Monero Economy

[AnonyMint]

Can we make it variable?

No way to make it variable. Who would decide? I answered that.

What if population and productivity growth wanes?

If population and productivity growth both diminish globally then we will be in a Dark Age, but some where the productivity will be increasing radically (e.g. Eastern Rome as Western Rome imploded), thus the debasing currency would be applicable where it is most useful.

In the Mad Max imploded economies (e.g. Western Rome, where population fell in Rome from 1.3 million to 30,000), they will be fighting and hoarding gold and so it is impossible to help them with a currency (they wouldn't use it any way and instead will bury their money in the ground thus imploding their economy).

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[FreeTrade]

But if the demand increases faster than the supply of the coin (i.e. the population rises) and or the production of the economy rises (i.e. productivity rises), it could eliminate those costs above because in the former case the price of the coin rises and in the latter case the purchasing power of each coin rises.

If I understand the main thrust of your economic argument - it is that the inflation of monetary supply must keep pace with growth and economic expansion.

I wonder do you accept that the future (perhaps even the present) consists of multiple competing and complimentary cryptocurrencies?

Thus, as new successful cryptocurrencies are introduced, these are a de-facto expansion of the money supply. The money supply is thus determined by the market's rate of acceptance of new cryptocurrencies.

In short, money supply means something different in a world of multiple competing currencies.

[equipoise]

But if the demand increases faster than the supply of the coin (i.e. the population rises) and or the production of the economy rises (i.e. productivity rises), it could eliminate those costs above because in the former case the price of the coin rises and in the latter case the purchasing power of each coin rises.

If I understand the main thrust of your economic argument - it is that the inflation of monetary supply must keep pace with growth and economic expansion.

I wonder do you accept that the future (perhaps even the present) consists of multiple competing and complimentary cryptocurrencies?

Thus, as new successful cryptocurrencies are introduced, these are a de-facto expansion of the money supply. The money supply is thus determined by the market's rate of acceptance of new cryptocurrencies.

In short, money supply means something different in a world of multiple competing currencies.

I was thinking about this lately. It is just one of the self adaptation mechanisms of the cryptocurrency network. There are so many layers of such mechanisms and different aspects. It will be quite interesting to see how those develop in practice.

[HardwarePal]

The point is to have a currency that is both good for hoarding (investing) - liquid - and beneficial for the network to be secure.

What if we use an formula that connects tx fees and a % inflation with the network diff

If total supply = A

Tx fees = X

Block Reward = Y

Network Diff = Z

so we rule out lost coins with something like 0.7% but txfees ( more with wide use ) gets subtracted from the 0.7% in compount interest style and we also add something to the Network diff equation if/when there is spikes in the network.

Im not a mathematician nor a big enough brain to do the exact formula

But I think it might help in a way to have both the lost coin issues solved aswell as miners being happy to secure the network without causing deflation with the inflation %.

[rpietila]

Dear sirs,

I made some calculations on the distribution of XMR balances using the same methodology that I use in BTC wealth distribution calculations. Please refer to the link for methodology.

- I use 1 XMR as the cutoff grade since it is a nice round figure and its value is reasonable to be the lower threshold of what can be considered an investment.
- Other than the cutoff, there are the parameters that specify the:
  * largest holding;
  * number of holders;
  * j-value ("wideness" of the distribution);
  * to which extent power law applies to the high end (increasing the number and share of large holders).

To compose the result, we need to set the parameters. With any coin, especially XMR which is anonymous, it is impossible to know the parameters. So they must be estimated. The laws of statistics and the law of large numbers dictate that the actual holdings between the endpoints do conform to the calculated result, if the endpoints (parameters) are estimated correctly.

Estimate 1:

Parameters:
- Largest holding: 100,000 XMR
- number of holders: 6,800
- j value = 0.58
- power law: no

Results:
10,000 or more: 23 holders
1,000 - 10,000:   435  <=half of the XMR are owned by this group
100 - 1,000:    2,300
10 - 100:    3,000
1 - 10:     1,050.

Questions, comments, what parameters to change in order to get a more realistic calculation?

Some have murmured against the distribution, but nobody has offered any alternative parameters!

- Should I make a more top-heavy one with a smaller number of holders in the lower rungs? Or less top-heavy?
- Should it be wider so that there are more holders in both extremes and less in the middle? Or the opposite?
- Are there 100,000+ holders that I don't know of? (power law = yes)

[cAPSLOCK]

Some have murmured against the distribution, but nobody has offered any alternative parameters!

- Should I make a more top-heavy one with a smaller number of holders in the lower rungs? Or less top-heavy?
- Should it be wider so that there are more holders in both extremes and less in the middle? Or the opposite?
- Are there 100,000+ holders that I don't know of? (power law = yes)

I would be surprised if there were so many as 100k.  The more I think about it the more I would guess your total is probably good, though I would also guess it will be multiplied shortly if the current trend continues.

