Economics on Yacoin YAC

[St.Bit]

I didn't want to bload the dev thread on YAC with economics so I post it here. The following are some of my thoughts on YAC and it's economical features and why it could be huge one time. It could also die, but who knows for sure ...

1. First of all "What is Yacoin":

Yacoin is a POW/POS hybrid with 5% interrest per year. Blockrewards for POW depend on the current hashrate of the network. Unlike other cryptos the hashrate depends not only on the miners currently mining. The so called n-factor increases over time and reduces the hashrates of the network. The same GPU will have less kh/s than it had previously. Once 1Mh/s on YAC was equal to 1Mh/s on LTC, but that's not the case anymore.

This thread is about economics, for tec stuff go to: https://bitcointalk.org/index.php?topic=206577.1400
Free coins can be found f.e. : https://bitcointalk.org/index.php?topic=336574.0;topicseen

Been away for a while and still holding YAC! Can anyone give me an honest opinion on the future of this coin and how widespread its use currently is?

Thanks

It's damm hard to predict how the future of this coin will be, I don't think anyone can predict it. YAC still has the best economical features of any cryptocurrency (that I'm aware of), but that of course doesn't mean it will succeed. Current use for purchases is somewhat non existent besides small gambling and stuff you can do with almost every other crypto.
I think the chart on coinmarketcap.com speaks for the current adaption of it, but I hope this will change.


The following are some of my thoughts on YAC and economics in general.

[1714317307]

1714317307

[St.Bit]

1.1 What is a currency:

In my opinion just PoW or PoS rewards alone have fundamental economical flaws that make a crypto with just one of them unuseable as currency. A currency is used to transfer wealth and doesn't necessary have to be a good storage of wealth. As long as it has at least some value and doesn't change that too rapidly it's fine to use for exchanging goods and services.


The USD is still the best currency of the world although it's a terrible storage for wealth. Untill 1968 one troy ounce gold was fixed at 35USD. Todays price was at 1300USD so it has lost 97% of it's value vs gold since then. Considering the great ammounts of paper gold now in existance it's right to say that one USD has almost lost all of it's real value in the last 50 years. Interest on saving accounts make this less dramatic, but saving acc are still very bad in comparison with real investing.

No mather what investment asset you could have bought in 1968 nearly all of them had increased dramatically in value by now. Inflationrates on consumer and investment goods are 2 different things. Official rates (even if they wouldn't be faked) are based exlusively on consumtion goods and so have no meaningful message for savers.


1.2 Supply and Demand:

Changes in supply or demand result in changes of the price. Usually increasing prices also increase production since it is more lucrative to produce now for higher prices than it was before. This mechanism stabilizes prices if production can be adjusted fast enough.

Price bubbles and their burst only occur when production can't be adjusted fast enough. Every market has limitations on adjusting production, but in fiat currencies that is virtually instant and virtually unlimited. That's what makes fiat so convenient.


1.3 Supply of Bitcoins (and any other PoW only coin)
Bitcoin mining will always produce the same amount of bitcoins it's supposed to. More problematic than no adjustment on the production it also the decrease of production over time. In fact coins mined on yesterday are just a very small fraction of coins traded today.

For someone to buy bitcoins someone else has to give some away. Fast increasing prices also increase the prices a seller would accept as minimum price. This leads to many price bubbles and bursts and make it very hard to use as currency. If bitcoin wouldn't be used as currency it would be worthless ...

POS cryptos face the same problem here, but this problem goes to extreme for them. Without new coins mined independently of coins someone already has there is no objective method for price disvovery. This makes them by far more volatil so even more useless as currency. PoS is a better storage for wealth since it doesn't burn that much energy like f.e. bitcoin does.


1.4 Why PoS/PoW hybrids are different:
A PoW coin with increasing blockrewards would be ideal for price discovery, but who would buy into such. Only additional PoS rewards could compensate for the loss. Otherwise every new mined coin would reduce the wealth of all coins already in existance and people wouldn't choose such currency.

