rpietila Altcoin Observer

[Johnny Mnemonic]

What I'm suggesting basically means the same hardware will yield the same profit whether it's used for mining now or 10 years from now, because every contributed hash will always have the same return over time (CPU mineable forever?). I'm guessing this would also reduce the profit incentive for special hardware manufacturing.

I don't get it. How does manufacturing an ASIC that hashes 1000x more efficiently than a CPU not have a high profit incentive if rewards are tied to hashes?

I'm assuming there would be no increased competition to "win" blocks if the same asic is just as profitable today as it will be tomorrow (ignoring speculative coin value). If the hardware race is truly a product of bitcoin's manufactured scarcity (a growing network competing for a decreasing reward), then assigning a fixed value to every hash would remove scarcity from the equation. More hashes is still better, but there's no more race to dominate the network.

However, I'm simply thinking out loud and could be completely wrong about everything.

[rpietila]

My newest thoughts about monetary economics, plus exhortation to find a new initial coin distribution paradigm.

I believe that:
- coin generation schedule should take into account the size of the economy;
- it is not necessary to waste 100% of the value of the new coins as energy - that was necessary in gold era because trustless generation could not be otherwise maintained;
- it might be possible to find a way to distribute this value trustlessly in a way that enhances the economy and adoption;
- none of the current POS are in a right track (but I am glad to be proven wrong!  ).

[devphp]

- none of the current POS are in a right track (but I am glad to be proven wrong!  ).

You seem to be overall a nice guy, but you're wrong about this one

[rpietila]

- none of the current POS are in a right track (but I am glad to be proven wrong!  ).

You seem to be overall a nice guy, but you're wrong about this one

Well this is the place to discuss about it. Sorry that I always want the people to explain it to me, instead of me going to the source.

But awaiting the explanation..

[devphp]

...awaiting the explanation..

I don't think I can explain, it's a clash of ideologies. In that kind of opposition verbal arguments, which there's been no lack of recently, just don't work. There is a reason they made the "A picture is worth a thousand words" proverb, because sometimes you have to see it to believe.

[yogibaer]

My newest thoughts about monetary economics, plus exhortation to find a new initial coin distribution paradigm.

I believe that:
- coin generation schedule should take into account the size of the economy;

Is there an economy behind BTC or any altcoins? Altcoins are bound to BTC and BTC is bound to the USD. But I never heard a company is producing and selling their goods for a fixed BTC price. Everyone still calculates in fixed $ prices and adjusts BTC prices every minute/hour/day.

[rpietila]

...awaiting the explanation..

I don't think I can explain, it's a clash of ideologies. In that kind of opposition verbal arguments, which there's been no lack of recently, just don't work. There is a reason they made the "A picture is worth a thousand words" proverb, because sometimes you have to see it to believe.

Nah just pick your favorite POS and try to articulate. I don't mind pictures either. Without any way to convince that you are doing something great, the chances that anyone will buy it with significant value are slim.

[rpietila]

- coin generation schedule should take into account the size of the economy;

Is there an economy behind BTC or any altcoins? Altcoins are bound to BTC and BTC is bound to the USD. But I never heard a company is producing and selling their goods for a fixed BTC price. Everyone still calculates in fixed $ prices and adjusts BTC prices every minute/hour/day.
[/quote]

Luxembourg is typically considered a state, yet its economy is 75% connected to the neighboring states. Therefore it has no economy?

You would have to define quite strenuously what an economy is and is not.

One way to go is attributes of money:

- in the transactions, Bitcoin is typically quite minuscule % of even those who use it
- in the unit of account, quite many use it internally, but things priced in bitcoins are rather few (Malla event was priced in bitcoins and made a huge loss due to exch fluctuation and cost being in fiat)
- in the store of value, the Bitcoin heavy users store most of their value in Bitcoins.

Alts similarly, but to a smaller global degree of course, since all alts combined do not match 10% of BTC.

[devphp]

Nah just pick your favorite POS and try to articulate. I don't mind pictures either. Without any way to convince that you are doing something great, the chances that anyone will buy it with significant value are slim.