[rpietila]

Some have murmured against the distribution, but nobody has offered any alternative parameters!

- Should I make a more top-heavy one with a smaller number of holders in the lower rungs? Or less top-heavy?
- Should it be wider so that there are more holders in both extremes and less in the middle? Or the opposite?
- Are there 100,000+ holders that I don't know of? (power law = yes)

I would be surprised if there were so many as 100k.  The more I think about it the more I would guess your total is probably good, though I would also guess it will be multiplied shortly if the current trend continues.

What will be multiplied? The number of holders? If that's the case, the dilution must happen from somewhere --- ahh.. it doesn't - that's why the daily 1% inflation is good, it lets everyone keep their coins and still accommodates new holders!

[superresistant]

Some have murmured against the distribution, but nobody has offered any alternative parameters!
- Should I make a more top-heavy one with a smaller number of holders in the lower rungs? Or less top-heavy?
- Should it be wider so that there are more holders in both extremes and less in the middle? Or the opposite?
- Are there 100,000+ holders that I don't know of? (power law = yes)

I would be surprised if there were so many as 100k.  The more I think about it the more I would guess your total is probably good, though I would also guess it will be multiplied shortly if the current trend continues.

What will be multiplied? The number of holders? If that's the case, the dilution must happen from somewhere --- ahh.. it doesn't - that's why the daily 1% inflation is good, it lets everyone keep their coins and still accommodates new holders!

Is 1% inflation THAT big ?

Why people are so scared ? 1% seems really small when you look at the current block distribution.

[rpietila]

Some have murmured against the distribution, but nobody has offered any alternative parameters!
- Should I make a more top-heavy one with a smaller number of holders in the lower rungs? Or less top-heavy?
- Should it be wider so that there are more holders in both extremes and less in the middle? Or the opposite?
- Are there 100,000+ holders that I don't know of? (power law = yes)

I would be surprised if there were so many as 100k.  The more I think about it the more I would guess your total is probably good, though I would also guess it will be multiplied shortly if the current trend continues.

What will be multiplied? The number of holders? If that's the case, the dilution must happen from somewhere --- ahh.. it doesn't - that's why the daily 1% inflation is good, it lets everyone keep their coins and still accommodates new holders!

Is 1% inflation THAT big ?

Why people are so scared ? 1% seems really small when you look at the current block distribution.

We are talking about the present inflation rate, which is about 1.1% per DAY. But it seems to achieve the goals smoothly - ownership is increasing, without the need to coerce the coins from existing holders (which leads to pump, dump and abandon).

[superresistant]

We are talking about the present inflation rate, which is about 1.1% per DAY. But it seems to achieve the goals smoothly - ownership is increasing, without the need to coerce the coins from existing holders (which leads to pump, dump and abandon).

Right sorry I missed a part of the discussion. You guys go so fast.
Yes the inflation is absorbed pretty well until now.

It is also the rule : if you buy it, you agree with the distribution. Therefore, the inflation is right.

Anyway we'll see how it goes but I'm not worrying too much.

[AnonyMint]

FreeTrade, competing currencies also means if a parameter of your coin is too messed up (e.g. Bitcoin's debasement will decline asymptotically to 0[1]), users could leave for another coin. And there is a research paper that predicts declining debasement is one factor that might cause miners to leave Dogecoin[2].

Rpietila has shown that 5400% annual Debasement (1.1% per DAY) is working to distribute the coin via the normal expected power law distribution of money[3].

Decentralized debasement is the way we efficiently distribute crypto-currency.

Distribution is very important, because Metcalf's Law tells us that usage scales as the square of the number of users. Peter R had even shown that the Bitcoin price is scaling by Metcalf's Law. This is observed fact not just theory.

Dogecoin showed that more liberal distribution works (the community was working very hard to donate and get coins into as many hands as possible). Note there is a research paper that predicts Dogecoin's death due to declining rate of debasement[2].

It is true that most people just spend what ever you give them, e.g. Rpietila often cited the land given to Russians after the fall of Communism then most just sold it and the ownership ended up concentrated again. But this spending process creates the network effects that are the square of the number of spenders. Any one here who understands a little math, understands that something that is scaling by NxN instead N, is scaling (growing) much faster.

I'd prefer to go even higher than 3% to something like 5%, but it seems to turn off myopic investors who don't want to maximize distribution. And the difference between 3% and 5% is only 278% of Metcalf squaring. Whereas the difference between 1% and 3% is 900% network effects growth factor. So seems to me that 3% is the best choice. It also matches the level of population + productivity growth, so if ever it became the dominant currency then it would be well matched for the long-term.

P.S. Using the term 'inflation' where you should be using 'debasement' is an error. Inflation has to do with the price level in the economy, not the money supply and the relationship between the two is complex given by the 4 variables in the Quantity Theory of Money.

