[XMR] rpietila Monero Economics thread

[bitcoin_bagholder]

I don't know much what to think of your post. Cognitive dissonance, sound theory? I honestly don't know. I'd appreciate opinion from other people.

It isn't possible to experience a near-death experience without guaranteeing that death won't be the end result.

"Crazy street preacher" comes to mind for advocating a near-death experience.

[1714121828]

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[jehst]

It isn't possible to experience a near-death experience without guaranteeing that death won't be the end result.

There are many examples in which organisms, sub-organisms, and super-organisms are brought to near-death levels in order to cure or build them up. When the body is invaded by bacterial invaders, what does it do? It increases your body temperature to dangerously high levels. Levels so high that it kills the invaders and comes just short of killing the body itself. This is a fever. Think about anesthesia. We purposefully bring the body dangerously close to death to excise a cancer or perform other life-saving surgery. Think about physical training. We often push our bodies to their absolute limits in order to grow. Natural forest fires. The culling of the herd. The point of the drop would be to move coins into the (few) hands of those who are in it long-term.  To move XMR towards the distribution that has shown to be dominant (BTC's top heavy distribution).

To be clear, I don't believe the market will allow this NDE to occur in the near-term. But we should be ready to seize the opportunity if and when it presents itself without hesitation. Thinking clearly about our goals.

[TrueCryptonaire]

I do not know if NDE for a coin is something we should be looking forward to.
In the case of bitcoin it was possible in early days as there was very little to no competition.
Currently there are hundreds of cryptocoins and the market is very competive.

I see it as a strength to have wealthy investors who are willing to buy significiant stashes of coin out of market.
They can sell their holdings when the price starts rising in small quantitives.
Remember, the more there are coins in deep frozen accounts, the less there is supply and thus the more likely the price will rise if there is increase in demand in Monero.
For a coin's marketcap point of view the strong hands holding large portion is essential, and on the contrary, if the coin is too diversified it means stability in price and the price will not rise more likely as many already owns coins and do not feel any urgency to increase their positions.
Ideally there need to be some sort of stability of coin's diversification and concentration. Too much concentration is bad for the coin's price and too much diversification is also bad for the coin's diversification.

About NDE: the advantage is that the big whales are able to acquire significiant amounts of coins from hoovering from hands to hands in exchange. The risk is however that the community's interest will drop as the coin price is sinking.

[rpietila]

Nice thinking, jehst and all!

If you're thinking pricewise, yes, the plunge to sub-0.001 would qualify. Adoptionwise, economywise, developmentwise, even feelingwise, I don't think we have experinced anything close to death.

The recent price moves are interesting. We almost visited my dip bottom region of 0.0013. But since we are here, and it does not obviously look like bottoming, I'd say that we continue making new lows until 0.0011-0.0012 like David's said in the IRC. The big buying has completely stopped now because of the viable scenarios of:
A) making a double bottom at 0.0009
B) making a new low.

Of course it makes no sense too buy high (60% higher, currently) unless you think the market is just about to turn back up. And then you fight against everyone who is "too late in selling".

I don't personally believe it will make a double bottom even, the low is somewhere higher. Follow the VWAPs, as long as they are declining, the bear-trap downtrend is in force.

Building a community buy wall at 0.001 might be an option, and indeed I will start with 3000 XMR right away

Crossing 0.002 will be the exercise not this or the next week, I'm afraid 

[aminorex]

A) making a double bottom at 0.0009
B) making a new low.

P(A => B) >> 0.5

double bottoms which actually hold just don't occur much in real life.  double bottoms mean more downside, overwhelmingly.  Either it holds a higher low, or it breaks down, with high probability.

Responsive to jehst:

I think taking the distribution of the top 3 as an indicator of optimal distribution is hasty induction.  The idiosyncracy factor is very high, so variance is massive, and a proper estimation of the central tendency of probability mass would require a lot of samples.  In other words, while it might be your best estimator of optimal distribution, i.e. the best among those considered by you, jehst, it is a very poor estimator, and the confidence interval will be incredibly large, and in such a high dimensional space as to encompass worlds undreamed of.

That certainly doesn't mean you're not right.  It just means I don't see how to have any meaningful confidence in the hypothesis without a forward sampling strategy, and I don't see a practicable forward sampling strategy.

I think the case that an NDE would leave coins in strong hands is clearly very strong, basically a given.  I enthusiastically agree with that part of the hypothesis.

[aminorex]

Why does the difficulty not continue to go up?

If another coin is given a higher forward-discounted value per unit of hashing power by the miners, then they will, rationally, redirect their hashing power.

It is unreasonable to think that miners would be particularly good at the forward discounting process, however, as this is a different specialized skill.  Still, a "wisdom of crowds" argument suggests they will at least be better in aggregate than is a typical (or median) individual.

[dewdeded]

One thing alot of people forget or didn't notice. Monero is also superior vs. other coins, if u judge and rate soft factors, that make e.g. open source projects in general and cryptocurrency projects particular successful/sustainable/efficient/... or proven to be important and influential in management of successful (corporate) businesses.

