitcoin has 21 million cap. what is the actual problem that you faced or expect to face in the future because of this cap?

what i am trying to do is to figure out what the problem is before moving on to finding a solution for that problem.
for example one of the reasons why the argument about the cap  exists is that some coins may be lost over the years (forgotten private keys, hardware failures, proof of burn,...) to a point where it may lead to a lack of supply. well this is an exception and exceptions can be fixed with a simple one time hardfork while still keeping the supply capped.

[nightways]

just because fiat and printing money works in a certain way it doesn't mean that way is a good way and cryptocurrencies should use that way also.

the first thing that needs to be answered is that "what is wrong with having a fixed supply?" for example bitcoin has 21 million cap. what is the actual problem that you faced or expect to face in the future because of this cap?

what i am trying to do is to figure out what the problem is before moving on to finding a solution for that problem.
for example one of the reasons why the argument about the cap  exists is that some coins may be lost over the years (forgotten private keys, hardware failures, proof of burn,...) to a point where it may lead to a lack of supply. well this is an exception and exceptions can be fixed with a simple one time hardfork while still keeping the supply capped.

There is a lot of difference in between the paper money and that of the crypto currencies and that we cannot treat them in the same manner. There are number of things which are very much different in case of the bitcoin and other crypto currencies and that even if we wanted to treat digital currencies like the way we treat paper money, we cannot do that. You can expect a coin with floating supply but this will not happen.

[tee-rex]

Right now I'm not against the idea as I just don't see it possible to implement.
Once we have a clue how to make this we could discuss the good and the weak points, but till then we're talking about what hotel to book on mars once they build the new colony.

I see where you are getting at but I can't agree with your analogy. Or rather, I can't agree with the place where you put us in it. We already have crypto on board but you mean as if we were talking like it hadn't been done and proved to be a viable concept yet. We are already past that milestone. Look, people are talking about cryptocurrencies substituting fiat all over the world but I just raise the issue which is pretty much in line with that and about taking that to real application.

If we are to consider this endeavor seriously, it is one of the problems that we should solve.

[Sidiq SP]

I think the odds are small, really in a floating and unspecified-based economy, the profit earned is small, each coin here has its own target, and if the target is successful then the gain will get bigger, and every the target is bound to exist, what happens if there is no real limitations .. ?? the possibility that happens is less get the appreciation from the investors, this is my opinion on this matter, thanks

[stompix]

Right now I'm not against the idea as I just don't see it possible to implement.
Once we have a clue how to make this we could discuss the good and the weak points, but till then we're talking about what hotel to book on mars once they build the new colony.

I see where you are getting at but I can't agree with your analogy. Or rather, I can't agree with the place where you put us in it. We already have crypto on board but you mean as if we were talking like it hadn't been done and proved to be a viable concept yet. We are already past that milestone. Look, people are talking about cryptocurrencies substituting fiat all over the world but I just raise the issue which is pretty much in line with that and about taking that to real application.

If we are to consider this endeavor seriously, it is one of the problems that we should solve.

Of course my analogy was a big exaggerated but it still stands.

You say we have the cryptocoins ready but none if them is capable of doing such things, just as the current rockets we have right now, none is able to get us to Mars.

If you think that there is possible to build a crypto that is both decentralized an capable to adjust it's supply based on the algorithm only (without forks) then please tell us how it will work?
Unless you have a viable idea then it can still be compared to mars trips.

[tee-rex]

Of course my analogy was a big exaggerated but it still stands.

You say we have the cryptocoins ready but none if them is capable of doing such things, just as the current rockets we have right now, none is able to get us to Mars.

This is not quite so. The rockets we have today are definitely capable of getting us to Mars, but they are not capable of getting us back to Earth. That's the real problem.

Regarding the question raised in the OP, why not try to replicate some features of fiat as a trial balloon of sorts? For example, we could create a coin with a supply determined by the total amount of loans provided with this coin. If someone wants to take a loan, a crypto bank creates new coins for this loan and then these coins make it to the blockchain by being transferred to the borrower's wallet. When the loan is returned or if the borrower defaults, the coins get destroyed on the blockchain. If he has provided a collateral for the loan, which should be expected, selling this collateral would also lead to the creation of coins. I think this is an overall viable idea which could be done via smart-contracts.