[1] Strictly speaking I believe the minimum is 1 Satoshi thus it does concretely reach 0, not asymptotically.

[2] https://bitcointalk.org/index.php?topic=600436.0

[3] A. Dragulescu and V. Yakovenko. Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States.

P.P.S. Xanis perhaps you need some Xanax and then watch this.

[cAPSLOCK]

Rpietila has shown that 5400% annual Debasement (1.1% per DAY) is working to distribute the coin via the normal expected power law distribution of money[3].

Part of the reason it is working is the fact we all understand the emission rate is currently as high as it EVER will be and drops off in an exponential-like curve.

1.1% per day... works for TODAY.  If it were going to be that forever no one would touch this with a 10 foot pole.

[AnonyMint]

Rpietila has shown that 5400% annual Debasement (1.1% per DAY) is working to distribute the coin via the normal expected power law distribution of money[3].

Part of the reason it is working is the fact we all understand the emission rate is currently as high as it EVER will be and drops off in an exponential-like curve.

1.1% per day... works for TODAY.  If it were going to be that forever no one would touch this with a 10 foot pole.

And investors accept it because they understand distribution is necessary to gain adoption and make it worth something via Metcalf's Law.

Coins that stop distribution die (Bitcoin will either die or be morphed with debasement when the G20 government coordination takes it over via the 1 or 2 pools that control it). Gold with its very low rate of distribution has never been used a currency (without additional debasement), not even in Byzantine.

The reason is very simple and due to the power law distribution of money[1]. Investors don't redistribute to spenders because they only spend a small fraction of their net worth. Thus government must step in and redistribute it. Crypto-currency offers the option of decentralized redistribution (that can't be gamed by the power vacuum of democracy). That is the reason I would prefer to go to 5% than 3%, but the investors here are ignorant. That is why I am teaching now.

Naive investors don't understand that there is a symbiosis between investing and spending, you can't have one without the other. Warren Buffet understands this.

Btw, Monero appears to have a very serious fatal flaw (another reason I didn't bother to develop for it, nor buy it). With the distribution rate being so high, it is impossible to bring it down without causing the miners to leave for another coin[2]. If I designed a currency, never would I make the initial distribution so much higher than the long-term. (do you really believe the core developers are so unselfish as they try to paint themselves, of course not!...why did they set the initial debasement rate so high...to get more coins!)

[1] A. Dragulescu and V. Yakovenko. Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States.

[2] https://bitcointalk.org/index.php?topic=600436.0

[rpietila]

If I designed a currency, never would I make the initial distribution so much higher than the long-term.

If the currency starts from zero, there has to be a high initial daily inflation to get it going.

If it does not start from zero, it is called "premine" and I don't buy it and it will die.

[AnonyMint]

If I designed a currency, never would I make the initial distribution so much higher than the long-term.

If the currency starts from zero, there has to be a high initial daily inflation to get it going.

If it does not start from zero, it is called "premine"

That is true but what is the second 6 months debasement for Monero? I will be happy to mea culpa if it is not that high?

Or more specifically is the nominal block reward declining?

and I don't buy it and it will die.

You not buying a coin does not mean a coin will die.

[rpietila]

If I designed a currency, never would I make the initial distribution so much higher than the long-term.

If the currency starts from zero, there has to be a high initial daily inflation to get it going.

If it does not start from zero, it is called "premine"

That is true but what is the second 6 months debasement for Monero? I will be happy to mea culpa if it is not that high?

Or more specifically is the nominal block reward declining?

Yes, nominal is declining. And percentage is rapidly declining. After 12 months the percentage is something like 0.2% per day instead of 1.1% as it is now.

and I don't buy it and it will die.

You not buying a coin does not mean a coin will die.

Seriously   

[AnonyMint]

If I designed a currency, never would I make the initial distribution so much higher than the long-term.

If the currency starts from zero, there has to be a high initial daily inflation to get it going.

If it does not start from zero, it is called "premine"

That is true but what is the second 6 months debasement for Monero? I will be happy to mea culpa if it is not that high?

Or more specifically is the nominal block reward declining?

http://www.monero.cc/index.html#specifications

As you see the block reward is declining. This is the hallmark of dying pump & dump coin like Bitcoin.

[rpietila]

This is the hallmark of dying pump & dump coin like Bitcoin.

You never fail to make my day 

[AnonyMint]

and I don't buy it and it will die.

You not buying a coin does not mean a coin will die.

Seriously  

I think we should test this theory.  

Bitcoin is dying. Look the mining is centralized in 1 or 2 pools. And the funding for mining will die (tx fees being a Tragedy of the Commons). That is a no brainer.

[AnonyMint]

Meanwhile as we fiddle around (which is pissing me off all the infighting and lack of focus), the global gridlock and thus the collapse of monetary velocity is accelerating.

http://armstrongeconomics.com/2014/07/17/russia-threatens-to-collapse-of-the-u-s-financial-system/