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Author Topic: Quantity theory of money and cryptos.  (Read 2757 times)
V for Varoufakis
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February 06, 2015, 11:26:13 PM
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Is it possible to create a crypto based on the equation of the quantity theory of money MV = PQ?
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According to NIST and ECRYPT II, the cryptographic algorithms used in Bitcoin are expected to be strong until at least 2030. (After that, it will not be too difficult to transition to different algorithms.)
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February 06, 2015, 11:30:31 PM
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You would need a quantum computer for it to be operation, unless you dont have the resources its kinda pointless.
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February 06, 2015, 11:41:29 PM
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Why you need a quantum computer?
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February 07, 2015, 01:46:40 AM
 #4

Is it possible to create a crypto based on the equation of the quantity theory of money MV = PQ?

This statement makes no sense.

Its like saying let's make a spaceship based on theory of relativity

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February 07, 2015, 02:10:45 AM
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So the proposal is something like creating a new crypto which the amount is based on relative amount of fiat money, right? Hmm. Why do we need that? Wouldn't that defeat the purpose and concept of crypto of going against inflation. So if Fiat is printing more money, in effect the value of that crypto is going down as well. It's like building something new on something which is already flawed.

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February 07, 2015, 02:51:14 AM
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So the proposal is something like creating a new crypto which the amount is based on relative amount of fiat money, right? Hmm. Why do we need that? Wouldn't that defeat the purpose and concept of crypto of going against inflation. So if Fiat is printing more money, in effect the value of that crypto is going down as well. It's like building something new on something which is already flawed.

The proposal makes no sense syntactically

QTM says that prices have a proportional relationship to money supply.

You use the formula to estimate the price based on velocity and supply.  Has nothing to do with how a currency is designed. It has to do with informing monetary policy.

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February 07, 2015, 06:38:25 AM
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Yes, of course it's possible to base a coin off anything.  And now that you mention it I'm sure someone will.  But it only matters if the coin generates real value.

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February 07, 2015, 07:37:17 AM
 #8

I've been proposing this for years to be added to the Bitcoin mining protocol; although not being an economist, I didn't realize it was an actual theory. The problem is collecting the data statistical analysis. I wouldn't base the security on it, but the value could be denoted on the blockchain not as a measure of very manipulated markets, but actual coins in circulation.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
V for Varoufakis
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February 07, 2015, 02:00:18 PM
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So the proposal is something like creating a new crypto which the amount is based on relative amount of fiat money, right? Hmm. Why do we need that? Wouldn't that defeat the purpose and concept of crypto of going against inflation. So if Fiat is printing more money, in effect the value of that crypto is going down as well. It's like building something new on something which is already flawed.

We don't want the inflation nor the deflation. We want a self-regulatory system. If you know the three parameters V, P and Q you can calculate the money supply:  M = (PQ) / V
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February 07, 2015, 03:28:06 PM
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Why you need a quantum computer?
To process quantum operations? I dont think you can do it with binary computer.
V for Varoufakis
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February 07, 2015, 03:38:14 PM
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Why you need a quantum computer?
To process quantum operations? I dont think you can do it with binary computer.

What quantum operations?
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February 07, 2015, 06:08:46 PM
 #12

Is it possible to create a crypto based on the equation of the quantity theory of money MV = PQ?

We are witnessing the theory of Bitcoin in real time.

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amspir
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February 07, 2015, 06:39:54 PM
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Is it possible to create a crypto based on the equation of the quantity theory of money MV = PQ?

P is going to be determined by a market; what people are willing to trade for the currency.
V is determined by individual choices, whether one decides to spend or save the currency
M is the only thing that the rules of a cryptocurrency  can control, and through the identity of equation, have an effect on Q.
neurotypical
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February 07, 2015, 10:19:13 PM
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Hi Vaourofakis. What are you going to do on the 28th when Merkel tells you to pay or GTFO¿?
V for Varoufakis
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February 07, 2015, 10:42:21 PM
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I'm not Varoufakis.
dinofelis
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February 08, 2015, 05:12:28 AM
 #16

Is it possible to create a crypto based on the equation of the quantity theory of money MV = PQ?

I would say that it is impossible to create a crypto that is NOT based upon the quantity theory of money Smiley

The quantity theory of money is an evidence.  It says that the total amount of X coins that has been spend during period T on things, is equal to the total price (in X coins) of stuff that has been bought with X coins, which is tautologically true.

The amount of coins spend is equal to the amount of coins existing (M), times the average number of times they have been spend during time T (which is obviously equal to the amount of spend coins, by definition of the average V).

The amount of stuff bought is equal to the amount of stuff (Q) times its average price (P).

The quantity theory of money is true for any thing that is traded against stuff at a price.

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February 08, 2015, 04:18:58 PM
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Why you need a quantum computer?
I think they mistakenly read "quantum theory" instead of "quantity theory". I know because it also happened to me at first glance. Interesting.
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February 09, 2015, 12:14:11 PM
 #18

Is it possible to create a crypto based on the equation of the quantity theory of money MV = PQ?

I would say that it is impossible to create a crypto that is NOT based upon the quantity theory of money Smiley

The quantity theory of money is an evidence.  It says that the total amount of X coins that has been spend during period T on things, is equal to the total price (in X coins) of stuff that has been bought with X coins, which is tautologically true.

The amount of coins spend is equal to the amount of coins existing (M), times the average number of times they have been spend during time T (which is obviously equal to the amount of spend coins, by definition of the average V).

The amount of stuff bought is equal to the amount of stuff (Q) times its average price (P).

The quantity theory of money is true for any thing that is traded against stuff at a price.


This formula exists only academically and it is too simplified, never solve any problem in reality

M means money in circulation. Any money that is put aside as long term saving is not calculated as M. When people start to save money, M in the formula shrink by magnitudes. Another question is which M you are looking at, M0 and M3 are totally different things

V means money flow speed. I could simply transfer the same dollar a million times per second in high-frequency-trading platform, that does not affect anything in economy

Q is GDP, but is Swiss bonds included in Q? In fact lots of today's financial activities are trading foreign capital goods and they are not counted domestically

P is price level. Because Q should include foreign goods, their price are affected by foreign currency exchange rate

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February 09, 2015, 01:52:02 PM
 #19

This formula solves the problems of inflation and deflation.
OnkelPaul
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February 09, 2015, 02:02:12 PM
 #20

This formula solves the problems of inflation and deflation.

The formula can be useful to gain some understanding of how some aspects in an economy interact, but it leaves a lot out, and it does not solve anything.
The parameters can not be measured accurately, and as far as I understand they aren't even defined accurately.
It's not like this is the "E = mc2" of economics...

Onkel Paul

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