[St.Bit]

2. Yacurrency
Even better than the hybrid mentioned above is YAC's mechanism.

2.1 Price discovery
Blockrewards depend on the hashrate of the network. Higher hash --> lower blockreward.

The higher the price the more miners will mine and the less rewards for one block found. Falling prices will so increase supply from the remaining miners and reduce prices to the point where people had bought all coins newly mined. That's the reason why Yacoin is currently so damm cheap, but that's the real price people are actually willing to pay for.
An overpriced asset could correct -50% from one day to the other, but such thing is useless as currency.

2.1 The n-change:
That's probably the most important innovation of YAC

At fixed dates the n-factor will be increased +1 by the protocoll. An increase by 1 doubles the memory required to mine and so reduces the hashrate of the network by usually more than 50%. Running out of fast memory will reduce your hashrate even stronger so it forces old hardware out of buisiness. This makes it resistant to specialized hardware and developing ASICs for YAC is utopical even at very high prices.

A n-change favours CPU over GPU and private miners over professionals. It's uncertain if YAC will become CPU only one day, but it will always be possible to mine YAC with a standard pc.

[dcl595]

Very interesting, thank you

[azariah]

It's a pretty interesting coin from the technical parameters.

Also quite nice for CPU mining; it's the coin I'm mining on my CPU atm.

Will be nice to see more Yacoin community activity in the next months.

[bitdwarf]

One point worth making is that, on periods of low consumption, the idle coins will generate PoS creating an automatic "economic stimulus", while in periods of high consumption more coins are moving around and never idle long enough to generate Stake blocks, which will decrease inflation automatically cooling down the economy. YAC's 5% PoS (in practice, I would never expect more than 50% of coins idling, or less than 25%, so the real supply inflation would e 2.5% - 1.25% plus mining) seems high enough for this effect to have significance in balancing the economy.

[Beave162]

One point worth making is that, on periods of low consumption, the idle coins will generate PoS creating an automatic "economic stimulus", while in periods of high consumption more coins are moving around and never idle long enough to generate Stake blocks, which will decrease inflation automatically cooling down the economy. YAC's 5% PoS (in practice, I would never expect more than 50% of coins idling, or less than 25%, so the real supply inflation would e 2.5% - 1.25% plus mining) seems high enough for this effect to have significance in balancing the economy.

Good point about the 'real' proof of stake.  Let's also remember the deflationwith transaction fees.

But when it comes to the 'velocity' of money, wouldn't you want the opposite effect?  VM=nT where V is velocity, M is money supply, and nT is nominal value of aggregate transactions (good, services)... So with bitcoin, once it reaches the total supply limit, as bitcoins are used more (velocity), the more value is given to the transactions which is 'stored' in the value of each bitcoin as the amount of 'stuff' you can get with each bitcoin.  Thus, spending is encouraged in high production times and savings are encouraged in low production times.  With yacoin, isn't it the opposite because of how proof of stake works? ...?  Inflation (M increase) occurs in a stagnant economy (V decrease) which makes people think the value of the currency (nT) increases.  Thus, the value of the currency is determined by the money supply and not the velocity of money, which encourages more inflation and not real production.  Do I have this confused?

It seems like the coin has built-in Keynesian theory mechanics.

[bitdwarf]

It seems like the coin has built-in Keynesian theory mechanics.

I've been trying hard not to say the 'K' word.

[Beave162]

I could be completely wrong.  Bottom-line it is all about the most efficient allocation of resources right? 

I think you can say that the velocity of POS coins right now is very low. 

[St.Bit]

It seems like the coin has built-in Keynesian theory mechanics.

I always asked myself if this was planned by Pocopoco or just a coincidence.

My first contact with YAC was a bit after WM took over development so I never got in contact with him. Given his lack of involvement I thought he just trew some new ideas at YAC and those just happend to have some great economical properties on their own.

I took me a while to see how great these work together and that the parameters (initial n-factor, PoS rewards,...) are actually too good to be just choosen arbitrary.

[El Dude]

yacoin is the stupidest name i ever heard

[maxsolnc]

yacoin is the stupidest name i ever heard

Your messages are really aggressive, take it easy