EnCoin Proposal v4.0 - scads of technical details - now with a WIKI!

[Red]

Encoin is the opposite of Bitcoin. If you like the idea of a fixed number of coins that grow in value based on population growth, you will hate Encoin. There is no early adopter premium in Encoin. Nor does ENC grow in value based upon increases in the trading economy nor number of users.

Whatever scheme you come up with that regulates the production cost will have no effect on the value, the only thing that will remain stable is hash power for a given electricity cost.

Supply is constrained by generation cost bounded by trading value. It doesn't make sense to spend $X in electricity to generate an ENC when it is worth $<X in trade. If the demand for ENC increases then 1 ENC will be worth $>X in trade. This will stimulate new minting which brings the value back down to $X.

That makes no sense at all, if there is one thing you dont need or even want to be stable its hashing power. You want it to grow with the value of the block chain.

The transaction record is not secured by hashing power. There is no concept of a hidden 51% attack that can change history.

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[Etlase2]

but from what little I read, you seem to think production cost has anything to do with price? BTC price doesnt adjust to mining cost, its the opposite.

Are you referring to my post just above? because this "The more people that want bitcoins, the more they cost to create." was like the 4th sentence.

Whatever scheme you come up with that regulates the production cost will have no effect on the value,

This is based on a bitcoin-centric view. When demand increases, prices will rise, this is obvious and I think we can agree here. However, with encoin, more people will mint coins to meet that demand so that the price will level back off to being near its cost to produce plus a return on investment in the computer-hours it takes to produce coins.

the only thing that will remain stable is hash power for a given electricity cost.

Hash power per cost in electricity is most definitely not stable, and that's why there are two different ways encoin will compensate for it.

That makes no sense at all, if there is one thing you dont need or even want to be stable its hashing power. You want it to grow with the value of the block chain.

Hashing does not secure the block chain. There is no block chain. Security is achieved through consensus based on reputation.

And if you regulate neither supply nor demand in, there is nothing to prevent the exact same excessive speculation that is causing btc volatility.

A regulated and difficult cost to produce makes supply inherently difficult. No one will be able to monopolize supply without putting in a lot of real-world value. And even then, the monopoly is highly temporary as the price will rise and encourage more people to make coins. Any speculation would be in the form of currency arbitration which is a common practice among real-world currencies, and in fact helps currencies stay stable relative to each other.

What about those that have free electricity or steal coins or steal electricity ( broken power meter BS ) etc. How will EnCoin sort that aspect out ?

Free electricity is never free. Someone is always paying for it and that is all that really matters. Effort was made to produce the coins. And encoin discourages high-end rigs by using a payout structure. No matter how awesome your 8x gpu rig is, you still have a maximum award per block and a few other rules that basically means you want to be only as efficient as necessary. Being too far above everyone else just means you're wasting electricity. You could divide up your rig into multiple peers on the network, but you still have to account for the high initial costs of these rigs when the profit per month will be quite low. You are no longer competing for a fixed amount of money, a thousand other people could join the supplynet when the price is high and take all of your hopeful profit right out from under you.

[Red]

With electrical costs varying from free/stolen/unmetered to as low as $0.01 per kWh up to $0.48 per kWh any price point selected results in massive profit for some and non-viability for others.

The system is bounded by the most efficient producer in terms of electrical efficiency (times) electric costs. So those using efficient hardware in low energy cost areas will run other "minters" out of minting.

I can't answer the "what if electricity prices tend toward zero question." In the GEM system I laid out that contingency requires manual intervention. EnCoin handles it differently. Etlase2 will have to explain his concepts there.

At least existing systems allow alternatives to compete.  For example Venezuala has ultra low energy costs (subsidized) but highly developed countries like Finland have high standards of living meaning that FPGA are more viable alternative. 

All alternatives compete, but they have the same bound, electrical efficiency (times) electric costs. Personally, I don't care who creates the new coins. I only care that they get created in a timely manner.

However, unlike Bitcoin, minting isn't a continuously running process. Minters will mint until the trade value of the coins is below their electrical cost to create them. Then they stop. When the trade value of the coins increases again, all minters race to create new coins until falling values force them to stop again.

[Etlase2]

Or large enterprise setting up massive farm in an ultra low energy cost country?
What about the effects of falling energy prices?  
Say a breakthrough in solar power bringing cost below current grid parity?

Remember that peers are randomly assigned to SNGs:

TD-9) Mint Block Awards
A Mint Block is awarded to a SNG when a peer finds a hash value that beats a target hash value for a given problem. Peers are then paid out based on how close they were to the winning value.