From my expierence this even more valuable and a long-term strength, then (the much talked about) very good quantifiable, fundamental characteristics of Monero (hard factors).
(Remember, later arising problems, from then non ideal hard factors, can always be mitaged and dealt with as best possible with Moneros community, that is above average skilled and has great dev- and man-power.)

In other words
The skill-level and quality of Moneros core team and whole community is so very good and now provenly productive, that it's sure assumption, besides whatever happens or changes now & in future, they will build a very good, solid, useful product/coin.
(as sure as project predictions can maximal be)

This is an important fact that alot of people forget.Mostly because they didnt do intensive research on Monero, didn't came in contact with Monero community, just rate coins via their own classic favorite (bad) metrics or are fully uninformed about success factors in (project) managment, organization and operation.
That's why they often don't understand, why Monero is judged so understanding good and its community members are so confident and enthusiastic.

This is even positive, this keeps alot of unintelligent, uninformed people away. Because they prefer the latest, most shiniest and trendiest scam-coin/alt-coin, in their hope of finding their rocket to the moon.
Mainstream attention and over-hype could and would more harm then benefit Monero today.

[smooth]

Why does the difficulty not continue to go up?

If another coin is given a higher forward-discounted value per unit of hashing power by the miners, then they will, rationally, redirect their hashing power.

There are only a few other coins that are viable to mine on CPU and therefore botnets. Just the other non-BBR cryptonotes (all small) and BSTY (current market cap 5K USD) I think. I don't think botnets are shifting to other coins.

If botnets could really mine at no cost, they would increase their mining of XMR and the difficulty would continue to go up.

In reality I think botnets' actual costs are right around the current XMR price.

[aminorex]

In reality I think botnets' actual costs are right around the current XMR price.

If so, then driving up the cost of operating botnets might behoove the hodlers.

[KennyTheMartian]

Another problem with XMR is the lack of buy volume minus (amount mined per day + Monero sellers) (with exception to the $100K+ volume 3 days ago). There needs to be an ample amount of demand relative to supply (produced by miners and sellers) for the price to rise steadily instead of spikes that only last a few days. It basically comes down to getting more investors, ease of use (simple wallet is great but it just isn't simple enough for the average person - no pun intended  ). I would like to see this coin rise and I wouldn't sell my Monero if the price went down even more. I understand the near death experience, but the only reason it would even get that low is due to lack of interest in the coin and if glitches were found that would jeopardize the whole coin itself (which I doubt would happen). Also did we take into account that most of the XMR on Mintpal has not been returned to their owners yet? With that incident, it seems like it created an artificial hold of a decent amount of Monero, which I am surprised the price did not rise during this occasion...maybe because the volume went down a bit since a whole exchange went down. I know a friend who has a decent amount on that site and has not received his coins yet. Just my 2 satoshis.

-KennyTheMartian

[dewdeded]

From my point of view:

There seem to be, some well known to be wealthy posters and some boards accounts that always suggested they are rich and own super many Bitcoins, that claim they support Monero fully and saying they (seriously) want the project to succeed.
But they dont give the buying support, that is expected after such statements.
Even in very crucial market situations, where are little could help the coin/price alot.

This make me wonder why? Consindering
-  the history (not so long ago), and remember what big amounts of support well known altcoins (e.g. LTC, Doge, Quark) and really bad ones got.
- Are just the sheer number of people claiming to support Monero.
- and XMRs low price (where the needed stakes to support where alot of cheaper vs. coins who got support)



Question remains, if Monero is special in not receiving buying support or are "the old days" of making supports buys for the altcoins you like are over.

[jehst]

Question remains, if Monero is special in not receiving buying support or are "the old days" of making supports buys for the altcoins you like are over.

People are making support buys, but you have to understand the sheer number of XMR being created. There's something like 125,000+ XMR made per week. Even when a bunch of us acquire 10,000+ XMR within the space of one week, it doesn't stem the tide. MEW has already rightly decided not to change the inflation, so we have to be patient and wait for a) the next influx of new crypto users (if there's going to be a next influx) and b) the emission rate to eventually go down

[smooth]

People are making support buys, but you have to understand the sheer number of XMR being created. There's something like 125,000+ XMR made per week. Even when a bunch of us acquire 10,000+ XMR within the space of one week, it doesn't stem the tide.

This is it.

I've said it before, every new single new coin needs to find a home. If its not a buyer, its a miner who is paying to mine and not selling to recoup costs (therefore, a buyer).

If people are buying a few hundred coins per week, and I love people like that who believe in the project and support it, then we need 400 of them to maintain the balance. Of course, there are some bigger buyers, and there are a good number of these smaller buyers. And indeed the coins are finding a home. But what happens is over time at least a few of those people (in both groups) get to the point where they feel like they have enough, and then the price needs to fall to motivate those still buying to buy a few more per week for the same cost.

