Do altcoin devs need to understand economics?

[Bizmark13]

While I am quite a fan of NXT overall, it's interesting to note that the founder of NXT admitted he had very little knowledge of economics:

Economics is not my area of expertise.  I can say nothing about the issue.

Which was posted in response to:

4]  Virtual goods store.  The goods will be provided by ordinary users (books, links, game codes, anything represented as plain text)

It's hard to sell goods for bitcoins due to ever-increasing price. Nxt will have even "worse" deflation, number of Bitcoins is increasing while number of Nxts is set in stone. The store will fail unless sellers adjust their prices each day.

NXT is somewhat unique in that its goal is to create an "ecosystem" rather than a simple coin. Hence you have things like an asset exchange, digital goods store, monetary system, etc. Because of this, you would think that an understanding of economic theory would be very important for a dev.

And yet despite the founder admitting he knows very little about economics, NXT has still maintained its position in the top 10 and new features continue to be rolled out successfully.

Where do you stand on this issue? How important do you think it is for a dev to understand the economics behind their creation?

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[Daedelus]

Nxt devs consult a professor and his collegues at a university in Prague, when required. He is the one that wrote the 'economics parameters of Nxt' paper about a year ago. I will find the links later.

Also, since this post, a feature referred to as 'antideflation' has been developed. Some details are dotted around on how it is intended to work.

[Demille]

No, they don't need to just as I don't think regular users of crypto need to be an economist to get involved, though the better the understanding the easier it is for you. I suppose it all depends on what level of knowledge of economics you require? Economics is a wide-ranging subject to be fair and you might lose some respect for a dev but it's not a requirement.

[Twipple]

I think they do. but hardsly any dev does. but they should certainly have people on their team looking at the economics of the coin,

[nagatlakshmi]

Every Altcoin Dev, it is must and should to understand economics.

[readysalted89]

Every Altcoin Dev, it is must and should to understand economics.

Also, they could always hire someone to help with the economic.s

Professor bitcorn understands economics, they could hire him to help 

[Este Nuno]

As an investment anything which continues to increase in supply negatively effects the price. A truly deflationary asset is something special, as I don't know of many systems which have managed to incentivize network participants without rewarding them with tokens through inflation.

As a currency you could argue that deflation isn't ideal, but when investing in cryptocurrency it's pretty clear that people are primarily concerned with the expected growth of their holdings. Supply being fixed is a huge advantage.

Bitcoin and other cryptos that inflate at a predictable rate are self limiting. The higher the price goes, the more money it takes to sustain the price. Monero is a good example of a legit project that's performed poorly as an investment despite a big community and a huge amount of investment. Their emission schedule that they were stuck with after taking over the project is incredibly steep for the first three or four years.

This is why I expect crypto assets to become more popular over time too. As there's really very little point to people pumping out these currencies based around a certain niche when they could use those resources and create a organization that offers shares and a clear path to value for shareholders. No inflation, no wasted money on mining, perfectly secure. Making coin after coin is just silly when there is a far better alternative available in many cases.

[EvilDave]

I would say that if a dev is trying to create a simple currency, ie one with little to no inflation/deflation/stagflation/insanely complex structures then, no, a deep understanding of economics isn't really necessary for a dev.

However, if you're trying to create a more complex system (I'm thinking BitShares, or NeuCoin as examples), then you will need a deeper understanding of economic processes.
Best way to get that deeper understanding may not be that coding devs absorb this knowledge themselves ,but that they can consult economists, or have an economist on the team.

[PolarPoint]

Altcoin devs do not need to be an expert in economics. They only need a basic understanding of how economies work and also about money supply. If they don't understand something, there can consult an economist.

[TaunSew]

We already have "economic experts" (self-proclaimed and/or accredited) and it hasn't made Bitcoin or any alternate viral in mass society.  Bitcoin may be the most well known but we're talking about 250,000 users over 6 years. . .   which perhaps, some may confuse as being a big number but this is smaller than the internet in 1989 and Yahoo had more users in their first year.   We need less ivory tower intellectuals and less gun-totting Libertarians and more programmers and especially more marketers.
 
Of course, instead of skillsets, it may just be a change in reputation that will allow this technology to go viral - what we need in cryptos is less anonymity race and more multisig / wallet protection race (the day people think cryptos is safer than a credit card is when many tens of millions will jump on board).

[finnile]

Altcoin devs do not need to be an expert in economics. They only need a basic understanding of how economies work and also about money supply. If they don't understand something, there can consult an economist.

I would agree with this. The economics part usually takes care of itself most of the times.

[altcoin hitler]

Most devs have no fucking clue about economics - Gavin and satoshi aren't excempt from that. And that's also the reason most coins fail.

[dsly]

Most devs have no fucking clue about economics - Gavin and satoshi aren't excempt from that. And that's also the reason most coins fail.

Thats not the reason why most coins fail.

[o0‡0o]

............
And yet despite the founder admitting he knows very little about economics, NXT has still maintained its position in the top 10 and new features continue to be rolled out successfully.

Where do you stand on this issue? How important do you think it is for a dev to understand the economics behind their creation?

Oh dear it dyed.

R.I.P nxt
.

[banksycoin]

Altcoin creators may not need to be experts in economics but they do need to understand the fundamentals of running a business.

[StanLarimer]

The fact that many successful crypto projects have been implemented without the developers claiming such a background is pretty good evidence that one is not required. (Although one might accuse some of them of having pretty good economic instincts.)

But Bytemaster would argue that a knowledge of economics is very helpful in illuminating design decisions when developing a new block chain. At least four major BitShares innovations can be traced to his study of Austrian economics.

Here are a couple of his quotes from Why I Am An Austrian Economist.

The article began with this quote:

Founders of major crypto-currency projects depend as much on economics as they do technology. Every crypto-currency project is a huge economic experiment and whether it will be successful or not depends upon the economic beliefs of its leaders. Recently, Vitalik, co-founder of Ethereum, made a critique of one of my blog posts based upon my assumption of an Austrian perspective on economics. Vitalik directed me to a post by Bryan Caplan of George Mason university titled “Why I am not an Austrian Economist”. This post inspired me to explain why I am an Austrian economist and why that makes BitShares stand out among the leading crypto-currency projects.

...and ended this this quote:

Economics and Crypto Currency

A crypto-currency is effectively an economic experiment and if the economics of the system are not sound then the experiment will eventually give way to the economic laws of nature. Bitcoin, Ripple, BitShares, Nxt, Ethereum, and Maidsafe are the leading crypto-currency projects and each of them has very different economic foundations.

As far as I can tell BitShares is the only system that explicitly tries to be fully consistent with Austrian economics and the principles of voluntary trade. It is the only system designed around Austrian economic principles rather than economic math. BitShares was the first project to provide the company metaphor for understanding both the value of the coins, the cost of mining, and the impact of and morality of dilution (vs inflation). BitShares is the first project to recognize the decreasing marginal utility of each additional degree of decentralization. BitShares was the among the first to recognize the the economic inevitability of centralization in all systems.

Over and over again it is the understanding of economics, Austrian Economics, that has given rise to many of the innovations in the BitShares space. I am sure there are things I have not fully understood and examples of mistakes I have made along the way. The key is my approach to economics and my commitment to certain principles.