To encourage SupplyNet peers to use “honest” hardware (everyday GPUs), there are five restrictions to a Mint Block Award:

1.   To be paid in a MB, a peer must have found a minimum target value (TBD – probably 1/3rd or 1/4th of the target value). This prevents very efficient, low-output machines such as FPGAs or ASICs from making it in to most blocks.
2.   A minimum of 20 peers must be paid out. A supercomputer/botnet/4x GPU system will have to wait for other peers before submitting a block. It will also be subsidizing those other peers as the payout structure is fixed.
3.   The payout structure is one where 65% is awarded to the top 50%, 35% is awarded to the bottom 50%. Individual payout structures within those halves is TBD, but 1st place will receive a bonus to incentivize competition.
4.   A minimum amount of time must pass before a SNG may submit a winning MB (likely 1/3rd of the average time to create a block based on the last 10 CCPs – see TD-1). This prevents a supercomputer from being able to adjust the difficulty too much (see ATK-1). It also allows more peers time to find a minimum target value.
5.   If a maximum amount of time (in coin-hours, likely 3 times the average) has passed before submitting a block, the coin award will be reduced.


Farms will have a massive set-up cost that will take many, many years to break even. Maintenance, etc. means it may never be insanely profitable. Regular GPUs will keep upping the difficulty over time, so this server farm will have to keep upgrading to keep up. SupplyNet members need to take part in the network as well, so if a server farm is split among 100 SNGs, it must send/receive 100x the data. Perhaps this will never be a big concern, but it might be.

When the award is dropped as I described in TD-2 on the last page, more efficient miners can realize a greater profit by increasing their output. They can "game" the system by not raising their output, but then they are reducing their potential profit. And everyone has to agree to game the system this way, or the difficulty will still rise.

With electrical costs varying from free/stolen/unmetered to as low as $0.01 per kWh up to $0.48 per kWh any price point selected results in massive profit for some and non-viability for others.

At least existing systems allow alternatives to compete.  For example Venezuala has ultra low energy costs (subsidized) but highly developed countries like Finland have high standards of living meaning that FPGA are more viable alternative. 

*shrug* This is really no different from bitcoin. If demand is too high for cheap electric economies to keep up with, then the opportunity opens for those who pay more for electricity. It really is not intended to be a profiting venture, it is meant to pay minters for their services and allow those who want to store wealth without worrying about the machinations of fiat the ability to do so. As well as being a nifty way to send money wherever you want.

[Red]

I said a few things to help people understand basic concepts. They might not exactly agree with your latest proposal. I suggest you discuss the two concept below based on how Encoin aspires to be different from my rudimentary GEM principles.

Hash power per cost in electricity is most definitely not stable, and that's why there are two different ways encoin will compensate for it.

This was difficult for me to understand because you mixed intrinsic inflation (variances from Koomey's law) from extrinsic inflation (variances in demand).

Can you explain the basics?

encoin discourages high-end rigs by using a payout structure. No matter how awesome your 8x gpu rig is, you still have a maximum award per block and a few other rules that basically means you want to be only as efficient as necessary.

You care more about leveling the playing field than I do. Perhaps you should explain why you do. And how you compensate against efficiency.

[DeathAndTaxes]

Wait

1) Not rewarding early adopters is the stupidest thing I ever heard.  Think Intel would have took the massive risk in making first personal computer microprocessor had it not been for at least the potential to be rewarded for the massive risk they were taking.

2) How exactly are you going to know electrical cost and efficiency of every miner? 

[Red]

1) Not rewarding early adopters is the stupidest thing I ever heard.  Think Intel would have took the massive risk in making first personal computer microprocessor had it not been for at least the potential to be rewarded for the massive risk they were taking.

Yeah, Encoin is different like that. People are rewarded for producing/trading goods and services. The coins are designed just to facilitate this exchange. They are not designed to be goods themselves.

2) How exactly are you going to know electrical cost and efficiency of every miner? 

Encoin doesn't need to collect or even try to deduce this information. The system starts from a wild-ass-guess (WAG) as to what the difficulty should be. Then it stabilizes on an ENC = X kwh relationship based upon the most efficient of competing minters. After that point it should trade in a narrow range.

[DeathAndTaxes]

How do you know who is the most efficient miner, what their efficiency is, and what their electrical costs are?