[amishmanish]

In the OP you raise question about how crypto would adjust to growth and contraction cycles in economy. From what I understand of your analogy to present economic cycle, this is what you have stated:

1. During growth, banks extend more credit allowing availability of currency for things like capital investment, additional wages etc.
2. During contraction, the bad loans get 'written off' resulting in money being destroyed.

I don't understand how the second point is a desirable characteristic for any currency to adopt. Aren't such cycles of credit destruction caused by the banking, politician, business nexus in the first place??

Let's talk about the first case. Lets assume that a country has its own publicly auditable cryptocurrency. It is being mined with a PoW algorithm and you can always expect to have predictable supply available to be added to the pool. This assumes that the reward hasn't trailed off to almost zero yet.

This leaves you ample scope for "planned growth". Planned as not in a planned, socialist economy but planned as in prudent planning about where to allocate the budget rather than simply allot huge amounts to schemes like today that get distributed to private contractors via a complex system of Government sub-contracts. The flow of money in such government handouts is completely obscured and unaccounted. It's as easy to write off a loan as an asset loss to accident or unforeseen incidents.

Contrast this with a scenario where every allocation and fund outgo is publicly available on a block explorer. Every single payment from Government coffers can be traced to it's recipient and approver. Mix in smart-contracts and you could have a publicly available record of what the expenses was made for.

I understand that this will not be an answer if you keep looking at it through the established lens of macroeconomics. Why do we need big money expense to be so obscure and tentaclized that any chance for accountability and auditing is a huge task that is corrected only in hindsight.

[nelsledma]

I think the odds are small, really in a floating and unspecified-based economy, the profit earned is small, each coin here has its own target, and if the target is successful then the gain will get bigger, and every the target is bound to exist, what happens if there is no real limitations .. ?? the possibility that happens is less get the appreciation from the investors, this is my opinion on this matter, thanks

It happens like this, definitely. Everyone coin comes with a different concept and goals. Sometimes they have already market their profit ratios and amounts that at the end of this year, our coin must be having this much of popularity and this big value and with percentage of investment. So the progress is continually controlled and observed and the results are made accordingly.

[tee-rex]

In the OP you raise question about how crypto would adjust to growth and contraction cycles in economy. From what I understand of your analogy to present economic cycle, this is what you have stated:

1. During growth, banks extend more credit allowing availability of currency for things like capital investment, additional wages etc.
2. During contraction, the bad loans get 'written off' resulting in money being destroyed.

I don't understand how the second point is a desirable characteristic for any currency to adopt. Aren't such cycles of credit destruction caused by the banking, politician, business nexus in the first place??

Honestly, I can't say if it is a desirable characteristic or not because I don't really know. I just point it out. The debt shouldn't necessarily get written off as it often happens in real life, though, but that's actually a technicality. If the loaning bank has a collateral, it just sells the collateral and receives the money if that was your point. But even if the loan is returned, the money still gets destroyed because this is how the whole thing about endogenous money works. Credit is money and when it is returned, the money it represents disappears.

Let's talk about the first case. Lets assume that a country has its own publicly auditable cryptocurrency. It is being mined with a PoW algorithm and you can always expect to have predictable supply available to be added to the pool. This assumes that the reward hasn't trailed off to almost zero yet.

This leaves you ample scope for "planned growth". Planned as not in a planned, socialist economy but planned as in prudent planning about where to allocate the budget rather than simply allot huge amounts to schemes like today that get distributed to private contractors via a complex system of Government sub-contracts. The flow of money in such government handouts is completely obscured and unaccounted. It's as easy to write off a loan as an asset loss to accident or unforeseen incidents.

You seem to neglect the fact that you can't predict how the economy in question is going to evolve. The business cycles live on their own, and you can't pull off things like "prudent planning about where to allocate the budget". There is no "planned growth" unless we talk about a planned economy. But we all know where such planning leads.