Well, here is one way to articulate it.

The only real driver of demand for a currency not backed by unique tangible properties (all cryptos fall under that category, PoW and PoS) is when something unique can be purchased for that currency and that currency only. That is the key to success. Why is USD in such great demand? Because you need it to buy oil, no modern economy can operate without oil. Create unique use cases that others don't have and you're ahead of others, but not for long if you stop creating those unique use cases. Algorithms, inflation rates, proof-of-xxx models are not significant. What really matters is what you can use it for. If you think of unique use cases for various cryptos, you may come to interesting conclusions. But you need to try to use various cryptos (PoW, PoS) to be able to appreciate their pros and cons and envisage their potential.

I won't pick one PoS, you know which PoS is ahead of others at this point. This can change, but the concept of PoS is here to stay as long as the concept of crypto currencies in general survives.

[rpietila]

Nah just pick your favorite POS and try to articulate. I don't mind pictures either. Without any way to convince that you are doing something great, the chances that anyone will buy it with significant value are slim.

Well, here is one way to articulate it.

The only real driver of demand for a currency not backed by unique tangible properties (all cryptos fall under that category, PoW and PoS) is when something unique can be purchased for that currency and that currency only. That is the key to success. Why is USD in such great demand? Because you need it to buy oil, no modern economy can operate without oil. Create unique use cases that others don't have and you're ahead of others, but not for long if you stop creating those unique use cases. Algorithms, inflation rates, proof-of-xxx models are not significant. What really matters is what you can use it for. If you think of unique use cases for various cryptos, you may come to interesting conclusions. But you need to try to use various cryptos (PoW, PoS) to be able to appreciate their pros and cons and envisage their potential.

I won't pick one PoS, you know which PoS is ahead of others at this point. This can change, but the concept of PoS is here to stay as long as the concept of crypto currencies in general survives.

Of course I understand that you are hard pressed with time, but that answer seems very focused on one aspect of the economy. As well I could have said that the hoarding is the only thing that gives value to anything (absent debt money of course which is very insidious, since the unfulfillable requirement to pay back (= debt slavery) gives them their value). If there is no interest in anyone to hoard (save) in your currency, even the marvellous use cases do not give it any value, as it just travels lightning-speed through the use cases, but is not in demand by anyone.

Therefore I posit that transactional uses are important, but mainly as a marketing and community building tool. Without increase of hoarding, the currency does not gain any value. (That is a different discussion whether currency should even have any value at all - I am looking at this from the opposite viewpoint, I first select my unit of account and hoard it, and then try to use it as a transactional medium as much as practical as well. This has been the way money emerged and evolved over millennia, and attempts to change it are synthetic and futile.)

[devphp]

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

[rpietila]

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

Once the expected loss in transaction costs is smaller than the expected loss of the transactional currency being a weaker store of value, people prefer currency exchange to hoarding the transactional currency. Between cryptos, currency exchange cost is very low, so I don't give much chance of success to a coin that is a weak store of value even though it had superlative transactional use.

But higher usage on the other hand makes a coin gain in value also, therefore making it a better store of value.

[devphp]

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

Once the expected loss in transaction costs is smaller than the expected loss of the transactional currency being a weaker store of value, people prefer currency exchange to hoarding the transactional currency. Between cryptos, currency exchange cost is very low, so I don't give much chance of success to a coin that is a weak store of value even though it had superlative transactional use.

But higher usage on the other hand makes a coin gain in value also, therefore making it a better store of value.

I see you have a somewhat balanced view on what you call transactional currencies, which is good compared to those who don't bother to check or think about advantages and disadvantages. I have one question though. When you say people exchange from transactional currencies to another, which supposedly is a better store of value, do you mean crypto, Bitcoin? If you mean crypto, how do you consider it a good store of value with hundreds of percentage points in yearly fluctuations? It makes it no better than a transactional currency. I think it's too premature to call any crypto a good store of value, as there is no history of stability supporting this theory. And once we have no good store of value among cryptos, we're back to transactional currencies.