[TrueCryptonaire]

From my point of view:

There seem to be, some well known to be wealthy posters and some boards accounts that always suggested they are rich and own super many Bitcoins, that claim they support Monero fully and saying they (seriously) want the project to succeed.
But they dont give the buying support, that is expected after such statements.
Even in very crucial market situations, where are little could help the coin/price alot.

This make me wonder why? Consindering
-  the history (not so long ago), and remember what big amounts of support well known altcoins (e.g. LTC, Doge, Quark) and really bad ones got.
- Are just the sheer number of people claiming to support Monero.
- and XMRs low price (where the needed stakes to support where alot of cheaper vs. coins who got support)



Question remains, if Monero is special in not receiving buying support or are "the old days" of making supports buys for the altcoins you like are over.

It is not smart to support it much now since the emission is still high.
When emission is much lower, then the support will maximize the impact and the price will skyrocket even higher (more btc are available for driving the price to new heights thanks to not to wasting the bitcoins now).

[Este Nuno]

From my point of view:

There seem to be, some well known to be wealthy posters and some boards accounts that always suggested they are rich and own super many Bitcoins, that claim they support Monero fully and saying they (seriously) want the project to succeed.
But they dont give the buying support, that is expected after such statements.
Even in very crucial market situations, where are little could help the coin/price alot.

This make me wonder why? Consindering
-  the history (not so long ago), and remember what big amounts of support well known altcoins (e.g. LTC, Doge, Quark) and really bad ones got.
- Are just the sheer number of people claiming to support Monero.
- and XMRs low price (where the needed stakes to support where alot of cheaper vs. coins who got support)



Question remains, if Monero is special in not receiving buying support or are "the old days" of making supports buys for the altcoins you like are over.

Oh they're definitely buying. Monero has some of the best buy support I've ever seen in an alt. It's just that there's an insane amount of XMR being mined everyday and even for a handful of wealthy supporters it's a lot to buy.

[darlidada]

What would qualify as low emission ? 15K ? 10k ? 5k ?

Or shall we calculate in USD ? 18K * 1.3 mbtc * 313 = 7324$ per day.

Is that still too much?

[TrueCryptonaire]

What would qualify as low emission ? 15K ? 10k ? 5k ?

Or shall we calculate in USD ? 18K * 1.3 mbtc * 313 = 7324$ per day.

Is that still too much?

A large portion of Monero community consists of people who are not a buyer in bitcoins anymore. Therefore for them the price of bitcoin is irrelevant when it comes to Monero's daily emission.

From their point of view the relationship between btc and xmr is something that matters. For fiat-denominated hands the relationship between btc and usd is also a factor.

[rpietila]

It is not smart to support it much now since the emission is still high.
When emission is much lower, then the support will maximize the impact and the price will skyrocket even higher (more btc are available for driving the price to new heights thanks to not to wasting the bitcoins now).

+1.

This is a side-effect of deciding to keep the emission high. The reason for the proposed lowered emission, was to spare it for the future time, when we hope that XMR would enjoy mass popularity. A high emission then, instead of now, would serve to add "fairness" and cap the rallies, ie. more stability and better network strength.

This did not weigh as much as the continuity of the social contract. But the side effect is that nobody has a reason to pump XMR now. Game-theoretically the large bagholders such as me are better off when the price is low, so that we can add to our already large stashes and if it would hit big in the 1-2 years, we can act as the dampeners of irrational exuberance by selling to the rallies, instead of the miners. If it does not hit big, well then we lose all, but how can you think anything can have a chance for a 1000-bagger without having a much larger chance of going bust?

Nobody knows the future really. These are just different paths the coin would take, and the rally that followed the emission vote was a sign of confidence. The fact that XMR price could drop to even lower levels now, in itself, does not spell the end of the coin. It is only a rational decision of the current supporters, while waiting for any of the several breaktroughs that each could quickly put the price to a much higher new level.

Patience is a virtue, and if you play a game, knowing the rules is quite important also  

[dewdeded]

rpietila: Thank you for your great postings and work. You are really outstanding. IHMO, you should really receive some gratitudes as recognition.

As I dont know you personally and you are much richer than me. I can only offer this post today. Thanks a million.

But I can promise you, to buy you some beers and pizza at one the upcoming Monero meetups in the future (we both visit).

Everybody should use rpietila as a role model and be aiming to reach the same level of posting quality.

[aminorex]

Keeping it super-simple:

If .001 is roughly the cut-off for botnet mining, we might loosely infer that in 12 months the constant-demand clearing price will be ~.002.
A risk-free rate in a ZIRP environment is essentially negligible relative to our risk scales in crypto, so we can loosely call it 2%.
Present value of 1/1/2016 XMR ceteris paribus should be .00196, but it is priced about .00136, so we conclude that the market is discounting 1 year risk around 30%.
That is, the market value risk of XMR failing permanently to achieve a botnet-minable price level is about 30%.

Market seems a bit unduly pessimistic to me.