The road to hell is paved with good intentions too.

[amishmanish]

In the OP you raise question about how crypto would adjust to growth and contraction cycles in economy. From what I understand of your analogy to present economic cycle, this is what you have stated:

1. During growth, banks extend more credit allowing availability of currency for things like capital investment, additional wages etc.
2. During contraction, the bad loans get 'written off' resulting in money being destroyed.

I don't understand how the second point is a desirable characteristic for any currency to adopt. Aren't such cycles of credit destruction caused by the banking, politician, business nexus in the first place??

Honestly, I can't say if it is a desirable characteristic or not because I don't really know. I just point it out. The debt shouldn't necessarily get written off as it often happens in real life, though, but that's actually a technicality. If the loaning bank has a collateral, it just sells the collateral and receives the money if that was your point. But even if the loan is returned, the money still gets destroyed because this is how the whole thing about endogenous money works. Credit is money and when it is returned, the money it represents disappears.

You are right about loaning banks having collaterals, as an example, in the form of land deeds or houses when it's someone in their 20's taking an educational loan. When it comes to the real money out there, the business-men making impossible bets and banks providing them money for their mid-air castles, there are hardly any collaterals to bank on.

This mismanagement and nepotism based judgement in loaning out funds to select businesses is typical of the present system. This is made possible because we accept the point no. 2 we are discussing as an economic certainty. it necessarily needs to happen that the "poor, risk-taking. true-blood capitalist" businessman will eventually lose money when there is a downward cycle needing loan write-offs.

All I am raising a question on is in treating this as a necessity when it seems to me a corruption of the existing system. Why do we have to replicate that in crypto? I am probably not understanding the economics related point you are trying to make and I'd appreciate if you can point me to source on this.
 
On the face of it, the idea to justify money depletion as a method to compensate for bad loans given out by compromised banking entities seems illogical to me.

Let's talk about the first case. Lets assume that a country has its own publicly auditable cryptocurrency. It is being mined with a PoW algorithm and you can always expect to have predictable supply available to be added to the pool. This assumes that the reward hasn't trailed off to almost zero yet.

This leaves you ample scope for "planned growth". Planned as not in a planned, socialist economy but planned as in prudent planning about where to allocate the budget rather than simply allot huge amounts to schemes like today that get distributed to private contractors via a complex system of Government sub-contracts. The flow of money in such government handouts is completely obscured and unaccounted. It's as easy to write off a loan as an asset loss to accident or unforeseen incidents.

You seem to neglect the fact that you can't predict how the economy in question is going to evolve. The business cycles live on their own, and you can't pull off things like "prudent planning about where to allocate the budget". There is no "planned growth" unless we talk about a planned economy. But we all know where such planning leads.

The road to hell is paved with good intentions too.

Your question was about where the increased supply needed should come from. The amount of currency to be made available in any future period is mathematically known in case of bitcoin. I am not saying that we need planned economies.
That's the reason i insisted on "Planned as not in a planned, socialist economy ".

Planning doesn't necessarily have to mean communism. Every government has an yearly budget allocation. When you know the future money availability, you can always decide beforehand where and how to allocate funds to.

[tee-rex]

All I am raising a question on is in treating this as a necessity when it seems to me a corruption of the existing system. Why do we have to replicate that in crypto? I am probably not understanding the economics related point you are trying to make and I'd appreciate if you can point me to source on this.

Source to what, I'm sorry? To the concept of endogenous money and why it is all-important for today's economies? I think a Wikipedia article on this matter would do just fine for a start.
 

On the face of it, the idea to justify money depletion as a method to compensate for bad loans given out by compromised banking entities seems illogical to me.

When a credit is returned, the endogenous money created via credit gets destroyed anyway. Credit itself is the money. When someone borrows money, it is literally created out of thin air. Typically, this is where people start to point a finger, though they don't go further in seeing that the money thus created serves the needs of a growing economy, the primary driver for taking the loan in the first place.