[JorgeStolfi]

As well I could have said that the hoarding is the only thing that gives value to anything [ ... ]. If there is no interest in anyone to hoard (save) in your currency, even the marvellous use cases do not give it any value, as it just travels lightning-speed through the use cases, but is not in demand by anyone.

Hm, this is quite a change from the arguments used up to six months ago.  Claims like "1 BTC will soon be worth over 100'000 dollars" were entirely based on the prediction that bitcoin would capture some fraction of the e-payments in the world, and the price would have to be that high in order to have that much dollar volume with 21 million coins.

[Majormax]

...awaiting the explanation..

I don't think I can explain, it's a clash of ideologies. In that kind of opposition verbal arguments, which there's been no lack of recently, just don't work. There is a reason they made the "A picture is worth a thousand words" proverb, because sometimes you have to see it to believe.

I often find that an explanation first requires an understanding of the questioners understanding level, and an interactive argument.

The shortest bullet point that I could give in favour of PoS is this :


An initial period of inflation provides the driver for adoption of Digital Currency : cheap coins to play with, low risk:  high velocity of money to build an economy.....  PoW provides that.

That was Satoshi's original premise,worked for Bitcoin, and still working.

Bitcoin has a long lead on competitors . PoS is a kind of shortcut to PoW (but better to have both in the same coin). Creates 'free' coins on the fly, making regular coins available for new buyers , many of whom see the stake as if it were 'interest' , and the apparent ROI is the incentive to invest.

The ideal  PoS % , taper, and balance, is in the process of being found.

[Este Nuno]

As well I could have said that the hoarding is the only thing that gives value to anything [ ... ]. If there is no interest in anyone to hoard (save) in your currency, even the marvellous use cases do not give it any value, as it just travels lightning-speed through the use cases, but is not in demand by anyone.

Hm, this is quite a change from the arguments used up to six months ago.  Claims like "1 BTC will soon be worth over 100'000 dollars" were entirely based on the prediction that bitcoin would capture some fraction of the e-payments in the world, and the price would have to be that high in order to have that much dollar volume with 21 million coins.

It's beginning to become apparent that it's pretty unlikely that Bitcoin can compete on that level with private entities I think.

There are some bad an inefficient companies out there. Even if Bitcoin makes them step up their service or get over taken by a competitor that does it better it seems like a long shot that Bitcoin is going to become some sort of financial hegemon anytime soon.

Unless there is large scale bank bail-ins. Or some other financial disaster. Then there might be a large flight of capital in to Bitcoin.

But really at this point I'm pretty convinced that the only way crypto has a chance at mainstream adoption is through someone coming up with new, innovative, and easy ways to use it for regular people.

[nakaone]

maybe to add

the production costs of fiat as well as PoS are zero or close to zero. the production costs of the least sold coin of PoW should be the marginal costs of the least produced unit (at least in theory). this makes PoS to a pyramid scheme in the nearest sense, whereas this does not need to be neccessarily true for PoW. On the other side bytemaster argued that we should not overpay our security to keep the system efficient. the problem with proof of stake is obviously that you cannot allocate intertemporallily efficient.

[Majormax]

Hoarding has the goal of delayed buying. Of course, some people can hoard for the sake of hoarding, but most do it to store value for purposes of future consumption. Which again brings us to unique consumption cases that this or that currency can provide.

Once the expected loss in transaction costs is smaller than the expected loss of the transactional currency being a weaker store of value, people prefer currency exchange to hoarding the transactional currency. Between cryptos, currency exchange cost is very low, so I don't give much chance of success to a coin that is a weak store of value even though it had superlative transactional use.

But higher usage on the other hand makes a coin gain in value also, therefore making it a better store of value.

Is not higher use (velocity) really the only way a currency can gain traction ?  

Fundamental demand is always going to outlast speculative demand.

[rdnkjdi]

In the PoW vs PoS argument I believe the "Energy can only change forms" theory is partially at work.

[RonPaulBTC]

I think PoW is leading at the moment but Bitcoin will face massive difficulties thanks to PoW in the future, so we'll see.