Why would an early adopter take the massive risk of ending up with worthless alt-coin for no reward?  Or no reward that provides appropriate compensation for the risk taken?  Had Satoshi done that likely we wouldn't even have Bitcoin (as flawed as it may be) right now.  At some point a project need to get to the point where rubber meets the road and risk needs to be compensated.

I was mildly interested in the idea but the more I learn the more it seems to be some socialist fantasy land where people take risk for no reward and nobody is able to undercut competitors or profit too much. 

[Etlase2]

Wait

1) Not rewarding early adopters is the stupidest thing I ever heard.  Think Intel would have took the massive risk in making first personal computer microprocessor had it not been for at least the potential to be rewarded for the massive risk they were taking.

Actually, early adopters will be rewarded. How, exactly, is up for debate, but I do have a discussion point on it.

DP-4) Encouraging Early Adopting
With ENC being difficult to create from the start (compared to Bitcoin), several options exist to encourage people to join the Network:

•   Low Initial Difficulty: By setting the initial difficulty on the low side, users who join within the first 10 CCPs will be rewarded with more coins while the difficulty catches up with standard hardware. The effect of these early coins will be continually reduced as more people join the Network.
•   Donations: Because of the low initial difficulty, it is hoped that users will choose to donate to services such as a “faucet” similar to Bitcoin, as well as for bounties to encourage people to develop products necessary for the advanced functioning of the Network. All donations will be voluntary.
•   Beta Testing Payment: As the Network is quite complex, many areas will have to be beta tested prior to official release. Since there is no block chain to build from, initial accounts can be given a strict, set amount as payment for beta testing the software.
•   Merged Mining with Bitcoin: Assuming the SHA2(SHA2()) hash function is used for creating coins, users of the Network could be paid in both ENC and BTC for the same work. If the Network begins this way, it will be intended from the start to eventually break away from merged mining to let the Network stand on its own. But in the beginning, this could absolve almost all risk in switching to ENC.


Merged mining is certainly the biggest boon. And low initial difficulty is not like the low initial difficulty of bitcoin, it will be nowhere near the same order of magnitude. It will be a starting point where the network will work to get to a stable cost to produce. I can't predict what type of hardware or how efficient that hardware will be from the start anyway.

2) How exactly are you going to know electrical cost and efficiency of every miner?  

I don't need to know it. The market will figure it out. The network will do its best based on a lot of rules to encourage honest competition, and from there supply/demand/etc. takes over.

This was covered in one of the other threads, but if the entire coin-producing part of the network decided to collude to lower their output in an attempt to keep difficulty down, all it takes is one person to click over to the calculator section of the software to determine that they can mint coins at a huge profit based on their average GPU. You can't hide the efficiency of the network. It doesn't matter what an individual miner can or can't do, it matters what the network as a whole does.

This was difficult for me to understand because you mixed intrinsic inflation (variances from Koomey's law) from extrinsic inflation (variances in demand).

Can you explain the basics?

Actually, I was referring to koomey's and moore's laws. Most of the "kilowatt" coins only cover moore's law.

You care more about leveling the playing field than I do. Perhaps you should explain why you do. And how you compensate against efficiency.

Because some of the rules governing difficulty and awards are based on the assumption that an average peer is one person with an average computer. I don't want botnets or supercomputers to be able to monopolize the supply or increase the difficulty for everybody else. In fact, I want to make it unprofitable for them to do so. I can't guarantee that, but I can make it a lot more difficult with design decisions. I believe it is better for the adoption of the currency if anyone can "get into the game" and make a few coins if they want to. It shouldn't be a constant competition of who can spend more money to make a faster rig to take coins away from you like it is with bitcoin. I don't want there to be a $1000 start up cost just to be competitive. That is my opinion, and it is reflected in those design decisions.

[DeathAndTaxes]

I don't need to know it. The market will figure it out. The network will do its best based on a lot of rules to encourage honest competition, and from there supply/demand/etc. takes over.

This was covered in one of the other threads, but if the entire coin-producing part of the network decided to collude to lower their output in an attempt to keep difficulty down, all it takes is one person to click over to the calculator section of the software to determine that they can mint coins at a huge profit based on their average GPU. You can't hide the efficiency of the network.

So it is nothing different than Bitcoin.   If efficiency is based on the network average than those who can undercut the network can reap massive rewards.  For example even at $3  Bitcoin is massively profitable (compared to conventional businesses) if you can find a location that has say $0.04 per kWh or less. 

[Red]

How do you know who is the most efficient miner, what their efficiency is, and what their electrical costs are?