Let's talk about the first case. Lets assume that a country has its own publicly auditable cryptocurrency. It is being mined with a PoW algorithm and you can always expect to have predictable supply available to be added to the pool. This assumes that the reward hasn't trailed off to almost zero yet.

This leaves you ample scope for "planned growth". Planned as not in a planned, socialist economy but planned as in prudent planning about where to allocate the budget rather than simply allot huge amounts to schemes like today that get distributed to private contractors via a complex system of Government sub-contracts. The flow of money in such government handouts is completely obscured and unaccounted. It's as easy to write off a loan as an asset loss to accident or unforeseen incidents.

You seem to neglect the fact that you can't predict how the economy in question is going to evolve. The business cycles live on their own, and you can't pull off things like "prudent planning about where to allocate the budget". There is no "planned growth" unless we talk about a planned economy. But we all know where such planning leads.

The road to hell is paved with good intentions too.

Your question was about where the increased supply needed should come from. The amount of currency to be made available in any future period is mathematically known in case of bitcoin. I am not saying that we need planned economies.

I know that. But in effect it is not much different from a planned economy. In practice, though, it is far worse than the latter because planning takes notice of reality, however distorted or skewed this notice might be, while bitcoin's supply simply doesn't. It is, as you yourself say, a mathematical determinacy.

[amishmanish]

On the face of it, the idea to justify money depletion as a method to compensate for bad loans given out by compromised banking entities seems illogical to me.

When a credit is returned, the endogenous money created via credit gets destroyed anyway. Credit itself is the money. When someone borrows money, it is literally created out of thin air. Typically, this is where people start to point a finger, though they don't go further in seeing that the money thus created serves the needs of a growing economy, the primary driver for taking the loan in the first place.

Banks create money by giving away "credit", a fraction of which they maintain as actual deposits. When we talk about bitcoin, I think this is exactly what people are trying to change. I get your concept about the need to create money out of thin air or make it disappear (lol..why doesn't this sound non-intuitive? oh well, present economic order.. ) to allow for contraction and expansion of economy. My question is why do we need it??

Bitcoin is a potential settlement instrument which can result in sound financial practices without relying on a final arbiter. I wish more economists were talking about it. Have you read this guy who talks about such a settlement system envisaged with bitcoin??

--snip--
In practice, though, it is far worse than the latter because planning takes notice of reality, however distorted or skewed this notice might be, while bitcoin's supply simply doesn't. It is, as you yourself say, a mathematical determinacy.

I will just have to wait and see if the article I linked above gives you any different ideas about this..

[tee-rex]

On the face of it, the idea to justify money depletion as a method to compensate for bad loans given out by compromised banking entities seems illogical to me.

When a credit is returned, the endogenous money created via credit gets destroyed anyway. Credit itself is the money. When someone borrows money, it is literally created out of thin air. Typically, this is where people start to point a finger, though they don't go further in seeing that the money thus created serves the needs of a growing economy, the primary driver for taking the loan in the first place.

Banks create money by giving away "credit", a fraction of which they maintain as actual deposits. When we talk about bitcoin, I think this is exactly what people are trying to change. I get your concept about the need to create money out of thin air or make it disappear (lol..why doesn't this sound non-intuitive? oh well, present economic order.. ) to allow for contraction and expansion of economy. My question is why do we need it??

Banks don't need to keep reserves. It is a very common misconception. People are taught Finance and Banking from the wrong end. They are told that banks accept deposits and then give out loans (while keeping a fraction as reserves) but in reality, in today's fiat economy at least, it works exactly the other way round. Otherwise endogenous money wouldn't be possible.

Bitcoin is a potential settlement instrument which can result in sound financial practices without relying on a final arbiter. I wish more economists were talking about it. Have you read this guy who talks about such a settlement system envisaged with bitcoin??

I generally agree that Bitcoin is "money free of counter-party risk" (as long as it remains properly decentralized) but I don't think that the concept of "sound money" is actually sound for modern economies. One of the reasons why gold had been eventually abandoned as "sound money" was due to its tendency to cause severe economic crises. You can read more about them here.