You never do. You simply take all the available information and make a wild-ass-starting guess. By for example saying the most efficient advertised GPU (etc) miner is X hash/joule. The most lowest known electrical cost where miners tend to be is Y. We want 1 ENC to be in the $Z range so (do a little math) the starting difficulty is (WAG).

At that point minters will mint what they want and stop when they want. If they want to mint ENC for $2 and trade them for $1 we don't try to stop them. However, the electric company eventually will.

Why would an early adopter take the massive risk of ending up with worthless alt-coin for no reward?  Or no reward that provides appropriate compensation for the risk taken?  Had Satoshi done that likely we wouldn't even have Bitcoin (as flawed as it may be) right now.  At some point a project need to get to the point where rubber meets the road and risk needs to be compensated.

There really is no "massive risk". The idea is that merchants want to trade in digital money. People want to trade in digital money. How many digital coins do we need? It's a matter of external value and coin velocity. The faster the coins circulate the fewer total coins are needed. If the external value to be traded exceeds the plausible velocity of the existing coins, the coin value rises. This stimulates the creation of new coins.

I was mildly interested in the idea but the more I learn the more it seems to be some socialist fantasy land where people take risk for no reward and nobody is able to undercut competitors or profit too much. 

No one has to take the massive risk of generating 100,000 ENC worth of coins up front. Minters can start by generating 100 ENC. If there is a growing demand, they generate more.

I have some difference from Etlase2 on how cutthroat the competition should be. I think the most efficient should win. He likes to spread the wealth around a little more. He can explain why.

[Etlase2]

How do you know who is the most efficient miner, what their efficiency is, and what their electrical costs are?

Why would an early adopter take the massive risk of ending up with worthless alt-coin for no reward?  Or no reward that provides appropriate compensation for the risk taken?  Had Satoshi done that likely we wouldn't even have Bitcoin (as flawed as it may be) right now.  At some point a project need to get to the point where rubber meets the road and risk needs to be compensated.

Give me a chance to respond, bro. See the other post, obviously, but to touch on bitcoin, yes bitcoin probably wouldn't be as popular without the built-in pyramid. However, the advantages of a cryptocurrency exist regardless of that pyramid, and I believe with time, people will see that these advantages are very real. And encoin will attract a different group, one that really wants separation from government-controlled fiat to a monetary system that is controlled by the people. Encoin does not need to grow to maintain value. It can grow as slowly or as quickly as necessary.

I was mildly interested in the idea but the more I learn the more it seems to be some socialist fantasy land where people take risk for no reward and nobody is able to undercut competitors or profit too much. 

Sorry but this is the bitcoin mentality. There will be a profit for those who want to mint coins, but it's not going to be huge. It's not going to be in the thousands of percent returns. This is highly unrealistic for turning on a computer and making it do stuff. And it will have a huge advantage over fiat by being immune to government inflation. And it will have a huge advantage over bitcoin by having a stable value. If you don't want or don't like a stable value and would rather play a speculative game with an imaginary commodity, by all means continue with bitcoin. If you want a currency based on a stable medium that is backed by a relatively constant cost to produce, then perhaps you would be interested in encoin. There will still be ways to make a profit on the currency itself, it just won't be like it is with bitcoin, it will be like a more traditional currency. Except that you earn interest on transaction fees in the network, and you earn interest by being immune to fiat inflation.

So it is nothing different than Bitcoin.   If efficiency is based on the network average than those who can undercut the network can reap massive rewards.  For example even at $3  Bitcoin is massively profitable (compared to conventional businesses) if you can find a location that has say $0.04 per kWh or less.  

"Massive rewards" being the tune of a couple dollars per month. I can't control the price of electricity. But hashing power still costs a very significant amount of money. If you want to build that server farm, you have to plunk down the cash for those GPUs or whatever hardware you use. It will take months or years to begin to see returns. That's why I want the everyday GPU to set the bar. Something that is already a sunk cost in a computer. When people buy or upgrade their computers, they are generally not doing it so that they can mint coins faster. They are using it for its intended purpose of having a better computer. Someone who builds a rig or operation intending to profit on the coins must first pay off the costs associated with that operation. This could take many, many years, and in the mean time those upgrading their computers for fun will set the bar higher, lowering the profit margin of existing operations.

[Etlase2]

Risk is relative to investment.  If you don't think the risk of failure in a new crypto-currency isn't high then you are just delusional.  It doesn't matter if someone invests $10K in hardware or $100 in hardware the risk on that capital is similar and the reward should be relative to the risk.  If not then why not just wait.  Just wait for someone else to take the risk and when the economy magically springs up you can make just as much as the early adopter with substantially less risk...... except the economy will never spring up.