[mu_enrico]

How feasible is this? If you think it doesn't make sense, then what are your reasons?

I agree with you, it doesn't make sense if it use floating supply (like fiat), however tail emission still might work?!
IMO no algorithm at the moment can do the job of central bank related to supply control, well sophisticated AI might do. But why bother do that if it's just the same as fiat.
Also deflationary mechanism proposed by crypto seems worth to try considering fiat failure.

[vintages]

A floating supply of a cryptocurrency is possible, but it has many disadvantages and likewise some advantages also. If the coin has a steady supply; there is a tendency for the coin to be highly centralized and a huge part of the coin being held by the developers. There is also a possibility of the coins not being transparent and being easily manipulated by whale investors. The advantage there is a possible regulation and maybe a steady price.

[andreijoaquin]

I think supply is really a big issue if we are planning to have a full adaptation of cryptos and consider this as the only currencies available world wide. But the thing is, almost all coins have definite or fix supply which I think developers muct really look into. I agree, we cannot divert into cashless society until this issue is already settled.

[tee-rex]

How feasible is this? If you think it doesn't make sense, then what are your reasons?

I agree with you, it doesn't make sense if it use floating supply (like fiat), however tail emission still might work?!
IMO no algorithm at the moment can do the job of central bank related to supply control, well sophisticated AI might do. But why bother do that if it's just the same as fiat.
Also deflationary mechanism proposed by crypto seems worth to try considering fiat failure.

Actually, truth be told, I think that a floating monetary supply makes perfect sense (if done right, naturally), especially if some cryptocurrency aims at substituting fiat money for real as a genuine, full-fledged means of exchange throughout an economy. It is sort of a must-have feature without which such a cryptocurrency will kill the economy in the blink of an eye. But don't get me wrong, I have nothing against fixed or limited supply. I just want to say that such a currency won't be usable if it is to be used as a complete substitute for fiat in a "stand-alone mode", with no fiat money backing up its use.

[sindikat]

The floating mass of coins will inevitably lead to inflation. In this way, the government takes away our savings. Do you want to have some body that also took away your savings? You little speculators which periodically collapses the markets? No. I don't want bitcoin to become like Fiat.

[yvesp110]

On the face of it, the idea to justify money depletion as a method to compensate for bad loans given out by compromised banking entities seems illogical to me.

When a credit is returned, the endogenous money created via credit gets destroyed anyway. Credit itself is the money. When someone borrows money, it is literally created out of thin air. Typically, this is where people start to point a finger, though they don't go further in seeing that the money thus created serves the needs of a growing economy, the primary driver for taking the loan in the first place.

Banks create money by giving away "credit", a fraction of which they maintain as actual deposits. When we talk about bitcoin, I think this is exactly what people are trying to change. I get your concept about the need to create money out of thin air or make it disappear (lol..why doesn't this sound non-intuitive? oh well, present economic order.. ) to allow for contraction and expansion of economy. My question is why do we need it??

Banks don't need to keep reserves. It is a very common misconception. People are taught Finance and Banking from the wrong end. They are told that banks accept deposits and then give out loans (while keeping a fraction as reserves) but in reality, in today's fiat economy at least, it works exactly the other way round. Otherwise endogenous money wouldn't be possible.

Bitcoin is a potential settlement instrument which can result in sound financial practices without relying on a final arbiter. I wish more economists were talking about it. Have you read this guy who talks about such a settlement system envisaged with bitcoin??

I generally agree that Bitcoin is "money free of counter-party risk" (as long as it remains properly decentralized) but I don't think that the concept of "sound money" is actually sound for modern economies. One of the reasons why gold had been eventually abandoned as "sound money" was due to its tendency to cause severe economic crises. You can read more about them here.

If we talk about the crypto market, then we can only be sure about anything when we have read enough about all these things and that there are certain things which don’t seem the way they are. You need to sit back and study the behavior of the coins and things related to crypto currency to have a better understanding of the things. Only then, you will be able to achieve your goals.