Merged mining does cover most of the risk. This is a few posts up. And the risk is a few dollars of electricity from an average computer. Just like the initial bitcoin adopters. You just won't see 3 million % ROIs. 300%? Well within reason. And that is on top of being awarded bitcoins as well. The one who takes the real risk is the one who designs the software and potentially wastes hundreds of hours of coding time. Let's not blow a few dollars of electricity out of proportion.

[P4man]

Can you give the executive summary on how you expect to secure the network if not through hashpower? "Consensus and reputation" sounds vague and inadequate.

Also, you seem to suggest a supercomputer cluster and a PC are equals in your network when it comes to minting. Whats there to prevent a supercomputer cluster owner (or more likely, a botnet operator)  to present himself as 100.000 individual users? What would that do to your "consensus and reputation" model?

[Etlase2]

To join the tradenet and partake in securing the network, 30 reputation points are required.
This initial 30 points can be gained in two ways: making at least 2 mint blocks per day in a supplynet group to gain 0.25 permanent points (120 days assuming each node is powerful enough to meet the minimum requirement), or having an account balance of 1,000 ENC to get 30 current points. The balance can't go below 1,000 ENC until you get 30 permanent points or the current points will be removed. So the money can't just be transferred around.

Once 30 points are reached, the only way to gain more permanent points is by receiving transactions and making a transaction block (being randomly selected out of 8,730 possibilities per day) that is later confirmed by the rest of the network reputation. 30 points is the starting reputation required for confirming transactions, so the signature weight that it has is worth 0. Since the transaction selection is random and there will be some checks for honest behavior (e.g. not getting transactions only after producing a transaction block), if all of those nodes had 1,000 enc, they would all have to be receiving transactions and associated fees as well before they would start gaining real reputation.

So, say there are 100k merchants and 100k botnets join. First they need 100 million ENC or they need to spend 15 hours or so a day working on mint blocks for 120 days, or roughly $21.6 million in electricity ($0.12/kwh assumed).

Say the average reputation of the existing 100k merchants is 60. To gain reputation between 30-60, a minimum of 5 ENC is required in tx fees to gain 0.25 reputation per day, and it is only gained if they produce a valid transaction block. Since 25% will be refunded of that 5 ENC, it costs 3.75 ENC per node per day for a possible 2,182.5 reputation per day, but they are only getting half of that because the 100k honest nodes are getting the other half of transaction blocks. So 3.75x100k = 375,000 ENC to gain 1,091.25 reputation per day. Since 100k x 30 (60-30 for the signature weight) = 3 million, 3 million / 1,091.25 = 2,749 days to equal the amount of reputation currently in the network, assuming it never increases among honest nodes. So a cost of 1.031 billion (375kx2749) ENC to equal the reputation and be able to fork the network.

And all they can do is fork. They can't reverse transactions because the honest nodes will not approve it and the cloudnet peers will only transfer honest data. They could take over the cloudnet as well, but there is no 50% in the cloudnet, if there are honest nodes honest data will eventually get around. If they do fork the network, the client will see that only around half of the total reputation signed the last consensus block so they are easily aware that something has gone awry. They can't change any of the underlying network structure (such as awards or whatever) because the clients know that this data is invalid. They could change account balances, but when the client sees that a fork has happened via reputation, they can ask for the transaction log and see that one side of the fork doesn't add up.

The only thing that can really be accomplished is the delaying of transactions. There will be backups to backups to backups of who is supposed to create a transaction block so that too much time doesn't pass.

Anyone who doesn't make a valid transaction block will lose a lot of reputation, or if they make an invalid block they will go very negative and their account balance will be either inaccessible or simply destroyed/redistributed.

TD-3, TD-5, TD-6, ATK-2, and ATK-3 covers these details in the proposal.

In essence, unless you work on creating a large chunk of the coins in existence, you won't be able to subvert the reputation.

[bulanula]

Sounds good. Please let me know when it launches so I can get in early and pump and dump. Thank you !

My point : how will you prevent pump and dump and early adopters getting loaded ?

[Etlase2]

Sounds good. Please let me know when it launches so I can get in early and pump and dump. Thank you !

My point : how will you prevent pump and dump and early adopters getting loaded ?

By not subscribing to the bitcoin formula of coin distribution.


Thanks to SgtSpike of www.bitcoinforums.net, there is now an EnCoin Wiki here: http://encoin.bitcoinforums.net/doku.php?id=start
Hopefully this will make the proposal easier to digest. Please let me know where improvements can be made or if there are any broken links.

[Etlase2]

I have some difference from Etlase2 on how cutthroat the competition should be. I think the most efficient should win. He likes to spread the wealth around a little more. He can explain why.

I want to address this specifically because I have been thinking about it and have come to the conclusion that your system for GEM is really no different from mine, if it works by simply basing the award amount on hash power (divided by koomey's law and such).

All the payout structure and managed pools do are normalize distribution and prevent or heavily limit the ability of server farms to make a profit. But really, server farms were never going to profit on either of these systems because they are not taking anything away from others as in a bitcoin-like system. However, the EnCoin system does make it much more difficult for a botnet to attempt to profit off of it. And I do think that is a worthy goal. Pools need to be implemented in one way or another and I prefer the slightly more bandwidth-heavy option of having the network regulate it and using it as a basis for a minimum entry requirement to the reputable tradenet.

4x GPU rigs will still be able to make more profit by using multiple nodes (after they pay off the totally useless 3 extra GPUs that is), but because the profit per coin will always be rather low, there is no reason to encourage it. Since difficulty in EnCoin is based on a per-mint block basis, 4x GPU rigs would insensibly increase the difficulty. It would eventually hurt all 4x GPU rigs because if they are the only ones profiting, the difficulty is going to increase so that a 4x GPU rig is required just to mint coins. With the way I now have the system described, if a 4x GPU finds a winning hash before 20 other members have found a minimum hash, it is just going to idle anyway so there really is no unwarranted distribution.

So rather than "spreading the wealth" it is really just "keeping difficulty sane." More efficient machines will still win.



ALSO: minor update to the wiki--reputation is awarded based on the previous consensus block transactions and fees, this way it is impossible for someone to game the reputation by only sending txs around after they get a transaction block. also, came up with an idea to reduce supplynet join spam (possible attack) by requiring using a recent transaction block hash and finding a 1/20th difficulty (or some significant amount) solution before it will be transferred to the tradenet.

edit: I just came up with a crazy idea that would help distribute more coins for less electricity. I'm still kinda working on it, but if a new supplynet group is formed and makes a minimum number of new mint blocks (at least 4 or so) within 1 or 2 days, all mint blocks from existing SNGs made during that 1 to 2 day period could get a 1 coin bonus. I'd have to make sure it couldn't be gamed, but I think that's possible.

I still haven't worked out exactly what data mint blocks will use as seed data, so this could affect things.

[FreeTrade]

I haven't read all the details, so I'm open to correction but my understanding is that ENC would effectively have a maximum price.

Now if I owned ENC and it was currently trading at its maximum price, I would sell them. So would everyone else. This kind of thinking would be re-inforcing, driving the price down either to nothing and collapse.  Holding ENC would seem to have downside, with no upside.

What am I missing?

[Etlase2]

Since ENC is actually intended to be a currency, everyone selling would be no more likely (barring unusual circumstances such as the cryptography being weakened/broken) than a regular currency.

There is no "maximum price" if you mean in terms of fiat. As fiat is inflated by the will of the banks and the governments, more fiat will exist to buy (relatively limited) ENC thus increasing demand on a fiat->ENC basis. If electricity price remains the same in the face of fiat inflation (due to government regulation, for example), competition will increase to see who can make coins faster to make the interim profit on the market. This causes the difficulty to rise accordingly. If electricity price increases along with inflation (which it eventually will), then the fiat value to create ENC remains the same.

The goal is to provide a more stable purchasing power than fiat. It won't be perfect, but it will definitely be better, and inflation is controlled by the people, not the central bank. No government agency can bail out those who choose banks with a 10% reserve. And that inflation goes TO the people, not the banks.

And the whole "1 enc costs about 1 enc to produce" is ambiguous on purpose. No one person can determine what an average ENC cost to produce, they can only see what it would cost them to produce and figure out whether or not it is profitable. If cheap electric economies cannot keep up with demand, more expensive electric economies have an opportunity to step in.

Other properties create demand such as requiring merchants to keep a certain balance of ENC to attain higher levels of transaction fee refunds. Any tx fees not refunded are split up as interest among all holders of ENC proportionally. Plus the fact that creating coins will always be computationally and electrically difficult. No one can hoard cheap coins from the start, or even if that were possible, coins can be created to fill the void in the supply and those hoarding would lose value by not selling.